Are You Prepared for a Financial Winter?

Your flood of responses to my recent blogs on the economy made me realize what a vital topic this is. This morning I was watching another day of economic turmoil unfold on CNBC. Listening to experts tends to give me a headache in times when common sense might matter much more than expert opinion. I’m no economic expert, but common sense does seem to be quite obvious.

We’d all like to think the current escalation of foreclosures will be limited to those with “unworthy” credit. We’d all like to believe that unemployment rates will remain low. We’d all like to hope that we’ll all have money to spend in our consumer economy will keep humming even though there are plenty of dark clouds heavy with rain directly above our heads.

But what if what we’re seeing now is just the beginning of a much more fierce storm? What if the variable mortgages used by millions of middle class, good credit home buyers to get much bigger homes are going to trigger a rash of foreclosures across America’s core consumer? What if lenders, too-little-too-late efforts to bring sanity to mortgage loan standards choke off refinancing and home sales to a point that the real estate market freezes? What if we consumers cut back even 10% on our purchases of stuff we really don’t need? What if gasoline, heating, and oil rise in price again? What if business stops expanding and job lay offs become standard place? What if health care cost and the cost of war, milk, corn, and bread continue to rise? What if this is already happening? Are you prepared for a prolonged financial winter?

Maybe it won’t happen. Maybe it won’t be so bad. Maybe all our economic hype-freeze really know what they’re talking about. Maybe lenders will create 100 years mortgages to bail us out temporarily. Maybe some unexpected positive events will keep our leaky boat afloat indefinitely; no one knows.

Our global economy is more complex than our weather. Both are unpredictable. So we can just hang out and hope for the best, or we can prepare for a hurricane. One thing we can’t do is rely on experts to tell us we have nothing to worry about. They don’t know. It’s time to exercise our own good judgment to make ourselves less personally vulnerable to forces no one really controls. Nobody is going to take care of us. We‘re simply economic statistics to people who have their hands on the levers of commerce. And those folks are trying to control the weather. They are foolish enough to think they can. As for the rest of us, it seems wise to follow the advice of Winston Churchill. To paraphrase: It’s always best to plan for the thing you most don’t want to happen….in case it does.

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