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.
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.