Financial Preparedness

FerFal,
Thanks for all of your efforts in helping us prepare for the impending crisis.

Many of us here are certain that inflation will hit hard very soon because our government is accelerating the rate at which it prints "funny money". My question has to do with preparation as it regards to your finances.

Since it is almost certain that our savings will be stolen from us by the government in the form of hidden taxes (aka inflation), is it best to buy durable goods with our savings now? Should we be buying our kids shoes and clothes to last for the next five years? It doesn't seem like a good idea to have a huge lump sum of cash sitting around to be stolen, confiscated, or metered out by our banks (government).

It makes sense to have gold around, but shouldn't we just buy goods and supplies that we know will last us, and then have enough in gold to keep around for emergencies?

Thanks,
-J

I was calculating REAL inflation today with my wife ( not the BS reported by INDEC, even INDEC workers openly state that the gov. modifies the numbers they don’t like), compared to 2000 prices.
We estimated it in 500%, roughly speaking since 2000.

In both our families ( back when we were single) they would buy a month worth of groceries for 300 pesos. Now you need 1500 pesos and the quality of the products isn’t nearly as good as it used to be.

Guys, get this into your head: The number of poor will likely double in USA these following years. And no that’s not the end of the world, life still goes on, but it’s a pretty bitter situation.
The new poor wont come form Mars, they’ll drop from middle class.

It’s survival of the fittest. For us humans, it’s survival of the smartest.

Unless you are smart and find ways to crawl up the sinking pyramid, you’ll end up in the “poor” section.

If you want my honest opinion, save it in gold and silver instead.
DO NOT buy stuff you try to “guess” you’ll end up needing. If a year from now you need shoes, more food or whatever, the same amount of gold will buy you the same amount of product, or even more since gold goes up during hard times.
Of course have extra pairs of shoes and clothes. Don’t know about you but three pairs of shoes last me a long time. What I mean is don’t eat up your savings buying stuff. You’ll sure need that money later on for things you disn’t guess correctly.

You’ll soon see how every little spend becomes and important decision in your struggle to save as much money as possible.

Salaries and earning wont go up along with inflation, at least not at the same rate. That’s what makes poor people.

I’d try very hard to come up with new sources of income.
Here’ it’s unthinkable for a wife NOT to work. There’s really little doubt in that regard. If both parents don’t work, unless you are truly rich you can’ live here with the salaries and wages we have.

If you want your better half to stay home then get serious about home business. The internet is full of ideas. But do something that makes money.
If your wife can make money by staying home watching over the kids and you have some land and she can keep a garden and some far animals that sounds great, but be serious and calculate how money you are actually making and saving by doing this.

Staying home just to make 500 bucks worth of groceries doesn’t sound very effective when she can make 2000 working a normal job.
OK, you’ll need a nanny for the kids, but with a normal wage its still profitable to pay a girl you trust and go to work.

Wrapping this up, SAVE AS MUCH MONEY AS YOU CAN.
For every buck you spend, think:
Will I use this?
Is it worth it?
Do I need a 200 dollar knife/watch or a 1000 custom 1911?
Do I need the fanciest 4x4 ATV?
What benefit am I getting for my money? What the real benefit/cost rate?
If you already have 6 to 12 months worth of food and as much water stored as you can put aside,. plus a few weapons ( you do need at least a couple handguns in my opinion) ammo, cleaning supplies, medicines you may need, other than some gear I’m leaving out, don’t keep buying any more junk.

There’s a market out there for this stuff, and the crisis is being good business for many. That’s fine, I love capitalism, I myself have ads from Amazon that sell stuff, get a small % for each item sold, but that doesn’t mean you should go desperate and buy everything you’ll ever need the rest of your life.

This is a crisis guys, a depression, economical collapse, whatever you want to call it. Things are tough and will get tougher, but people, this is not the end of the world and people will not die by the thousands, ok?

*Save your money, odds are you’ll need it in the future.
For larger amounts of money, I'd invest in real estate right now.
For smaller amounts I'd go for gold.


