Today I want to take the time to talk a little about something I have not. The title says it all, I think, with the exception of defining what a “Personal SHTF” is because, well, it’s personal. In today’s economy, I think that most people might define a personal SHTF as a job loss. it seems to be the norm, and it is the one that comes to mind to me when I think of personal SHTF situations. Conversely, it doesn’t have to be a job loss to be a personal SHTF. I have a buddy out in AZ that was laid off and rehired within 48 hours at a reduced rate and hours. Yeah, they laid him off instead of asking him to reduce hours and wages to rehire him. Pretty classless if you ask me, but he lives in a small town and had VERY FEW employment options. Had they asked he may have just taken the cut in hours and pay. My point though, is that a cut in hours or a cut in pay could be just as financially devastating as losing the job if you cannot make your your bills or feed your family.
I cite these because I made no secret recently that money is tight recently. So tight in fact, that a job loss or other serious issue would devastate me financially and put me in my own personal SHTF situation. Thank goodness that I don’t really feel like this is the case at the moment, but having several months worth of preps, of course makes me feel better, and urge everyone to take steps, even small steps to bulk up their preps, even if they only spend $5.00 — $10.00 a week on some additional preps that might help to ease the pain in a bad situation.
Going out on a limb, I suppose you can also say that this is a sort of a bug in situation as well, as you (when I say you, I also mean me) may not want to do much traveling and work on projects at home more, as well as look for a better job, spend more time with your family, garden more, etc.
In addition to what I mention above, I am mentally reviewing my own finances, and am going to be putting together a 2011 budget shortly in an excel spreadsheet. I have considered my financial fitness recently and decided it is much like my physical fitness, in need of further improvement. I am going to make a mental contract with myself not do deviate from that budget in 2011 because I need to save more money and put more cash into retirement investments. Not to mention I have some debt I want to pay off. With luck I can put some money back in the bank in 2011 and give myself a padding of savings to work from if there is an emergency situation.
When I get the MS Excel budget template created, I will put it up for download so that you can use it yourselves if you wish.
What is your personal SHTF situation?
You sound like you are about where I was 5–6 years ago. I didn’t have much debt but I had done some stupid things and had to clean myself out of a hole. Have you read any of Dave Ramsey’s books? Pick up Total Money Makeover if you have not. You can read it in a few hours and it will help you set priorities. His site also has a forum section with a good group of people who are working their way out of stupid. It’s a lot like the prepper communities and some great tips on living frugally. We still live frugally even though we don’t really need to.
I got out of debt by selling a bunch of stuff including my boat and just buckling down for a few months. If my truck wasn’t already paid off, I would have sold it in a second and bought something cheaper.
Our personal SHTF situations that we prep for are:
1) Business dries up for me or my wife loses her job. My wife may have a harder time finding a job than I would, but winding down my business/laying off my staff/going back into the workforce would be tough. I’d probably just start over and do some consulting/start another business because I don’t think I could work for someone else again.
2) Moderate or long-term illness for one of us. This is mostly about medical expenses and partial loss of income, as well as just the mental issues of dealing with a sick spouse or becoming sick yourself.
3) Long-term disability for one of us. Similar to above but likely with a full loss of income.
4) A death of one of us would definitely be a SHTF for the other. We carry enough life insurance to pay off the house and give the other a nice runway to get life back on track.
5) Food inflation is something we’re starting to prep for. I wasn’t sure if we’d stockpile more than 90 day’s supply of food but the way things are going, I think we’ll shoot for a year. It’s probably one of the better short-term investments we can make as long as it’s stuff we’ll use anyway. We’ll also start gardening next spring and learning from our parents who still garden while we still have the opportunity.
6) Getting to retirement age without enough in reserves to live comfortably. I’m still 25–30 years away from retirement. I’m not expecting Social Security to be there and I have doubts if my 401K/IRAs will be either. I’m starting to try to figure out what types of assets I can acquire over the next 20 years that will give us more security as our earning power decreases later in life. My business is definitely one asset. We’re considering real estate and possibly some other things but I don’t have a good plan for any of that yet. Within 10 years we’ll have paid-for property we can live on but we’ll still have taxes/insurance/maintenance/utilities to worry about. There seems to be a trend where income begins to decrease for a lot of people in their mid-50s, so making the most of my 30s and 40s will be important.
@Alex, you guessed it. The past couple of years have been interesting, to say the least. I won’t get into a whole lot other than there was a major event in my life I spent quite a bit of money on that never materialized, and the IRS was involved in another issue, and I succumbed to the pressure and paid them every penny they asked for to keep them out of my hair, if only temporarily…
As for your #6, I think we all need to start doing that.
Don’t count on living off the land when you retire. It’s very hard physical work and at that age you just can’t do it as well as when you’re younger.
For me, some sort of devastating illness or becoming permanently disabled takes the ‘Personal SHTF’cake. Harder to plan for too I think. Without your health, nothing else really matters that much.
I agree. If I fell down the steps today and was permanently injured, the only person I can depend on is me to make anything positive out of the situation. No wife or kids to speak of, and I have always been too damn proud to ask or accept help if I needed it.
It is the hardest one to plan for, both financially and just physically being able to perform survival tasks.
Did you know medical expenses are the #1 cause of bankruptcy in the country, and that the majority of people who are bankrupted by medical expenses have medical insurance? (This stat may have changed in the last two years but is accurate prior to this latest meltdown) You can be doing everything right, have health insurance, get sick and be bankrupt within one year. Let that one sink in.
With medical insurance, you have no idea what you have or if it’s good insurance or bad until you start filing claims. I had a surgery back in college and came out of the hospital owing more than $10K even though I had “good” insurance through my employer. That wasn’t deductibles, it was hospital charges my insurance company refused to pay. It went into collections at which point my mom negotiated a lower settlement and paid it since I was a broke college student. If that happened today I’d be writing a check if I could afford the charges. Otherwise I’d be screwed.
Medical problems/health insurance/health care costs is the one thing my wife and I cannot do anything about/prep for other than save money and stay healthy, and IMO is the single greatest risk to our long-term financial solvency.
Up until recently, I have not given an unforeseen medical issue as a real SHTF. I think I have taken my health and physical health for granted. Like everyone that is starting to age, I find myself having a harder time getting out of bed, colds seem to last longer than they used to, and I have some minor medical issues I need to take into consideration, and make sure I have ample supplies on hand for that. But until you posted a response today, “falling down the steps” or another medical issue wasn’t an option. I suppose this is a naive point of view, but now it is front and center.
Thanks for the well thought out response.
Take my word for it: Life comes at you FAST!!!
No matter how well prepared you *think* you are, you’re not.
That said, there is a reality check: You can’t spend every spare dime and every waking moment worrying about “what if…”. There is never enough money for all the insurance coverage and savings you should have, not enough hours in the day to do the work, and life is too short to worry about too much detail.
Its amazing what can happen even when you have so-called good medical insurance. Its almost better to have no assets, go to the E.R. for everything and apply for charity care.
A health SHTF can quickly snowball to a financial SHTF. A double-whammy that one may never recover from.