Reality Check Q&A #11

Gary North

Oct. 15, 2009

SURVIVALISM

Age - 60
Location - Louisville, Kentucky
Retire - 70, in 2018
Annual income - $55k
Net worth other than home - $100k
Home equity - $170,000 home is paid for :-)
#1 Goal - Insulate my wife and myself from societal breakdown.
Deadline - ?
#1 Fear - a police state, in response to the right crisis.

Meanwhile, I have to/want to keep working in the city.
Plan - a low profile. Purchase while I can things that will enhance the survivability of my household, focusing on the basics: water, food, heat, light, gold, and guns. When the crisis comes, hunker down.

Question: What should I be buying?

Given your age, your plan is unworkable. You fear the worst. Your plan reflects a different scenario.

You are reaching the slowdown age. You need to develop rural survival skills. Stored stuff will not work. You need skills. You need personal contacts in a safer rural area. You have no place to go to where you will be safe. You have no personal contacts in your safe location. You are fearful of breakdown, yet you insist on stating in a city.

Make up your mind.

Decide what you really must do. Get moved within two years, or at least have a back-up rural property with a well and solar power, owned free and clear, with used mobile homes on it. You need a caretaker in one mobile home.

BOREDOM

I am 52 years old and for the last 40 years I have accomplished the all the goals I had set for myself and it feels like it's just doing the same things on a different day. The question is, "What do you do when you run out of dreams? or where do I go for a for a new set of goals?"

You are in a great position. You are not yet old. You have achieved your goals. You know you must change. You are ready to change. Not many people ever reach this stage in their lives.

The first step in switching gears is to find that area of service in your life that you want to be remembered for.

Second, evaluate your existing money, time, and skills in terms of that new goal. Can you attain it? If not, how much of it can you attain?

Third, write down what you must do to attain the goal. You need a tree-step plan: short (one year), medium (five year), and long (death).

Fourth, persuade your wife to switch goals with you. If she says no, (2) go back to the starting point, or (2) do what you want and invite her to come along for the ride, or (3) work out a compromise.

INVESTING

Age: 59
Location: Seattle Washington
Occupation: Avionics Software Engineer
Retirement year: 2009
Annual income: $175,000
Net worth (not home): $650,000 (very liquid securities with no debt)
Home equity: zero (sold home)
Your #1 goal: Retire and do charity work (children now grown)
Deadline: 1 year
Your #1 fear: Concern that my assets get involuntarily tied up by coming financial crisis
Your plan to deal with it: Uncertain

Question: All assets in precious metal and intl bond funds. How do I best assure that they don't end up getting frozen such as has happened to those in auction rate securities?

The odds against this happening are in your favor. These are broad markets. If they get shut down, the world's economy will be in a depression worse than the 1930s. It's possible, but unlikely.

Your main problem is occupational. You need to get paid something for your charity work. Go into a nonprofit that will pay you, if not immediately but eventually. Peter Drucker has written on this. His disciple Bob Buford has written a good on this, Beyond Halftime.

INFLATION

Can the inflationary rocket be ended by anything less than a Volcker style recession?

No.

RETIREMENT

Age: month shy of 53
Location: Seattle metro area
Occupation: Systems Engineer (Client OS)
Retirement Year: When that Sweet Chariot comes for me
Annual Income: altogether a shade over $100k
Net worth: around $200k
Home equity: none (rent)
#1 goal: start a home business (enrolled in 5 Days in July '08 sponsored by ETR)
Deadline: 12/31/08
#1 fear: debilitating illness, e.g., Alzheimer's
Plan to deal with fear: nutrition, exercise (eliminated arthritis during past four year, body weight 178#, body fat under 10%, did it with organic foods, kettlebells & bodyweight training, e.g, Combat Conditioning) My question: 401k (Fidelity) has severely limited investment options. Majority of mine is in WAIIX. How does one diversify out of the dollar in such a situation?

You have fallen into the 401(k) trap. You are tied to the idiocy of your employers' choice of a plan. It's nice and safe . . . for them. It's a widows & orphans plan. They will not be sued.