*Find new ways of making money.
Even something as simple as starting a blog is easy, has no initial cost, and can generate some spare cash.
Start a blog in blgospot ( just like this one, its as easy as opening a hotmail acount)
Write about something you like. Try learning a bit aobut blogs.
Then add some ads like the ones by adsense or some other afiliate programs, and writing regularly will make a bit of extra cash for you.
Starting a home business is something relatively simple. You dont make a ton of money but you dont invest a lot either. A number of housewives here started theri own business making scneted candles, breakfasts, etc.

*Reduce your expenses as much as possible.

*Yes, buy the basic necessary gear and supplies, get the necessary training and know how. Knowledge and mindset will make the real difference.

*There are a few items you might want to buy now.
For example: I’d try to use just one car at a time but have a second car ( cheap, low gas mileage, common model with cheap and commonly available parts) in case your other one brakes.
Going out buying a car after a crisis can burn a bit hole in your pocket. Its just not an option for most.
Same for certain appliances such as a fridge , chest freezer, and washing machine. If a generator is essential for you, have another one. No guys, don’t buy new, I’m talking about keeping eyes opened for these kind of things at garage sales and such. If you can get an extra fridge for cheap, Yes, I would do it. If you work with computers a lot, an extra used PC or notebook might be a good idea too.

I’m mentioning this because in my case buying theses things are very expensive right now, and before the crisis they were dirt cheap when bought used.

People will survive, we saw that here in Argentina. Even with 50% poor and 25% below the line of poverty people in general still get by and survive somehow.
The difference is that some live better than others.


FerFAL

Money during and after the crisis

Anonymous said...
Ferfal, I believe you are overstating the importance of knives, gu ns, doors, dogs etc.

You are emphasizing it a bit too much - not much - just a little.

You forget to mention one thing: how do you earn money?

Money in its various forms is the most important thing.
Without money you can forget buying everything else.

How do you earn money? How do you plan to earn MORE?
February 22, 2009 11:31 AM

Anonymous said...
A pocket knfe with some led light attached to it, is just cute, but it cannot buy you anything.

Surviving means being able to feed oneself, having health insurance and a roof over one's head.

With a gun and martial art skills you might survive one day, money makes you survive all 365 days of a year.
February 22, 2009 11:39 AM

My Anonymous friend...
You are underestimating me a bit too much.:)

I’ve insisted more than enough about the importance of money (both paper money and precious metals), even caught a bit of flames from angry survivalists that say it’s just pieces of paper and shiny metal.

Try looking into the Archives for articles regarding the importance of money and gold and how to make money after the crisis.
I’ve written about all those things you’ve mentioned… in the past… when people didn’t seem to thing money was such a big deal.. ;^)
Real estate investing and renting after the crisis
Mistakes survivalists make
More on gold and other concerns
Making money during crisis
(this one is rather appropriate given the current times)
Jewelry gold on field test
Most important need in first few days
About using gold and otherforms of currency


FerFAL

Real Estate: Investing and renting after the crisis

Norcal said...
Ferfal, I am wondering if you could comment on real estate prices.

For example, let's say a middle to upper middle class home (not super rich home) was going for say, $400,000 before your crash in 2001.

What would a home in such a neighborhood go for now? Again I'm not talking about the super rich safe suburbs, but a "nice" neighborhood, or at least that was nice before the crash?

You opened the door to a new dimension in real estate.
I know a bit about real estate because I do some operations every now and then.
Remember location, location location?
Well now it’s location, location, location location LOCATION!!!!!! :)

It’s so important to know the place like the palm of your hand, because one block of distance may me may be the difference between a very sweet deal and a rather bad one where you loose money.
"nice" neighborhood, you say?
I ask, HOW nice?

Are the people there new “nice people” or is the place full of well off older guys too, families with their own business going well, the kids of these older guys stay there and carry on the family business, or their profession, the doctor ha his kid that is also a doctor and is taking dad’s place, assured income post SHT?
Because if it’s a year 2000 higher upper class and the guy is an employee that just got fired, he wont be “nice neighborhood” material for too long.
You want people with solid finances, not rich but solid. An older guy that has had a business that survived lots of things for decades.

