Monday, December 12, 2011

Show Notes - Financial Prepping

Financial disaster can strike at any time without warning and hit you in a number of ways. Job loss, especially in today’s economy, disability or long term illness, or , god forbid, the death of a bread earning family member can cripple your financial stability. Of course, predicting any one of these events is impossible, but preparing for them is simply common sense. When a financial disaster strikes, there are a few staples of life that need to be provided for your family. Let’s face it, even with the most comprehensive disability or life insurance policy in place, these can take months to start to pay off. Even employment insurance benefits can take upwards of a month before you begin to receive cheques, and even then, they will only be for a fraction of your former income.

There are 3 major areas of financial preparedness…
1 – reduced essential expenses
The single largest family expense is housing. On average, 25% to 35% of our income is destined to pay for a roof over our heads. This doesn’t take into account the maintenance & routine expenses such as heating the home. The ultimate solution is easy…pay off your home. I know, easier said than done, and many of us live in an apartment anyways. Well, there are steps you can take to reduce this monthly payment. Pay down your mortgage as much as possible and try to renegotiate the terms with your bank. For apartment dwellers, searching for less expensive lodging when your lease is about to come due would be wise. You may however need to make sacrifices on space or location. If you have a country home, consider making it your permanent residence. This was the step I took when my work hours were cut in half a year ago. Believe me, not having rent to pay in the city was a huge relief. The increased expense of gas for the commute was offset by the reduced housing expense. If you want to look for a country home to be able to move to, remember that you can find some real deals by looking at distressed properties. Look for a home that the owner has had for sale for an extended period of time. It is likely that the asking price will have already been reduced and there may be room for further negotiation. With a lot of persistence and some luck, you may be able to find something that you could actually pay for with your accumulated savings. Trading a mortgage or rent in the city for an equivelant expence in a country home won’t put you any further ahead. Also, when purchasing a home, make sure you have a home inspection performed to be sure you won’t have tens of thousands of dollars in repairs to do or run into other issues like mould or foundation problems.
Car payments are also a major monthly expense that is easily reduced or eliminated completely. If you are leasing a car right now, consider buying it at the end of the term. If you bought a car on financing, consider keeping the car once the loan is paid off. Let’s face it, with a little care and regular maintenance, a car should be able to keep running smoothly and reliably for up to 10 years or more. Keeping up with the Jones’s is not the goal here. When you and a fellow coworker get laid off, you will own your car outright where as the other guy will now be worried about repossesion if he can’t make the payments. An older car is better than none.
Food & clothing
Entertainment is one expense that can easily be reduced. Look for better deals from your utilities such as cable or satelite and internet. With a suffering economy, companies are offering better and better deals. Shop around and don’t be afraid to change companies. Also, reconsider large television packages and give careful thought as to weather you really need 400 or 500 channels to watch. Fast food take out or dining out can gobble up a huge part of your available cash. Cut down on the frequency of doing this and cook from scratch at home. Groceries are less expensive than a fancy dinner at the local steak house.
Clothing is another expense that can easily get out of hand. Purchasing $200 designer jeans just to keep up appearances is a fast track to disaster when things go downhill. I’m not suggesting shopping at the thrift store or dressing like a hobo, but getting good quality clothing at reasonably priced department stores can keep that budget down, enabling for greater savings.
2 – savings
Keep cash on hand for 1 year’s essential expenses. Let’s take a look at the savings that can be realized with the above cuts made to the family budget.
Eliminating a mortgage or rent payment can easily get your monthly expenses down $1000
Driving a paid for used car will save you a loan payment of about $350
Cutting down or eliminating restaurants will land in pocket another $200 (based on $50 per week)
Chopping your clothing expenses can save you $50- $100 (depending on the size of your family)
3 – stockpiling essentials
One of the basics of being a prepper is to stockpile food. Again, store what you eat and eat what you store. Be aware of sales, closeouts, deals & yes, couponing. A year’s worth of food is not unreasonable both to expect to use or to achieve. Start with buying extra of what you normally eat when you find it on sale. Rotate your food to keep it fresh and be aware of expiry dates. When financial burdens hit, not having that $200 a week food bill will save you lots of anxiety.
Clothing is another basic need that you can stock up on. Socks, shoes, and unmentionables are the obvious, but don’t forget that kids grow, and middle aged adults too. If you have children, try to buy larger sizes of clothing when you find a good deal. Shoes will always be in demand so don’t be afraid to buy an extra pair a size bigger when you get a sale.
Always be on the lookout for bargains on paper products, men’s & women’s hygiene products, and basic cleaning supplies. Sanitation will have to be maintained during financial crisis, or you risk getting sick and causing even greater burden buying medications or missing work that can cost you valuable income.
Having a year’s worth of expense cash on hand can be a daunting task. By reducing the monthly expenses for essentials like housing & transportation, you lessen the amount of cash you need to stuff into the mattress. If you lower your spending on non essentials like dining out or that huge all inclusive cable package, you can put that money away even faster. Wherever possible, stock up on consumables and replace your storage items as you use them. Once you have a year’s worth of supplies, don’t stop if you can help it. The better prepared you are for the future, the better you can withstand what may lie ahead.


  1. Thanks for the info. Hope everything turns out alright for you.

  2. Thanks George,
    Please have a look at my new show, The Prepared Canadian here...