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Budgeting for a Lifestyle Contraction
I regard survivalism as a legitimate lifestyle that is hedging against a series of events that are unlikely to take place, but which if they ever take place, the serious survivalist will be in a much better position to deal with these events than most others who live in an urban environment.
The basic issue of survivalism is this: preparing against a rapid, comprehensive, and unexpected collapse of the division of labor. There are very few examples of anything like this in modern times, other than war and revolution.
If there were a major crisis in the banking system in which central banks could not create digital money fast enough to save the largest banks from collapse, there could be this sort of contraction. But even in the Great Depression, it took three years to get from 1930 to 1933, which was the trough of the depression. There was time to react.
There is always the possibility of nuclear war. We came perilously close to this in 1983, and close calls probably happened on more than one occasion. But it did not happen. To think that it could not possibly have happened is naïve. But, on the other hand, to think that there was a high probability that it would happen was also naïve. It was a long shot, but it was within the realm of possibility.
In today's world, I think the greatest threat in this regard is the threat of biological warfare. I think that this threat will increase over time. Again, I regard it as a low-probability event, but the devastation that it could cause is unthinkable -- so we prefer not to think about it. If we were in a situation in which a true plague struck modern society, the only way to prevent or at least reduce the likelihood of being afflicted is complete isolation. This would mean complete isolation from family members who show up on our doorsteps. I regard this as a risk that most families would take, which means that the spread of the plague would probably continue unabated. It would simply have to play itself out. The economic devastation would be massive, because millions of people would refuse to go to work. They would not want to have contact with other individuals in closed spaces. The division of labor would contract, although I am not saying that it would collapse. Our lifestyles would be fundamentally altered until the plague receded.
If you are not willing to hedge against this kind of event, then it seems to me that the word "preparation" is better than the word "survival." Survival planning means a systematic withdrawal from the division of labor society for several hours a week. It means getting prepared emotionally for a major contraction of the division of labor. It means getting the skills necessary to function in such an economy. Almost no one is willing to do this, so I do not really believe that we should spend a lot of time on survivalism. In other words, if you are not willing to spend 20 hours a week on gaining the skills necessary for productivity in a society with the division of labor comparable to 1850, which was a lot better than 1790, I do not think survivalism is sensible.
LOSING YOUR JOB
I think the best way to think about the problem would be to imagine your situation if your family lost all income from outside sources for a period of two years. This is not beyond the realm of possibility. Most middle-class families would be out of money within six months. But if this were to hit all families equally, some of the largest expenses would be removed. There would be very few people paying their mortgage payments every month, but there would also be relatively few foreclosures. If something like this happened across the boards, the foreclosure process would be delayed. But if you alone were the victim of this kind of reduction of income, you would then face the possibility of foreclosure, but probably not within a two-year period. You would have some maneuvering room.
If you had a year of stored food, which can be purchased cheaply today, you would be in much better psychological shape to deal with unemployment. You would not know that you had two years of unemployment facing you. You would hope that something would turn up. What you need in that situation is the ability to cut your expenses to the bone overnight. You have to match your lack of income with a lack of outgo. Most families are not prepared to do this. They are stretched to their limits in terms of debt. They have few reserves.
The best way to prepare for this kind of scenario is to build up reserves in the broadest sense. These include reserves of personal business contacts, reserves associated with a small business on the side, reserves associated with regular consumer goods store in the home, and cash in the bank. These are the kinds of reserves that really are necessary to families in a recession. If we have another recession, and if that recession were to turn into a depression, both of which are possible, and both of which are much more likely than biological warfare, the family with reserves would be in a far better position. These reserves above all would be psychological. The individual would not be forced take the first job that came along, nor would he be in panic mode with respect to his inability to maintain his own lifestyle.
This is why I think lifestyle preparation is more important than survivalism. I think it is wise to begin to prepare for a sharp loss of income before this loss of income takes place. The individual begins to budget his time and money in terms of building up reserves for a time of unemployment that lasts longer than the head of the household would otherwise expect.