You don’t want a place full of 20 year old internet wizards that are the first one’s to loose their jobs when things look bad.
Brick and mortar good. Digital bad. :)

OK, how can you tell the kind of people, the target of the place? Do your research.
Old nice neighborhoods that have been nice for 100 years and still have business owners, politicians ( like roaches, they never die, even after the nuke), judges, people with certain money still living there, that’s a good place.
A new development, even if nice, that started just 10 years ago and most people don’t even own their houses, not so SHTF proof.

What happened here, exactly what I’m explaining.

The more exclusive “nice place” that has been “nice” for 100 years still stayed ok, even keeping the pre SHTF prices, while just a block away ( I swear, just 1 block away form the nice place) the price drops like a brick. That house is worth maybe 75%, or 50% of what it used to cost.

Wont drop much more than that, 50% is pretty bad I know, but maybe you can hold on until the price goes up, or you can look hard for the proper person to rent to.
So that’s the key point in real estate after the crisis. The place must be consolidated.

Or you might explore the new market. That’s going to be people that can’t afford a “nice place” anymore and move to duplex or apartment right next to their job opportunities down town. So, it’s got to be easy on the pocket, small place but nice, and it should be right IN downtown or just next to it.
Just a small example, little true story.
Yesterday while waiting for my turn under the claws for that demonic sadist otherwise known as dentist ( ;^) )
I overheard the conversation two young women had while the TV was on in the waiting room. Its was news about another home invasion in a homestead in Pilar.
I heard them comment:
“See? We’re going to be just two women living alone, we cant live in a house, we need to move to an apartment. It’s much safer”
The other one shook the head in agreement right next to her with the eyes glued to the TV.

People just don’t die by the millions after an economical crisis like in the survival novels, in the real world they survive. And that makes things much more complicated. Because, where do they go?

The demand for this kind of real estate will create a new kind of “nice place” demand, in or right next to downtown, simply because there’s were more job opportunities showed up. That’s a niche in the market you’ll be able to exploit.
Before , it didn’t matter. A family lived in the suburbs, had a house in some sub with nice trees, lots of vegetation, and drove a large distance to work.
Now he has no work.
Now he cant afford the big house.
Now he cant afford the gas or maybe even the car.
See where I’m going? Don’t start splitting hairs and go for far fetched suppositions. These things, they happened here in my country, and it’s not something new, we’re nothing special, it’s the typical urban dynamic that has been going on forever.
Having said that, be careful of the places down town that are destined to become a rat hole.
Walk around the place a lot, see what kind of people live there, book stores and cafes? Nice .. xxx stores or industries that just went bankrupt? Maybe a larger investor can buy a few blocks and redesign the city, but not you.
So be smart, and do a lot of research until you know the place well, don’t just go along with whatever the RE agent says.

That’s also a nice way of investing.

In other words, what percent have the house prices fallen since 2001?

I'm asking as I read on automaticearth.com that they think our prices will go down 80 to 90%
Wow! What do you think? That is so scary as my husband and I worked so hard to buy and improve this house, then to think it will go down 80 to 90%?

Just to let you know in my area so far in the crash, the houses have gone down probably 20% so far. Many neighborhoods/cities much worse off than ours.

Thanks for your ideas and your blog.

80% and 90% is a bit extreme, unless you paid MUCH more than the already inflated market values dictated.

About 50 % is the norm, 70% for a very crappy deal to begin with prior to the crisis, and after a total market collapse.
Some are closer to going back to their pre-crisis value after a year when talking about a consolidated nice place like I mentioned before, some falling a bit lower than 50% when the buyer already paid too much for it before the crisis and the place was not even nice to begin with.

When property get down to 50%-60% tops, investors (bigger investors than the average folk) start buying because they see the opportunity. That alone prevents prices from going down further.

Old time real estate investors in Argentina estimate that 50% average is about as low as property gets until it reaches it’s floor. I’ve seen exceptions a bit above and below that number, depending on the variables mentioned, but it’s still accurate, as an average.

