PREP Prep 101: Finance

[Nuthatch]

This site is fabulous for considering all angles. I have been a part of it, including under other guise, since 1998.

My biggest beef is with folks who do not adequately consider financial issues. Not the bizarre, unexpected kinds, but the run-of-the-mill kinds of financial issues.

Before you invest in $$$$ of dollars of dried food, dosimeters, generators, bug-out-land.........make sure you can afford where you are.

How do you do that?

Regardless of family size: can you afford the location on ONE, Minimum-wage salary? If you cannot, you have overbought. If buying what you have is dependent on your current two-income life, you do not own it.

This includes mortgage, other loans (don't buy it until you assess your ability to afford it), rent to own, car loans, etc.

If you have overbought.....then you will end up vulnerable to what many on this site have faced. You may owe more than your home is worth. You may "own" many items that prove worthless ( fancy motorcycle, generator, prep items)....Only owning them free and clear makes a true prepper.

I recommend that living "under" your means is the way to prepper happiness.

Please add other $$ recommendations here.

To make this clearer: we have created our life to live low on the "food chain". We could each make maintain the household , on ONE minimum wage job. If that is not sustainable, we don't do it. Regardless of how lovely the item is, or how much we want it, or the discount. It is called discipline.

Otherwise, they are simply choices to overspend. You reap what you sow. (this is generalized, some folks have odd circumstances, in my experience, many simply chose their way into trouble......).

 

[LibertyInNH]

One strategy I have shared, including at church, is to think of everything you purchase in terms of "how many hours of my labor did it take to buy this?"

It puts some perspective on what your time is worth, and what the items are worth in respect to your time.

 

[Nuthatch]

Yep, Liberty, this is brilliant. And one of the pillars of the book, "Your Money or Your Life".

 

[Maher]

Nuthatch - this is a great thread and you have given some timely advice. The only payment we have is for our house. I am retired and we could live on my fixed income if circumstances warranted it. However, my wife is healthy, has a great education and loads of skills and is fully employed. So, we use her money to pay for some of the extras we enjoy and save or help our kids as money permits. In a month or so we will lose about 1K of income per month and will have to tighten our belts just a little. In the mean time, we have used the extra money to help our youngest son get a car and jump start his musical career, etc. (amps guitars, drums, saxophones, etc, are expensive).

 

[Volleyball Granny]

By the end of the month, the only debt payment I will have is my mortgage. My daughter is paying off her truck (which I drive, since she doesn't have a license). My car (which my son drives) has been paid off for two years.

It's a good thing, since our income dropped by 30% when my daughter turned 19 yrs old.

Once I take motor-cycle lessons and start riding my scooter to work, our gasoline bill will go down, too. I can't wait!!!!!

 

[MamaDel]

But what about people like me? 31, 6 kids, less than 5 years into a 30 year mortgage. We are making our bills... but how in the world can I pay off my home quickly...like by 2012

Truth be told it aint gonna happen. I didn't know half of what I do now when we bought the place. That is not being stated as an excuse...just a fact. Housing market what it is in my parts...selling doesn't appear to be an option and we are not the "just stop paying" kind of folks.

Your advice is sound, but a little late for me.

MamaDel

 

[Maher]

This winter we have been acclimatizing ourselves to live in a colder house to see if we could get our gas bill down. This winter it's averaged about $40 EACH MONTH.

Our Electric bill is about three times our gas bill, but then we still have one teenager home and his band practices here at least three times every week. We have loads of electronic gadgets plugged in all over the place.

Our food bill is half what it used to be since our older kids moved out. So, we are saving on that and we seldom eat out - since I really can't eat restaurant food. But, when we do break down and go out it's a big expense; because, we always take some of the kids and their spouses with us.

It wouldn’t be hard for me to live really cheap, I don’t need much. I could live in a cave and be happy. But, then I am married and try to give my wife and kids all the things they want and need.

