The first thing I want to do is to look at “preparedness” from an overall, you have all the time in the world to prepare for life angle. What would we do? We would sit down and ask ourselves, “What preparation should I make to care for my needs and the needs of my family?” right?
What is the first thing we need to do to be prepared for the unexpected? Most of would say live strictly within your income and save something for a rainy day.
How can we do this?
Incorporate the discipline of budgeting. Know how much you earn and what your expenses are. This sounds like a no brainer, but you would be surprised at how many people have no clue about the reality of a budget. Be realistic. If you drink a large mocha latte from Starbucks every day, you need to add the cost of 5 large mocha lattes to your weekly budget. You might just discover that you don’t really have the extra income for that large mocha latte and you would be better off with a travel cup from home.
Regularly set aside an amount needed for future family requirements. I know it seems like a lot, but you should shoot for at LEAST 3 months’ income put aside for times of possible unemployment. In fact, with the world the way is it I would strongly suggest having 6 months to a year in liquid cash assets in case of emergencies. When I lost my job, I had about 2 months put away…trust me, that’s not very long and the money goes fast, especially when you have an unforeseen emergency like a car breaking down and hospital bills. A budget won’t put the money aside for you, but it can help you get a handle on where you are now financially, and give you a plan to get where you want to be in the future.
Include your children in your planning. Remember, it’s their future too. They need to understand what your income is, what your expenses are, and how these realities affect their lives and desires. Children are inherently selfish. Unless you explain the realities of life to them they aren’t going to spontaneously understand why they can’t have that new iPhone and the ski trip to the Andes they have their little hearts set on. On the flip side, we tend to not give our children credit for being reasonable if things are explained to them. Talk to them. Keep them in the loop. They, and you, will be much happier for it.
Take on a more minimalist lifestyle. Again, I’m not suggesting a cabin in the woods with no electricity or indoor plumbing, although a smaller foot print might not be a bad idea. I’m suggesting less unused junk. I’m suggesting using what we already have more efficiently I’m suggesting a change in attitude that promotes a less is more mindset.
Just take unused junk as an example. Here’s an idea… go to your garage or basement and look over the unused bicycles, toys, athletic equipment, skis, roller blades, etc., and calculate what the return would have been had the cost of these items been invested in future needs. Remember, I’m emphasizing unused items. How many of you have seen garages so full of things that there is no longer room for the car? Let it go! A good rule of thumb is if you haven’t used it in a year…or the dust and spider webs are so thick it takes a hazmat suit to get near it…You. Don’t. Need. It.
Next, avoid excessive debt. This is the natural follow up to the first part. We need to cultivate the discipline needed to stay well within our ability to pay. I truly believe we should avoid debt as you would avoid the plague.
Start right now and learn to live within your means. Nurture the attitude of if you can’t afford to pay cash for something, you really don’t need it. I believe the only debt you should have is for your home. And even then, less is more. Living simply means living well. It means not having the stress of worry. Now, you’re probably thinking, “but you forgot about my car loan”! No I didn’t. I haven’t had a car loan in 35 years and I don’t ever intend to have one in the future. It’s true, I don’t drive a fancy new car and never have. I’ve always bought what I could afford and learned to be satisfied with it. It may not be extravagant, but it has four wheels and gets me where I need to go…and its mine.
Get out of debt. Keep out of debt. Put away extra for that “rainy day” which has always come at us in the past, and will certainly come again in the future. Learn how to be thrifty. Buy quality, but not extravagant. Learn to recognize a bargain and take advantage of it. Improve on our work ethic. Work hard and save for the things you want. There is nothing wrong with delaying gratification. You will develop patience and appreciate the things that you have worked and waited and saved for. It’s fun! It allows for freedom and a good night sleep.
Third, obtain and store a stockpile of food and supplies that will sustain the life of you and your family in the event you need them. I would suggest a minimum food storage stockpile of a year. More is better, but being realistic is the key. Do what you can in your circumstances. Get clothing, supplies and everyday needs to last for a year. Kids grow fast. Make sure you have enough to keep them going for a while. Remember, they will grow into it even if you don’t have an emergency. And lastly, build a savings account on a sensible, well-planned basis that will serve you and your family in times of emergency.
Fourth, careers are ever changing. It’s not like our parents or grandparents who went to work for a large employer after high school or college and retired from that same company decades later. My father only worked for one company his whole working life and so did my father-in-law. Young people entering the work force today will Not have the same luxury. They will be faced with major career changes on an average of three or four times during their work life. Job changes will occur even more frequently, approximately ten to twelve times during a life’s work cycle. I know I’ve had quite a few in my own lifetime.
The only way I know of to prepare for the in between times of unemployment and career adjustment is to be sure that during the times of plenty (when we are employed), that we are preparing the things we will need to see us through those less prosperous times. If you already have a plan, GREAT. Update it. If you don’t have a plan, start creating one right now. Think about what you will do if you become unemployed and need to live off what you have for a while.
I’m not a financial expert by a long shot and I’m not going to give you any advice. Talk to an account or financial advisor about your particular situation.
I don’t know much. I’m very open about that. What I do know is that the instability in the world today makes it imperative that we prepare for the future.