Eliminate Debt And Recession Proof Your Life

By |2019-02-25T08:34:48+00:00January 30th, 2019|Financial Planning|

Recession-proof your life by eliminating debt

“History doesn’t repeat itself, but it often rhymes.”– Credited to Mark Twain

It’s well understood that boom and bust cycles are an intractable part of every capital-based economy. Those of us who’ve been around long enough can recall the “Oil Shock” of the early ’70s, the recession of 1981-82, and the smaller recession in 1991. Each of these events had varying degrees of impact on the economy.  Most recently there was the Tech Bust of the early 2000s and of course, the 2008 meltdown, which has occupied a lot of our attention lately.

Hysterical commentary from TV “money personalities” aside, there is a historical pattern of economic correction that occurs about every ten years. Going into 2019, it may seem as if we are a bit overdue, but don’t let that lull you into complacency or you’ll find yourself caught off guard and unable to realize your retirement goals when the next major recession does hit.

Economist and author Charles Hugh Smith, whose “Of Two Minds” blog is a staple for contrarian investors, believes that those with little to zero debt and possessing income streams they control themselves are in the best position to survive (and potentially even thrive) during a major market upheaval.

I couldn’t agree more. Reducing or completely eliminating debt should be your first course of action as you prepare yourself for a coming crash.

Suggests Smith: “Selling (overpriced) assets to liquidate debt is one way to get rid of debt payments. Eating 95% of all meals at home slashes food/dining expenses, eliminating media subscriptions (and reducing the time spent staring at screens) cuts fixed costs, and so on. “

The great thing about debt elimination is that there is no downside. Even if the recession isn’t as severe as predicted, or if you aren’t as impacted as some others, eliminating debt frees you to snap up equity bargains, purchase income-producing assets, and pump up your retirement income streams. Getting rid of unjustifiable expenses also frees up a lot more of your most valuable currency-time.

Here are some ideas I’ve put together to help you on your way to becoming debt-free and cash flow positive.

1. Do a hardcore audit. This could be a bit painful, I know. Go through every regular expenditure and ask yourself tough questions. Do you subscribe to paid newsletters, news sites, or other media you never read? Ax them! Are you forking over money for cloud software, TV (cable or internet) that you use less than a few hours per month? Get rid of this, even if it’s “only” $4.95 per month. This goes for things such as gym memberships, discount clubs, etc. You’ll be shocked at how quickly the savings add up.

2. Curtail your online shopping. Amazon and other sites have made it amazingly simple to find anything you can imagine online. Whether you need the item or not, it’s so easy to achieve instant gratification using these sites that resisting temptation is nearly impossible. Is that multi-function Bluetooth-enabled disco ball really worth going into more debt?

3. Take stock of all your investments, taxes and insurance products. Have your goals or circumstances changed since you purchased that large life insurance policy? Are you having too much withheld from your paychecks? Perhaps another set of accounting eyes could find you more deductions. Is the IRA or 401 K you currently have charging you a lot of fees and admin costs? Are you paying a premium for things like homeowners and car insurance? Are there age or occupation-related discounts of which you are not taking advantage?

4. Consider financing major purchases yourself.  There are financial tools and strategies that, when properly designed and implemented, help you by-pass banks, credit card companies, and finance companies. This strategy can be particularly useful when it comes to buying things such as investment real estate, cars, and other big-ticket items that often carry high-interest rates. The idea was first popularized by Nelson Nash in his book, “Infinite Banking,” and can be achieved by using various types of specially-modified whole life insurance or other tools.

5. Have an in-depth meeting with your financial professional. He or she should always have your best interests at heart and should be willing to do whatever it takes to help you clearly define and achieve your financial goals and protect you from a market downturn.

These are just a few ideas for becoming more solvent and in control, so you can better withstand the next financial meltdown.

The funny thing about slashing your budget to survive a recessionary storm is that it works wonders whether the recession is deep or shallow. If your income doesn’t take a hit, then you’re saving money to buy recession-discounted assets or spend on important purchases later without having to go into debt.

If your income does take a significant hit, you’re already prepared.

Look at what the 1% own and what the bottom 80% own. The bottom 80% “own” debt and the top 1% owns income-producing businesses and assets.

About the Author:

Lyle Boss
Lyle has actively taught advanced estate planning and asset preservation for more than twenty years in such places as the University of Utah and in over 200 Senior Retirement Consumer Education Workshops throughout Utah, Idaho and Wyoming. Web Sites: lyleboss.retirevillage.com | safemoneylyleboss.com