FerFal,
Perparing for the most likely senario seems like the best way to go and I've done that and more. I started over a year ago and done the best possible for a large family, however there are loose ends. I was unable to sell a multi-family apartment 'complex', referred to as a '4-plex' here. It currently pays for itself and the mortgage. During the initial shock and surge in consumer prices, renters may not be able to pay the rent and I can afford to pay part of the mortgage waiting for wage increases to catch up, or cut rents by up to 50%. The mortgage payment will not increase. If I'm able to hang on and avoid defaulting, is there a chance that wages will increase quickly enough? This assumes of course that there are still jobs in the area.

What do you believe was the experience of rental property owners. I'm counting on wages to increase and the possibility of actually being able to raise rents to offset other expenses expected to rise. Somewhere in your blog I remember reading that rents increase 60%. Is this correct?

If I can hang on to this property there might be a chance that it could be a way to help keep up with some of the price increases and possibly pay off the mortgage with inflated dollars. This sounds good, but the reality of the stituatation might be different.

Thank you,
Sticks

That’s very smart of you Sticks. And a pretty accurate estimation.

Not quickly, but yes wages will increase. Here they don’t increase as much as inflation. That’s why things are slowly getting a bit worse and middle class is slowly turning into poor.
Again, I have experience renting and I could give you a couple pointers.

1) It’s business, ok?
If you let them cry you a river, you wont even have to water the lawn anymore.
At first I went a bit soft on a guy, until one they he let it slip that he was glad because that way he could pay for all other things that didn’t cut him any slack.
“Dude, I’m getting screwed just so you can keep paying for your credit card buying God knows what else”
I told him that I was sorry, he had a month to get updated with his rent or he could start looking for something within his means .
Those are the words you must use:
“ I’m sorry Mr/Ms xxxx, you’ll have to find something you can actually pay for, something more within your means. I can’t rent this to you for 10 bucks when I have people readily to pay the real market value, which is 12.”
That is it. Don’t be best buds, it’s business.

2) Careful what you sign.
Get a lawyer to read every thing you intent to sing.
I was looking for someone for an office down town. The real estate company wanted me to sign something before they started looking for a tenant.
They had like 6 months exclusivity, I had to pay them like 5000 USD if I found a person to rent to on my own, etc, etc.
Man, that was great. I started laughing at the guy in his face. I called my wife that is a lawyer so we could both laugh at the same time.
I’m not kidding or exaggerating, I laughed at the guy in his face and after wiping away a couple small tears I handed him back the paper and told him of course, I wouldn’t sing that.

He looked at me with a face made of stone “Sir, everyone we work with signs this. The owner of the real estate agency requires it to begin working and finding a tenant for you”

I told him “ That’s fine, I’m glad you find idiots to sign that for you. Only proves how much stupid people there’s around.
Tell you what. I’m not singing you that piece of paper, its ridiculous, but I offer you this:
I’ll give you half the commission you are asking for, I don’t pay anyone more than that. I’ll give you, say, 2 months. This is down town capital district and you should find someone fast enough, I’m not asking for more than the market value.
You have no exclusivity over anything. I’m going to contact at least a couple other brokers. If you find a tenant, they you get the commission, if not then that’s too bad.
If you’re not interested lets just stop wasting each other’s time.”

His jaw hung pretty low, I don’t know if he was pretending to be shocked or really was, I don’t think everyone fall for what he wanted me to sign, but many sure did.
HE asked me to hold on a second, talked to some guy on the cell, offered me 75% commission of what they asked before. I told him I was willing to round it up to about 60% of the commission he asked, he talked on the phone again and said ok.
Know the market, don’t let anyone push you around into paying more than you should. And just don’t sign anything until you are sure.
Important: Whatever contract you sign, make sure it includes some kind of protection against any jump of inflation and the market in general.
My contracts have the possibility of braking up the deal after 6 months if inflation increased and the parts don’t reach an agreement on rent.
Other’s also include how much rent will approximately go up, again, with the possibility of braking the agreement after 6-12 months.

