Saving Money & Wasting Less

Lesson 8: Putting it together

Surviving financial and other disasters

Financial disaster can strike anyone, any time. A few weeks ago, at a company at which I have casual employment one or two days a week (on average), twelve people who were full-time permanent employees were told at 4pm Monday afternoon that their services were no longer required. They had been 'down-sized'. So much for the security of a permanent full-time job. Another employee fell down stairs at work and injured her back so severely she has been unable to return to work for months. Fortunately, work insurance covers her and provides an income, but what if she had fallen at home, and without insurance?

Financial disaster may not only affect you and your family through unemployment or accident. It might affect us all through a recession, a stockmarket crash, or even another Great Depression.

Apart from financial disasters, there are disasters such as fire and flood, a possible flu pandemic coming, and all kinds of natural disasters.

We could just all wait and see, and hope for the best. But isn't it much more sensible to expect the best, but to prepare for the worst?

Coping with extended loss of income

How do we prepare for an extended loss of income through unemployment or accident? First of all, if you are currently employed, make sure you have income protection and accident insurance. The savings you have been making in this course would be wisely spent on insuring the income you currently have, and yet many people do not have adequate insurance. Especially if you have dependents, you should also make sure you have life insurance and a current Will.

Secondly, while you are working and well, use the savings you have been making in this course to get rid of your debts. Work on the high interest debts (such as credit cards) first, then on any personal loans you have, and finally on the mortgage, if you have one. Don't take on new debts for things you don't need unless you are really sure you can afford it even if the unexpected happens. At one company where I was a contractor, one man with a family borrowed money to take a six-week holiday in Europe. One week after he returned home, he was 'down-sized' and found himself unemployed and deeply in debt. It's much better to rediscover the old idea of saving up!

Reducing your consumption and environmental footprint, and learning how to budget will help you cope if you do end up with an unexpected loss of income. If it happens, and you have a lot of debts, try to consolidate them all into a single loan. Don't leave debts and bills unpaid, because there are often penalties for paying bills late, and you will pay more interest on credit cards or loans left unpaid. If you really cannot meet your expenses, seek financial help as soon as possible. Please review earlier lessons in which we covered paying bills and reducing debts.

It may also pay to have a stockpile of food on hand that you can draw on for extended periods. Stores of dried beans and other legumes, rice, flour, dried foods, and canned foods can last for years. If you learn how to use these foods now, and rotate your stocks, you will at least know that you won't go hungry. If you buy in bulk when you see bargains, and keep some long-term stores it will save you money when you need it most.

Coping with widespread financial crises

If there's a serious recession or depression, people who are self-reliant and debt-free, who know how to live on less, and know their neighbours and are part of a real community, will survive more comfortably than others, and will not be among those who panic. The single most important thing to do now is to pay off your debts.

This may be another reason to consider buying a smaller, more affordable house now. If there is a depression and interest rates go through the roof, nobody is going to want to buy a big, expensive house. You could be stuck with a high mortgage you cannot pay, and an asset you cannot sell.

We all hope it will never happen, but it pays to consider possibilities rather than drifting along, hoping for the best.

Preparing disaster plans

Have you thought about what would happen if you woke in the middle of the night to screeching smoke alarms (and I hope you have smoke alarms fitted)? Have you discussed with the family which exit you would use and where you would meet? Do you know where your keys are? (One family here died recently in a house fire because they had just installed security deadlocks, and in their smoke-filled home they could not find the keys to let themselves out.)

What if a wildfire, hurricane, flood, earthquake, or other natural disaster threatened your house, and you had to evacuate? You may only have time to grab one thing. Do you have a bag you can grab with things you would want or need if you lose your house, such as copies of documents, photographs, a battery operated radio, a change of clothes, perhaps some food and water, a first aid kit, emergency blankets, and anything else you can think of, already packed in it? Do you know where you would go? Is your car's fuel tank at least half full at all times?

We hope it will never happen to us, but it is wise to discuss the possibilities before the event. Keeping an evacuation bag somewhere close to an exit is a good idea. Of course you'll probably never need it, but you will probably never need your house insurance, car insurance or first aid kit either. See the Family Disaster Plan for some ideas on planning for the disasters you hope will never happen.

Planning for disasters won't necessarily save money or the Earth, but it might one day save your life.

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