The way to diversity out of the dollar is to get out of the 401(k) and buy foreign currency-related assets. If the company is matching your contribution, it's free money. But you have seen the problem: the dollar. WAIIX will get killed by inflation. Right now, it's OK.

If there are no foreign stock choices, then go with energy- related stocks when you are convinced the recovery is real.

CALLING

Age: 30, wife, 30, 2 children are 5 and 1
Location: Pittsburgh, PA
Occupation: Chemical Engineer for Naval Nuclear Propulsion Program (as a contractor, not sailor)
Retirement year: I don't plan to retire
Annual income: $78,000 gross
Net worth (not home): $20,000 (pension and 401k from last job) - $10,000 credit card = $10,000
We also owe $107,000 on one rental property (has good tenants)
Home equity: We rent (from my in-laws on property bordering theirs)
#1 goal: To raise Godly children who come to know Him as savior
Deadline: Death
#1 fear: That I will go through my entire life never finding my calling
Your plan to deal with it: Admittedly weak, my occupation is technically interesting, pays okay with good benefits. I fear I am trading "good for best," I come home at the end of the day mentally spent, with no time/desire for anything else, let alone thinking about my calling.

Question: How to determine my calling? I think I am getting (fill-in-blank precious metal) manacles. My life is not defined by designing nuclear pumps.

You are in good shape for your age: good job, decent income, good health. You know you need a calling: "the most important thing you can do in which you would be most difficult to replace."

What do you want to leave behind? Be remembered for? Start there.

Example: an on-line curriculum for home schoolers in the field of natural science. This would include math, chemistry, physics, and biology. If you think Khan's Academy (www.KhanAcademy.org) is good enough, then find another teaching area.*

INHERITANCE

2 sons, 6 and 9. Am considering putting $5,000 for each in a retirement trust that they cannot access until 59 1/2. Am still in debt, but time is on their side.

Better to use the money to buy a piece of income-producing property. Let them manage it. Let them own it jointly when the youngest turns 30 or when both of them have been married for 4 years, whichever comes first.

CAREER

Age 57
Location: Ashland, Oregon
Occupation: Chiropractor, some "Energy Medicine", network marketing
Retirement year: 2020
Annual income + net worth: too little
Home equity: none
#1 goal: utilize my skills, be easier on my body, increase income
Deadline: 2020
Your #1 fear: not enough income to retire on.

Insurance company reimbursals to chiropractors have decreased tremendously; many chiropractors cannot afford to stay in business.

You do not say what your income is. You do not say what your net worth is. You are 57. You have no home equity. You are at the end of your career. You chose the wrong career. I assume that you know this. Anyone who goes into network marketing at your age is desperate -- grabbing at straws.

You will not be able to retire. Forget about it.

You must concentrate on marketing skills. No matter what you decide to do for the rest of your life, you must have a mastery of marketing. Buy as many Jay Abraham books (used) as you can. Sign up for a daily subscription to Early to Rise. Learn copywriting. You must learn how to sell. That is your #1 problem. You are a rotten marketer. Spend at least two hours a day and all day Saturday on reading books on small business marketing and direct-response advertising.

You cannot work your way out of your ditch. You must market your way out.

REAL ESTATE

Age: 42
Location: Orange County, California
Occupation: Airline Pilot
Retirement year: 2031
Annual income: $83K
Net worth (not home): $50K
Home equity: $0
Your #1 goal: To buy a home (we're renting)
Deadline: Depends on local Real Estate market bottom
Your #1 fear: Being unable to take advantage of the bottom
Your plan to deal with it: Fix my credit; move into a local fixer-upper with zero down; fix it up and refi; sweat equity = my 20% in deal.

Question:

Post-short sale, I'm out of cash & credit. How can I fix my rating, then get a fixer zero down (locally)?

You need to read everything by John Schaub. He never uses banks to buy houses. www.JohnSchaub.com

Your problem is that you are focused on owning a home. California real estate is still out of your income range. You should continue to rent.

On California real estate, monitor this site: www.mhanson.com.