Thursday, August 18, 2011

Personal Financial SHTF Experience

(Guest article by Stryder. Articles about personal experiences, mystakes made, lessons learned and such are welcomed!- FerFAL)

The reason I’m writing this is just to convey a personal financial SHTF situation that happened to us, and describe how my “preps” beforehand helped me sail through the experience with minimal impact.  Just to be clear, this isn’t an exciting shoot-the-looters story, it’s just a tale of how the “boring” aspect of preparation are still important to ensuring stability.

My background: I’m a businessman.  I earned my undergraduate degree and then an MBA, and have worked since then in professional services.  In my spare time I’m also a gun nut with over 300 hours of tactical / self defense firearms and other fighting training, and am a serious shooting competitor.  I suppose I became a “prepper” when I was a kid living in Miami and watched the riots in Liberty City (1980) and Overtown (1982) unfold on TV.  I vowed even then that for the rest of my life I’d be ready for any type of calamity.  But I didn’t get serious about it until 9/11 which left me stuck on the other side of the country from my wife.

After 9/11 I’d often visit “survivalist” forums (you know the ones).  Although full of a lot of hot air, the forums did provide me with some useful things such as the idea of building a priority grid: the matrix where you sort out the most high-likelihood, high-impact events and prepare for those first.  During my long flights I would work on the grid and eventually saw that my #1 priority was to prepare for a recession / layoff.  Dang, and I had wanted so much to prep for an EMP strike.  Oh well.  But how to prepare?  I’d weathered several recessions before, and had never been laid off in my life, so I had to think a lot about what it would mean,  what the impacts would be to my life.  And, how could I mitigate those impacts?  I put together two lists to deal with this potentiality: stuff to buy and stuff to do.
·         Stuff to do:
o   Pay off all debt and save up cash for 6 months of expenses.
o   Write down on paper what an “emergency budget” would be.  It stripped out all nonessentials like lawn service, cable TV, restaurants, movies in theaters ,etc.  And I was sure to go through it with Mrs Stryder to make sure we both knew what to expect and agreed to it BEFORE anything happened.
o   Always be doing a job search.  Reach out to networks, contacts, former clients, etc.
o   Plant a garden
o   Raise chickens
·         Stuff to buy:
o   Food storage, starting off with 30 days, built out gradually.  I got to 120 days.  I’d  LOVE to have a year’s supply… still working on that.
o   Water storage containers:  started off with 7 gal water cans, would buy one a month, fill & store in dark area.  Eventually Mormon family next store told me they had a lead on cheap 55 gal barrels & I got one of those.  Approx. 3 weeks of water stored now, not including water heater + whatever we could store in Rubbermaid tubs given notice
o   Energy production: my idea was to get  small scale solar panels to reduce electricity costs during a layoff …. Never got around to doing this, the cost:benefit ratio was too high.
o   Security:  guns were already taken care of, as I suspect they are in any self-respecting “prepper’s” home.  I took over 300 hours of self defense / tactical firearms training as well, in addition to edged weapon and mixed martial arts fighting.  Also hardened home with better locks, security system etc.

Job Situation: bankruptcy and layoff
Fast forward to 2008.  There were strong indicators in the Fall that my firm was headed for bankruptcy, and we employees knew it.  So, I started to both “up my preps” as well as seriously look for a job.  My company was laying off in droves and within six months, 75% of the company had been let go.  I was still there in Summer of 2009, one of the last people left in the firm.  I tell you it’s an odd feeling to be the one to turn out the lights in a corp. you helped build.
I started job searching in the Spring 2009, and had my first interviews before my official final day, which enabled me to credibly say in my first interviews that I was still employed.  This was key as it was 2009 and it was the worst job market in almost 10 years, in a state (Oregon) with the 2nd highest unemployment rate in the country…. Not a good situation so I had to maximize every point of leverage I had.  When I got “the call,” I was 100% mentally ready and prepared for it due to all my “preps.”  I can’t say it felt good to be let go from a place I worked hard to create value in, but I had faced reality long before, so that when the time came it just felt like an emotionless business transaction.
From that point onward I put my job search into high gear, and put the whole emergency budget into effect.  Fortunately my company gave me two month’s severance pay as well as all my unused PTO (six weeks!  I told you I worked hard there…) so I made it my goal to not tap into my emergency fund.  It became like a game for us: I took on the grocery shopping duties, always looking for the best deals, and we had weekly challenges to see how little gas we could use.  I’d ride my bike to the store when possible and Mrs Stryder took the bus to work.  We’d also shop at “that store”  in “that part of town” where “those people” normally shop.  Former colleagues of mine – who were themselves out of work – in contrast shopped at Whole Foods.  I showed them how much cheaper it was to shop elsewhere but they still managed to rationalize spending 50%-100% more on groceries just because they like the decor.  Whatever.
Each day I just kept myself busy, with a schedule.  I devoted 4-5 hours of focused time to the job search and the rest of the time was spent on other worthwhile activities like shopping, tending the garden, home repairs, reaching out to friends & family, etc.  Having productive activities each day enabled me to keep from feeling down and playing the useless “what-if” mental game.
Within two weeks of my last day, I had my first job offer.  It wasn’t a place I really wanted to work in, so I held off committing to see if I would get any other offers.  I had this leverage since I knew that I could survive / get by for 9-12 month before NEEDING a job.  So I waited, and within three more weeks, I had two more job offers in hand that paid more, and better suited to me.  It felt good to not have to take a job I didn’t want just because I needed a paycheck.

