Coping with trouble: in the middle term

Today I would like to begin by going back in time; back to the second part of the 1980s when I was still living in Sofia and economic trouble was so thick in the air that you could cut it up and serve it with two vegetables. My parents were visiting me; we were sitting, having a quiet drink after the wonderful lunch my Mum prepared. Now, Britain is not the only place where talking about money is considered rude – Bulgaria is another one. Suddenly as we were chatting, I looked at my Dad and said:

‘Do you have any money saved?’

He started laughing in this peculiar way, half embarrassed and half self satisfied; that way parents have when they wish to say: ‘Yep, I do. Enough to help you start in life but you have to wait.’

‘Don’t keep money!’ – I heard myself saying – ‘Take it out of the bank and buy things with it.’

‘What to buy?’ – asked my Dad.

‘Anything – gold, land, houses. Anything; just don’t keep money.’

Later, in 1992, my Dad told me that in 1989 he had had money enough to buy an apartment in Sofia; he didn’t do it. In 1992 the money he had saved all his life was enough to buy four ice-creams – from a street vendor.

This is what happens during economic meltdown – there being little to buy is one aspect; currency devaluation is another one. And although an economic disaster of such proportions is hardly likely here and now, I believe the rules are very similar.

Going back to the measures I’ll introduce to make sure that my family survives a global economic meltdown, I believe in the medium run there are three.

Reduce savings!

I know exactly how this sounds: totally mad. After all having savings is our security, having savings means that we will be OK! Wrong! Having savings (and most investments) give security only during periods of economic and financial stability. Economic and financial volatility go together with very high inflation and currency devaluation. Thus, the purchasing power of money is reduced and one’s suffered savings pretty useless. A specious apartment in a capital city can become four ice-cream cones.

What makes sense in time of economic and financial meltdown, I believe, is to have no more than three to four months expenditure as easy access savings. Anything above this should be transformed into fixed assets: gold, real estate and land.

Don’t worry about debt!

It is not often one can say that borrowers have definite advantage but during times of economic and financial crisis they really do. High inflation reduces the difference between interest on borrowing and savings and currency and currency devaluation means that dept disappears (just like savings).

We will continue overpaying our loan and have it paid in accordance with our goals. The mortgage is an entirely different matter – we will have to see how things unfold.

Create a closely knit community!

Let’s face it: not many live well during cataclysmic economic and financial events. What ensures survival above all is the mutual support and more practical help of amongst family members, within friendship circles and in neighbourhoods.

Finally, please see this post for what it is: a piece of writing that offers some ideas that I have been toying with for actions in view of a serious economic and financial meltdown. Actions may be different depending on your situation. I believe that the simple messages are universal:

Change the focus of your worry! Worry about your savings not about your debt!

Whatever your financial situation is make sure that you are part of close groups for mutual support – when the going gets tough being in a group usually improves one’s chances.

I surely hope that I will never have to implement these measures.

3 thoughts on “Coping with trouble: in the middle term”

  1. Maria, I am glad I stumbled upon your website. Having lived in Bulgaria at the beginning of the 1990s I feel scarred for life and a maybe a bit paranoid. I am conflicted about what to do and whether I am reading too much into the news,or history will really repeat itself in front of my eyes. But there are easy and sensible things one could undertake to at least partially be prepared and I agree with all your points.
    One important thing I would add is to invest in yourself. Learn new skills and master old ones and be prepared to be as self-sufficient as possible. Creativity and adaptability are as important as money in hard times.
    As a result of my doomsday mentality my pantry is always well stocked. All staples I keep were bought at a deep discount and there are enough on hand so I can restock when they are back on sale. If, for example, toilet paper is marked down to half-price, that’s a 50% tax-free investment return – not too many financial investments provide that. So the way I see it, it’s a win-win situation – I can save money and have some peace of mind.
    Another important strategy is to have all existing debts (mortgages, car loans, etc) at a fixed-rate. In case of hyperinflation, the face value of a debt installment will be the same as before, but the real value of it would be greatly diminished. I remember having a “newly-wed loan” in Bulgaria at 2% signed for in 1989. Initially the 50 levs a month was equal to about a third of my take-home pay. Two years later, I was still required to pay 50 lev/month but that amount was not enough to buy my morning coffee with – the interest rates were around 60% at that time and my salary was a few thousand levs.
    I live in Canada now and when I tell colleagues or friends about those dramatic times back in my home country they are under the impression that this can never happen here. I hope they are right but lately the global economy is such a big house of cards that a meltdown probably is in our future.
    Sorry for the lengthy post. Happy blogging, I will be reading it!

    1. Maya, thank you so much for your message. I didn’t live through this time in Bulgaria, I was already in England. But I know that my parents survived because they had paid their apartment off, had land and a summer house, and I was sending them money.

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