My belief is that a person who has just lost his job should put in a minimum of eight hours a day in searching for a new job. He should develop a systematic program of contacting potential employers. He should not worry about the loss of income. He should not be out looking for some fast-food restaurant job just to make payments on a relatively small proportion of his monthly expenditures. A middle-class household develops monthly payment routines that are far beyond what a fast-food restaurant job can maintain. So, the most important thing that a person has in reserve is a way to free up time for a major job search. The reserves should be geared to buying time for this job search.
Anything that you can do today that will shorten the job search is a good investment. I regard this as the most important single source of reserves in the scenario that I think is most likely to strike somebody who is a member of this website. If everyone is suffering from the threat of job loss, as was the case during the Great Depression, everyone adjusts his spending patterns accordingly. Everybody cuts back. Even in the Great Depression, American unemployment never exceeded 25% of the workforce. That means 75% of the workers, while scrambling, managed to get by. When 75% of a population can do something to earn money, we are not talking about survivalism. We are talking about lifestyle contraction.
We hear of families where the breadwinner has been laid off, and he has been sent welfare checks by the federal government for 99 weeks. In order to keep from going over the fiscal cliff, Republican politicians had to accept Obama's offer, which included an extension of unemployment benefits. People today who lose their jobs still receive income. They get income for over two years. I do not believe that anyone in this economy cannot get a job if he has two years to get one. At some point, he will have to lower his sights. He will have to take a job that he really does not like. He will have to work for a lot less than he did before. But he can get a job, and he can get off welfare.
SURVIVAL GOODS LISTS
We see lists of survival products. I think these lists are useful. But your list should involve a careful consideration of exactly what it is you are hedging against, and therefore what your stash of consumer goods ought to look like. A list of 100 things you are to bu first should apply to a specific scenario, but the list will be different if it is designed to hedge against a different scenario.
Any list should be compiled in terms of where you will be living, what your neighbors will be doing, what your neighbors will be suffering, and how much of a pay cut you are willing to accept when you finally run out of reserves.
In other words, one size does not fit all, and one list of 100 survival goods does not fit all.
I think it is wise to allocate money every month to buying consumer goods on sale that can be stored free of charge in your home, possibly in the attic, that will give you reserves in the scenario that you think is most likely to hit you. Draw up such a list. Watch for sales. Buy in bulk. Go to Sam's or Costco and load up. Rotate your food inventory. In other words, buy the things that you would have bought anyway, but buy them in bulk at a discount price, and then put them aside. This will make you a better shopper, but it will also provide you with psychological reserves should the time come when your worst-case, higher probability scenario arrives at the front door.
I think psychological reserves are the most important reserves. When people give up hope, they consume whatever reserves they have in a short period of time. You need psychological reserves, which require economic reserves, in order to deal effectively with the kind of lifestyle contraction that is most likely to hit a middle-class family in today's economy.
All of this requires budgeting. People do not like budgeting, because it forces them to restrict consumption. On Netflix, I watched the movie The Queen of Versailles. It was about a woman who was completely out of control in her spending habits, and who became addicted to shopping. Then her husband had a dramatic decrease in his income, and he expected her to cut spending accordingly. She found it psychologically impossible to do this. Both of them had enormous pain in their lives, because both of them had become addicted to massive spending.
I recommend that everybody on this website see that movie. This is a warning to anybody about what can happen to almost anybody, at whatever level of income the person has. This case was memorable because of the massive income that this family had, which disappeared overnight. The parents were not able to adjust psychologically. We see them going through the adjustment on screen. We should not imagine that this kind of pain is limited to families that have enormous budgets that are cut back to merely extravagant budgets. It can happen to any family, no matter what the budget was before the contraction took place. Families should reduce their addiction to out of control consumer spending before the contraction takes place.
So, I recommend budgeting for lifestyle contraction. Any family can do this, and every family ought to do this. Keep the scenario realistic. Budget accordingly.