Reset or no reset, I believe we will have serious repercussions from the widespread lockdowns. Is there anything we can do about it? How can we prepare?
There is good news. Over the next three months, I'll be sharing stories of individuals and families who have taken practical steps to weather the coming financial storm. All of them shifted their trust away from small “g” governments with huge debt loads, to big “G” God, with infinite resources. Rather than seeking financial independence they pursued financial interdependence with family and with their community. First, we'll look at regaining monetary spending control. In March, we will discuss medium-term saving and investing. In April: Investing in assets that are beyond the reach of inflation, fraud, fees, and even taxation itself. Stay tuned!
Strategy 1: Buy more locally, using your credit card less.
When he was asked about missing out on the cash-back, Bill, who had done his research explained, “Cashback is a trap. You cannot save some money by spending more money. Many studies have shown that people tend to overspend by about 30% when buying on credit.1 When credit card companies offer a 2% or even a 5% cashback while encouraging 30% in excess spending, they confuse money management. Their cashback tricks conflate spending and saving in the minds of the consumers. It increases the consumers' financial fog.” Bill sipped his coffee and elaborated, “It's really easy to blame the credit card company for everything, but responsible use of credit is possible, and has been exercised by lots of people. Individuals need to take responsibility for their financial decisions, and I think that's the approach I'll take.”
Bill is right. People who get out of debt can only do so because they recognize that they are the problem.2 It means they must get into the habit of having a positive cash balance in their bank accounts and then watch it daily. Getting out of debt is hard. Bill decided to resist the easy-credit, quick-pay trend that has been growing for the past 35 years. He took full responsibility for his finances and is building a stronger community by supporting local businesses. Imagine Amazon getting smaller.
Strategy 2: Have an in-house, cash emergency fund.
The Gagnon family was worried about digital currency being used to control their purchases. They started to build an emergency cash-stash of over $1,000 in their house/on their property. Mrs. Gagnon said that “having a large sum of cash available in the form of twenties and fifties, is part of our emergency fund. The rest is in our Tax Free Savings Account. Our cash-stash is a reminder that money is real. Besides, the banks pay almost no interest, even in their savings accounts.”
The Gagnon family has it right. Rather than improving the efficiency of their spending they are spending more effectively. She elaborated, “I am a very tactile person. When I count out $225 dollars for our grocery bill in tens and twenties, it feels much more significant than paying with a credit or even a debit card. We have more control. We spend slower and try to buy just what we need.” Less efficiency. More effectiveness.
Strategy 3: Buy some hard currency.
Ruth is concerned about the sustainability of fiat currency. She believes that paper money will eventually return to its intrinsic value: zero. Historically, gold was used to store wealth, and silver was used for daily commerce. Silver has been used for thousands of years before paper money ever became popular. Small units of high-grade, authenticated silver are much more tradeable than gold. Ruth is working to store on her premises close to $5,000 in one-ounce, or one-half-ounce, high-grade silver coins, the Canadian Maple Leaf (one ounce), the Canadian Polar Bear (1/2 ounce) and the American Silver Eagle (one ounce). She buys silver on its price dips. An ounce of gold currently costs about $3,000 CAD, but an ounce of silver about $35 CAD. I think Ruth’s strategy makes sense. The recent surge in silver prices reflects declining confidence in global monetary systems. Ironically, it reflects a reversion back to the first recorded currency.3 The Latin word for silver, ‘argentum,’ is also the root word for money in French: ‘l’argent.’
You can work on these strategies simultaneously. Be sure to use a system such as Your Money Kitchen or Every Dollar (Dave Ramsey) to track your spending. Develop new purchasing disciplines. This will take time to learn. Be patient with yourself, but don’t procrastinate. All three of these individuals are using specific methods to change spending patterns. Their underlying trust is not in the method, but in the Master. He warned us that “Poverty and shame will come to him who neglects discipline.”
The economy is fundamentally built upon trust. If enough people can encourage interpersonal trust, with or without the government in the process, it will go far in building a better world.
Use credit less and buy locally. Slowly establish an in-house cash-stash emergency fund. Get some hard, classic currency. Prepare for financial difficulty by changing your spending habits. Take responsibility for your own financial welfare. Next month we will look at saving and investing.
Footnotes
1This link describes spending double on credit versus cash, a 100% increase.
Do people really spend more with credit cards? (Forbes)
2Thirteen stories of those who eliminated personal debt.
13 tips to eliminate debt from regular people who paid off thousands.
3Did you know the oldest legal text in human history relates to commercial use of silver? “The rich must use silver when purchasing from the poor, and if the poor does not wish to sell, the powerful man (the rich man or the priest) cannot force him to do so.”
The Urukagina code of ethics (approx. 2,380 BC) was written about 5,000 years ago, 900 years before the Ten Commandments. It is preserved in its original form. “Urukagina.” Wikipedia. Accessed April 26, 2017. https://en.wikipedia.org/wiki/Urukagina
Tom Lipp