Mama Del - I know what you're going through. Back during the Carter era, I was out of work with 8 kids to feed. My wife got a job working at a local restaurant and we paid the rent and utilities with her check; and, with her tips, we bought food etc. I baked lots of loaves of whole wheat bread during that year I was unemployed. (Thanks to my training as an Army cook.) It was tough times, but with the Lord's help we managed.

We had a Kerosun kerosene heater that we warmed the house with; because, we couldn't afford to fill the oil tank. I walked about three miles every other day and bought five gallons of diesel to run in the Kerosun. It didn't burn as clean, but it worked. Those were hard times but, somehow we managed. Living through those hard days made us stronger. And, we needed it when our ten-year-old son got cancer. I think that two years of trying to keep him alive was the hardest thing we ever did. Sometimes hard times just make us tougher. I wish you all the best as you work your way through these trying times.

M

 

[Palmetto]

But what about people like me? 31, 6 kids, less than 5 years into a 30 year mortgage. We are making our bills... but how in the world can I pay off my home quickly...like by 2012

Truth be told it aint gonna happen. I didn't know half of what I do now when we bought the place. That is not being stated as an excuse...just a fact. Housing market what it is in my parts...selling doesn't appear to be an option and we are not the "just stop paying" kind of folks.

Your advice is sound, but a little late for me.

MamaDel

Don't worry about dates. Live one day at a time. Trust God for your needs.

Hopefully, 25 years from now your house will be paid off and we will all still be here looking for prep ideas.

Palmetto

 

[Jef]

I recommend that living "under" your means is the way to prepper happiness.

I absolutely agree with this. I remember making a similar comment on the previous incarnation of this forum prior to y2k in 1999 and was criticized by several posters. Many of the forum participants position was to spend everything they had stocking up on supplies. My position was that lots of money and other diversified assets could be very helpful in difficult times. I've always felt that even in the event of a serious major disaster that the free market forces will eventually take over and if you have cash and other assets, you can find a way to continue to live well. Therefore, my approach to prepping in addition to keeping a 30 day supply of food and water & being well armed, was to work very hard at securing a high income, living below my means, and saving as much as I could. I'm thankful for the choices I made...

 

[MamaDel]

Doing my part and trusting God is all I know for sure. I figure I'm where I am for a reason. Got to make the most of it as honorably as we can. Cars are paid off and we try to be as careful as possible on every other expense.

MamaDel

 

[Nuthatch]

Try not to be discouraged, MamaDel. We all make decisions based on what we knew at the time. Shoot, my first home loan was a balloon, because that was all there was at the time. Luckily, at balloon time, we qualified for a traditional mortgage.

It might help to consider paying $10 extra a month on the mortgage. That adds something and lets you feel you are making progress. I have taken on more work, when possible, to make these goals, mostly because I like to have a bit of fun too! Can your children do anything to earn spending money out in the community (yard work, paper route, babysitting)? Let them.

No one likes to hear this. Just because you can afford the payment does not mean you can afford the item.

Make a list of what you owe and keep it visible. Not to punish yourself, but to remind yourself what your goals are. You want the $250 Berkey? Then something else needs to give so you can find the $. Or you put that $10 away each month until you can afford it.

It is also important to keep a cash fund that you can use when something goes wrong. We have enough in the cash fund to pay our mortgage off, but I won't, since a house is not liquid. If things go really bad, I could pay the mortgage off, but it is more likely that I will need to replace a car, pay for health care or house repairs/maintenance. So I keep the cash available.

This cash fund helped ease the burden of spending 18 months un/underemployed. We went into austerity mode, for sure, but we made it. I know you can too.

 

[WildDaisy]

We have no debt at all. Home is paid for, cars paid for, no credit cards at all. Fiance has been unemployed for over a year now and we do just fine on my salary. Money goes to utilities, taxes, groceries, insurance, and savings and we each have a set "mad money" budget line item that we alot ourselves each month for whatever we want to buy. We can save it for something big, or use it on little things. No questions asked.

I craft, so my mad money goes to crafting supplies. He likes to play games, so his money usually goes to gaming sites. We're both happy that way.

