FEAR = False Evidence Appearing Real
The FEAR is far worse than the FACTS. Far worse. And unfortunately, those fears will influence new facts. For example, if no one sold their stocks the markets would be stable. People dump their stocks which drives down the market which adds to the fear which leads to far more stock dumping etc. Someone suggested on social media that we ought to buy toilet paper and a week later you cannot find it in any store anywhere, which leads to hoarding everything from bottled water to ammunition. Yes, ammunition.
It's called a self-fulling prophecy.
I know I'm taking a risk in writing this. Perhaps, I am fueling the paranoia. Perhaps, some of you will act now and be ready when needed. My intent is to support those of you that are at risk. In my early days as an entrepreneur, I had to do financial triage many times. I did the craziest things to stay afloat. And, I have coached many people through their own financial maze. Often times, our own bias keeps us from even considering options. Notice how you personally respond to some of these suggestions. Notice how violently you may oppose them. That is your bias in play and it may cost you in the end. I encourage you to read this with as open a mind as you can muster. And, just consider your options.
COVID-19 may bankrupt more people than it hospitalizes.
This message is for those of us that are not prepared financially for what MAY come. I am not predicting it. I don’t know, but if you don't have sufficient cash to take care of your family in the event of a collapse of your income, you are at risk. This article is for you.
Precious few people have the residual income or the reserves to pay their bills for 3 to 9 months and a lot of people may be out of work for that long. Do you work in entertainment, travel, hospitality, manufacturing, food service, transportation, elective healthcare (including dental), massage therapy, personal training, yoga, hairstylist, sports, real estate, etc? The ripple effect of professions that dry up may cut a wide swath.
Do you have the reserves to cover your needs? Are they in the stock market? CDs? Real estate? Then they are not liquid. Now is the time to sit down and map out the rest of 2020 by month. What are your expenses … detail them? What is your guaranteed income? What is the shortfall? Do you have the cash reserves to cover it?
I am not paranoid. I am not afraid. I don’t think the worst. I don’t want you to think the worst. Kimmy and I are not doing these things below (except one … cable TV, which we did two months ago unrelated). These suggestions are not for the faint of heart. Nor am I suggesting you personally do any of them as I do not know your personal situation. These are family decisions. It may serve you to involve your children. It could prove to be a priceless life lesson for them.
If you have lost your job or are at risk, just consider the logic.
If you are in good shape, congratulations. You have made some great decisions in the past that are paying off big time right now. If not …
Here are 10 things you can do, right now, to protect your cash flow:
- Slash your expenses. Do an audit of every subscription and bill you pay, and every habit of spending you are in. I recently dumped my cable boxes for YouTube TV saving $100 a month. Turn off your spa, clean your own house, raise the deductible on your car insurance (not healthcare). Study your credit cards as a family and make some decisions. You will be shocked at how much you can save each month.
- Apply for 20 credit cards tomorrow. Do it online. Do it tomorrow all at once. Cash is going to be king and new personal credit may be frozen quickly. $20-$50,000 in available cash even at 20% interest may save your bacon … literally.
- Sell everything you own that you would have wished you would. Think about the worst-case, where you cannot buy food … which maybe 3-4 times the cost of fuel or heat or internet or healthcare. If you could have prevented the worst case by selling stuff would you have sold it? Think of it like hindsight. Sell it. Unless it's a family heirloom it can be replaced. Stuff doesn't produce income and it often sucks income. Dump it. Collect the cash, but do it quickly and fire sale it as everyone will be doing this very soon (e.g. no buyers).
- Sell stocks. Sell entertainment, transportation, oil, and any discretionary spending type stocks. Think about what companies will thrive in a health care disaster ... maybe keep those. We don't know what the markets will do. Cash is far more valuable than dubious investments. We are in a downward spiral that is feeding on itself. It may turn in 3 to 9 months, or who knows when. No doubt when it turns stocks will roar back. When this breaks, people are going to rush back into the world and throw their money back into the markets. In the meantime, how will you cash flow your life?
- Consider … just consider, stop paying non-essentials. The downside is your credit score. Yes, it takes years to restore it but what is more important your credit score or food and fuel? Start with any credit cards that are near their max. They are of no more use to you. Stop paying them. Next is anything that cannot be repossessed like department store cards, personal loans, student debt, etc. It's possible the movement may impose some kind of relief on bad debts and credit scores in the future. The last option would be things that can be repossessed. Your home is actually a good option. It can take years for a foreclosure to be executed. In the meantime, you could save tens of thousands. Your car might be the last as they can pick it up pretty quickly … 3-4 months, and you need a car.
- If you have whole life insurance, borrow on it or cash it in. If you really need life insurance buy term at half the price.
- If you have 401K money, find out how you can borrow on it or cash some of it in. Just do the homework. It is expensive money … 20% penalties to access it but it just might be more valuable as 80% cash than 100% of something you cannot eat.
- Keep all cash you can accumulate at home in currency. Who knows what the banks will do. Remember, they don’t actually have your money in the building. They never did. It's all virtual dots and dashes and they loaned all of your dots to someone who will probably not be paying them back. Capiche? Go with coffee cans in the backyard.
- Get creative as a family about what you can do to serve others and earn an income. Make things you can sell on Etsy, eBay or Facebook. Offer some expertise you have via Zoom, accounting advice, bookkeeping, taxes, healthcare, or home improvement? My friend, John Riddle, created this business in early March, www.30ABidet.com. Talk about creativity serving a need! Notice how in times like these our pride and priorities change, and we are willing to do things that in the times of milk and honey we would disdain. Now is the time to adapt, improvise, and overcome. We need to become the Marines of income!
- Watch PBS or Newsy for unbiased objective facts and reporting. Everything else is an infomercial for a political party. If you get your facts from an infomercial you are doomed to a life of stupidity. Study the concept of Confirmation Bias. Have a family conversation about how it impacts your beliefs, attitudes, and opinions … most importantly, how it influences your listening. To protect your family you need to be a critical thinker … for yourself, not a drone for someone else or a political party. Get smart. Thank you for listening with an open mind and heart. Pass it on to those that may benefit.