Yesterday as I absent-mindedly scrolled through Google News, I spotted an article educating readers to start a victory garden to offset the cost of inflation this year. It struck an eerie chord in me because victory gardens were popular not only during World War II but also during the Great Recession of 2008-2012.
If I am reading the tea leaves properly, here’s my prediction: we’re heading into a worse economic recession than what happened in 2008. It’s time to bring back the lessons learned to educate a new generation that hasn’t experienced such a terrible financial crisis in their adult lives.
When assessing the current situation, I feel this new financial downturn will be much more catastrophic than the last. Inflation is ballooning at the highest rates since before Regan screwed up the country. The housing market is much more inflated than it was from 1999-2006. Wages have remained stagnant over the last 25 years. We’re into the third year of a global pandemic unlike anything seen since 1918. Oh, and the world is likely in the initial stage of World War III.
Yikes.
Since investors don’t care about anything except increasing (or at least maintaining) their accumulation of wealth, companies are forced to increase the prices of products and services to appease their overlords while keeping wages low.
Thus begins the domino effect. Prices go up and wages stay the same, which means those very same employees (aka consumers) must spend more of their low wages on the same items they previously purchased. Shoestrings tighten and eventually consumers buy fewer products and services.
Then the companies suffer more. That’s when the layoffs begin.
In 2005, my wife and I made around $100k a year and bought our house for $241k. Assuming a young, newly married couple living in our city are in the same position today. They likely make around the same income due to wage stagnation but now they have to spend $330k for the same house (at least that’s what Zillow and other realty sites value our home).
Think that’s bad? Let’s say one person from that married couple gets laid off. Repeat that tens of thousands of times.
The government will come to the rescue, just like they did in 2007, right? LOL.
Back then, the national debt was around 9 trillion dollars. Today the national debt is well over $30 trillion. The government spent billions bailing out companies and citizens during the never-ending pandemic. There’s only so much money available.
Circa 2007, the Fed relied on a fancy economic approach called economic easing. They reduced the federal interest rate from over 5% in 2006 down to 0.09% by the end of 2008 to promote spending. That’s a lot of wiggle room. Want to take a guess as to what the current interest rate is? 0.08%. There’s no more wiggle room for the magic of quantitative easing.
My point is this: it’s going to be bad. Very bad.
So what can you do to prepare (and hopefully survive) the pending doom?
Here are a few things that worked for my family and me:
- Use Dave Ramsey’s Baby Steps and pay off your debt ASAP.
- Come to terms with the reality of being poor. That means assess what you should be spending money on versus what is a giant waste of money.
- Cancel cable (if you have it) and stick with 1-2 streaming apps.
- Lower your home internet speed to the next lower plan. I bet you won’t even notice a difference.
- Stop going out to eat and instead make meals at home.
- Learn how to be an extreme couponer.
- Consider shoping at thrift stores for clothes. You’ll be surprised at the quality of clothes you can find there.
- If you own a gas-guzzling vehicle, consider downgrading to a fuel efficient car. Odds are you’ll save money on insurance, too.
- Borrow books and movies from your library or at least buy used copies instead of new.
- Get rid of Amazon Prime today. This should be higher on the list.
- If you’re forced to go back to work at the office, try to carpool with coworkers.
- Do not use your credit cards to buy anything unless you know for a fact that you’ll pay it off by the next statement. Only use cards that offer reward points.
- Switch your mobile phone plan to Mint mobile and you’ll save a TON of money.
- Avoid adopting a new pet or at least thing about it long and hard before committing. Dogs are expensive. Cats are less expensive. Fish are the cheapest and require the least care. Just saying.
- Consider bicycling to work in nicer weather.
- Find a higher-paying job now while the economy is suited for employees.
- Opt for less expensive vacations like camping and weekend road trips versus the big trip to Disney, cruises, or international travel.
- Skip heading to the theater for new movie premiers. Instead, have a family movie night at home and buy decorations and favorite snacks.
- Keep your current mobile phone instead of buying the latest iPhone, Galaxy, or Pixel.
- Sign up for fuel rewards apps at your local gas station. Typical savings is around $0.10 per gallon. It adds up.
- Read up on disaster preparedness and build up a 3-6 month supply of non-perishible food and household staples. This helped my wife and I sleep better at night.
- Make extra mortgage payments if you own a house. At one point my wife and I were 6 months ahead in our mortgage payments and that helped us sleep better, too.
- Pay off your car and drop your insurance down to the minimum coverage you feel comfortable with. Keep that car for at least 5 years. Preferrably 10 years to get maximum value from it.
- Stop drinking alcohol at home or reduce the amount you consume. When I quit drinking beer and switched to filtered ice water, I felt better and saved a ton of money every month.
- Spend money to improve your skills and education. Investing in yourself is the smartest decision you can make. At the beginning of the Great Recession, neither my wife nor I had a college education or good job. By 2016, we both had our degrees, I had a high-paying career in IT as a network engineer and she was a licensed x-ray tech. It wasn’t easy but it was the best decision we’ve ever made.
I hope what I shared above helps at least one person. My wife and I worked so hard to make ends meet from 2005 to 2016 and not only did we survive but we ultimately thrived. You can, too.