3)Find the right tenant.
The guy ended up finding a tenant, a gay psychiatrist.
The place had two offices and he’d use one, a woman ( also a psychologist) would work in the other office.
That’s the perfect. Not only one, but two professionals. The guy will never have a divorce of childcare to worry.
That guy will be paying rent for the rest of his life, and one things people need during a crisis, that’s therapy. He’s going to have lots of work for sure.
Don’t rent to any chunk of meat that walks and breathes.

Kids are a reality, but take a good look. A shabby looking guy with 5 brats running around, with an equally shabby looking wife is not someone you want.
Clean looking, verifiable job, preferably not 12 kids and someone that sounds reasonable when you talk to him. Check his background as well as you can. Lots of scams going on and once inside, it’s harder to get rid of them.

FerFAL

Counterfeit Money

I have a couple of other longer posts going on but I wanted to share this little tip with you because it’s one that can save you a lot of money, for real.

I’m not so sure how used you are to detecting counterfeit money.
In Spain, I’ve been handed funny money IN A BANK, without the employee realizing it unitl I told her, so I suppose that at least there, people aren’t used to it.

Point is -> economical crisis -> people need money-> some genius realize they can “make” money.

So sooner or later you start seeing a lot of counterfeited money. Some is better made than other, but this will probably become a problem in due time.

After our 2001 crisis, it happen after a few months, about a year.
It already happened before teh crisis, always had some funny money around, but after the crisis you noticed an increased number of it. There was a lot of fake money around, even fake coins. (someone made a killer there, since it was very hard to tell the fake coins from the cheapo post crisis coinage)

Inexpensive gadget that can save thousands ( literally!)




http://forums.the-gadgeteer.com/photon-micro-lights-uv-purple-review.html

I started carry one of these ultraviolet LED lights. Not this particular brand, but one similar in terms of function.

Just lighting it over the bill would quickly tell you if the money was either fake, real, or maybe a good copy. I’m saying this because other things must be checked to before you can tell it’s not fake, but the light helps a lot.

I must say, I don’t carry one of these any more, and use the space for a real LED flashlight.
Why? Because after years of this, I humbly must admit that I got good at telling funny money form the real one. But don’t get too cocky, don’t think you can tell the difference too just because you think you be able to. Wait until you’ve detected about 50 counterfeit bills give or take( in actual exchanges and in payments at the cash register) before you can claim that.:) Better to be humble than loosing 100 bucks.
Now, things to look for, besides the light:

What to Look For:

1) Overall feel, the paper, the graphic quality. I’ve found fake money that had ugly quality paper. Not quality fake money, but in a rush you might not notice. Even with a home printer they can do this low quality counterfeit, so take a breath when you have money in your hand, and look at it well. Do not rush.
I remember once, I found a bill that was wrong since I first had it in my hand? Low quality and obviously fake but something else, What was it?.. After comparing it with a real one it was clear that it was 1/10 smaller. :)

2) The ink used. A real USD bill will leave a mark when rubbed against white paper ( the darker numbers)

3) The water mark. Don’t just make sure it’s there, make sure it has all the detail. I once found a fake dollar that had the watermark portrait, but with much less detail. It was hand make. Good detail, but not enough. Fake. Some look like drawn by a 5 years old, others a real work of art, making the bill probably more valuable than the real deal. :)

4) The vertical strip. Only noticeable when looking through the bill with a light in the back.
This should not only be there, but have numbers in it. I once found one that was a simple black strip inside the paper. Fake.

5) Look at the shiny ink marks, the one that sparkles a bit, it should be clearly defined, and not messed up a bit.

6) The numbers, the ones that change color when you look at it at a different angle, it should clearly change color.

7) Last the paper. Touch it, look at a lot of real paper bills trough light. The paper money is printed on is special, has a number of marks, a texture, that is different from ordinary paper.

These are basically the things I look for in money. I’m sure I’m forgetting some and there are others too, but check these, with the light to help, and you’ll avoid most counterfeit money out there.

Seems like a long list now that I look at it, but once you get used to it you check all these things in seconds.

FerFAL