Lessons learned: Debt Reduction and Mindset

When I drove to my first day of work at my new job, I thought, “wow, my plan really worked!” OK sure I wasn’t in a life or death LA Riots type situation but … damnit we it was a real SHTF event for us, and we got through it with minimal impact, due in no small part to the preparations we had made.
Debt Reduction
When I first got out of B-school in ‘99, my mindset was way wrong, having bought into the image that “I have an advanced degree from a top school and work at a top firm.  Therefore I must live in a ritzy neighborhood, drive a new car and belong to the country club, and golf every weekend.”  I realized after some years that that just wasn’t me, and it didn’t jibe with my desire as a prepper to be secure & safe, and so I changed my mindset.

I switched from being a conspicuous consumer to being a saver, and focused on “reducing fixed costs” in accounting-speak.  My work colleagues couldn’t & still can’t understand why I drive a 10 year old car, and live in a more affordable neighborhood away from the city.  Whenever they ask, I answer honestly, “because it’s cheaper.”  And that answer is almost always met with stunned silence, or some rationalization of why spending more money on a newer car or being closer to the city helps me enjoy living now.  Ummm, I kind of enjoy my life actually!

So, Mrs. Stryder and I have long been focused on saving money and realized the goodies we normally enjoyed (such as maid service, cable TV, etc) could go away at the drop of the hat.  And because I had socked away a good amount of $$, and because I was on top of things, the impact to our lives was minimal.  Despite all that was going on:  unemployed for the first time ever, terrible national economy, worse local economy, stock market crash, bank nationalizations, TARP, QE 1 & 2, etc., I slept well every night because I knew we’d be OK.  And that last sentence is to me what the value of being prepared was.
Mindset really is key.  But what specifically did that mean for us in this case?  It meant we simply had it in our minds that we would NOT be put down by this layoff.  We knew who we were, and that this bizarre set of circumstances was just a bump in the road of life.  Having the right Mindset helps you adopt a frame of mind that you keep with you daily.  You thus train your mind to see opportunities and possibilities – and take advantage of them – when you otherwise may not have.

What I would have done differently 

Honestly, I don’t know what else I could have done.  I guess the only other thing I might have done in hindsight was to not be part of the big Obama Gun Buy of 2008.  I spent a lot of $$$ on that.  But on the other hand, I wound up getting all the things I had planned to anyway for “preps,” just earlier than I had planned.
Info that helped me along the way
·         Financial:  Millionaire Next Door, Dave Ramsey radio show.  Rich Dad Poor Dad was OK but you can sum up the entire book in about a paragraph.
·         Real world survival in an economic decline:  FerFAL of course!
·         Mindset: Listening to Katrina (“Keep Moving Forward”), Cody Lundin’s 98.6 Degrees and When All Hell Breaks Loose for his phrase “Party On”
·         Gardening:  Square Foot Gardening, Jack Spirko’s podcast.

Join the forum discussion on this post


Totalinvestor said...

Informative and very well written. I'll post this to my blog.

Anonymous said...

Great post. Thanks for sharing.

Isidro B. said...

Wow, how honest man. You really changed your mindset. You turned away from what most people are chasing. And you are living happier. Good for you.

Anonymous said...

This was very interesting and thought provoking about my own preparation for layoff and preparation for living without income. Good stuff. Thank you for writing this down and sharing it with us.

What if it's today? - A survivalist's blog said...

We did something similar with our "emergency budget" at home. When I got custody of my grandkids I changed my work schedule to accommodate them. This meant a 25% pay cut. On top of that I work for the government and have seen an additional 15% pay cut to help balance the state budget. Our family emergency budget is now our daily budget. Having this planned out before it was needed sure took the stress out of having to cut back.

Anonymous said...

I have been unemployed for more than a year now. Had I not put my financial house in order long ago this would have been catastrophic. Our friends in similar situations have lost their houses, gone bankrupt, and are moving out of state to find work. Many are in dire straits. We, on the other hand, are doing relatively fine. We lived on only 20% of our net income and have no debt, so when that income was cut by 40%, we are still doing fine. Economic preparedness and diversification may be one of the most important things to learn in this brave new world. My other take away from FerFAL is to get ready for disruptions in our routine, retail supplies, and to lower our expectations.

As a part of preparing and not believing the official propaganda, I earlier moved 100% of my retirement assets into precious metals. The wife still has bonds, so we're diversified, but that may change as the economy changes.

We're not rich but we live well below our means. What we are is prepared and flexible.