Economic Depression and You

Anyone want to bet on the economy? Anyone?

Funny thing about economic downturns. The kinda sneak up on you. We tend to think the start of the last major depression coincided with the collapse of the stock market. While in hindsight that was a major turning point, the average Joe at the time didn't feel it. Some folks were impacted right off, but others didn't feel the pinch for a year, two years or even longer. A minority actually prospered.

Even most of those who lost big didn't get feel the full brunt of the downturn immediately. It took some time for savings to be exhausted and debt collectors to catch up. Some folks limped along for a while selling hard assets at fire sale prices. There are families who's tales of the depression are about how they had to let most of the servants go. Yeah, times were hard on them.

There are a couple of ways to deal with a downturn in one's economic situation. One is to limp along trying maintain as much of the old lifestyle as possible. Middle class people will probably try and do that by living on their credit cards. The idea is that when their situation improves they'll make good on all that debt.

Another method is to not wait for things to get better. Instead you assume things won't, at least for a long time. With that in mind a person's lifestyle is ruthlessly cut back. Expenses are reduced to reflect one's downsized income.

Personally, I've used both methods at the same time. That's not something I recommend, but I had some reason to expect a monetary settlement that would eventually cover most of the debt. While it worked for me, it was a near thing. The stress level is pretty high so if you can reduce your expenses and still live a reasonably comfortable life, that might be better.

Most people think they are in pretty good shape if they have the resources to survive a year. Yes, that's good, but economic depressions don't last just one year. If you can radically downsize maybe that cushion can last much longer. The time to prepare for a down turn is before it really impacts you.

On a personal level I was fortunate that I had my own well, some solar electric power, and a woodstove. Those resources were extremely useful. However, after four years I was about to lose the house for nonpayment of the mortgage and taxes. Even if the house had been paid off, I would have been unable to pay the taxes. That's something to keep in mind. They will take your house away and put it up for auction.

Now is a good time to figure out how to deal with a depression. It might be a world wide economic downturn or it could be something personal like a job loss, medical expenses, or other problems like legal issues.

Don't let your problems pile up. Have a plan. The last thing you want to do is ignore approaching disaster.

-Sixbears