We make sure that the contributions go to the emergency fund and savings first.

However, the one thing I want to work on is backing up that savings with more gold and silver. While we are Ok on one salary, we want to plan for a possibility that perhaps we both might be out of a job at once one day.


Mama, I am just like you. I am 40 and was a single mom for the past 14 years. I started the Dave Ramsey program about 10 years ago when I was first divorced. It took us 8 years, bue we paid off everything, just on my salary mostly. Fiance has been unemployed for over a year now, and this is the third time he was laid off in the 9 years we've been together. When he was working, we threw everything in his pay at the debt. We snowballed it, taking the smallest debt first (not the largest as most suggest). By taking the smallest, you get a feeling of accomplishment as you pay that one off.

You make the minimum payments on all your debt and take as much extra to throw at the smallest debt first. As that one is paid off, you take that amount you would have paid to them, and roll it to the next smallest one, continuing the minimum on the others. When that one is paid off, you take the payment you would have made on the first and second and roll that to the third smallest....and so on.

To start, we need to get $1000 in an emergency fund

 

[ivantherussian03]

I sold tires once...I always thought the saddest people would have high maintaince vehicles that required high end expensive tires for one reason or another. Some vehicles require 16 inch tires, or low rider style, or high speed racing tires. They would try and buy the Sears special, which would be dangerous. Dont buy vehicles you cant maintain.

So much for looking cool, or pretending to be rich.

 

[Nuthatch]

Brrr

 

[Nuthatch]

So many folks are easily confused. A true prepper prepares for more than 6 or 12 months of unemployment (of one or more of the family). They save and do not buy until they are safe for that time period. And they do not buy beyond what they could afford on the lowest possible salary of one person (minimum wage for one person).

Once that is done, they are prepped. Otherwise, they are not.

Yep, stuff still happens to kick your butt on bills (I am speaking of health care costs as I pay on my new knee), but if you buy only what you can afford, then divorce, death, need for a new car, will not bust your lifestyle.

People not paying their mortgage often made choices to over-buy prior to this moment. Bummer, but welcome to consequences.


Edited to add: I went through 18 months of under/unemployment with a self-employed SO.

 

[Amberglass]

I will be mortgage free May 2011.......I am counting the days. I could pay it off now but at 2.5 %, I will leave my money in the bank. For me, being mortgage free is major. I can hardly wait.

About 10 years ago we started paying our mortgage weekly and upped the payment,it took years off. I'm so happy we did that.

 

[Nuthatch]

Amberglass: Congratulations!

Just knowing that you made the smart choice along the way, well, pat yourself on the back!

 

[fairbanksb]

Sounds like the way to go in theory but I can't see how it's done looking at the math. You may be able to do it for a time but eventually things will fall down around your ears. Minimum wage is what? about $1000/mo. after taxes? Two hundred of that would go to property taxes and homeowners insurance and I live in a fairly inexpensive part of the country. Auto insurance, health insurance, food, electricity, water. Just the maintenance on the home will eventually get you the older the home gets. The car too. My home is paid for but it is now 22 yrs old. Already had to replace the roof, $6000. The central air, about $3000. Just had to replace the windows. The appliances have been replaced. Hurricane took out privacy fence, twice. Insurance has $3000 deductible so no help. It would take many, many years of savings on minimum wage to try to keep up with just costs like this.

 

[Dux]

25 years ago, we used to dip into debt via credit cards. I didn't like credit card debt, so would pay it off. A few months later, same story. Then I learned to keep saving, regardless of debt, and just reduce spending to get the debt paid off. I used 401k plans and other automatic savings techniques to save money. Any raises would disappear into my savings plans.

Currently, I am paying my mortgage on time but not ahead. Our debt service is comfortable, could make it on one income if we had to. Life insurance policy would take care of the mortgage, if one of us died.

I can't plan for retirement. Not smart enough to know how much I'll need. Just how much would that be, with hyperinflation coming?