How To Protect Yourself As The U.S. Economy Collapses

The winds of a collapsing economy are blowing, and in the months to come they will gain hurricane force. On Tuesday (8/24) the front page of The Wall Street Journal characterized the latest Fed meeting as "among the most contentious in Ben Bernanke's four-and-a-half year tenure" as chairman. The Fed knows the economy is faltering but can't agree on what to do next and it is nearly out of new options.

Meanwhile the FHA, which guaranteed nearly half the real estate loans this year, and accepts down payments as low as 3.5% is sinking and will need a taxpayer bailout. As The Wall Street Journal put it (8/24), "The agency's reserves are falling sharply as many of those loans have defaulted at a rapid clip."

And from CNN, "Plunging home sales could sink recovery." http://money.cnn.com/2010/08/24/real_estate/existing_home_sales/index.htm.

To protect yourself, try to save $20,000 in cash so you can whether an enormous financial storm. How?

If you have an old car, maintain it rather than replace it, which will save you a $600 a month car payment and higher insurance costs. And discuss ways to cut unnecessary insurance costs with your insurance broker. If you have an old TV set, skip the new technologies for now and enjoy what you have. My TV is 9 years old and works fine.

If you have expensive but unnecessary items on a payment plan such as an ATV or a boat, try to sell them and get out from under those payments.

If you're going to spend money, invest in your health. If you have a lump, go see the doctor for without good health, you won't be able to work and may not even be able to enjoy your life. If need be most doctors will offer you a payment plan.

If your house is or will be in foreclosure, negotiate a revised and sharply lower 30 year fixed rate mortgage with your lender. They don't want to take your house back, they have too many now. If you can no longer afford the house, negotiate a short sale discounted price with the lender and price it to sell. The lender would prefer you sell it than to carry an empty house on its books and have to sell it later.

If you rent an apartment, negotiate a lower rent with your landlord. Vacancies are growing, landlords are offering move in specials and they do not want to lose a good tenant.

If you're buried in credit card debt, negotiate a forgiveness for most of the debt with the card providers and an affordable payment plan for the balance. They don't want you to declare bankruptcy or to default.

If you can no longer afford your car payments, negotiate a settlement with the finance company and give them back the car. They too don't want you to declare bankruptcy or default.

If you're getting calls from bill collectors, speak to them, don't hide from them for their incessant calling will only make your life miserable. In many cases, once they get past their initial demands, they too will negotiate a settlement with you, for collecting some money is better than getting none.

If you like to read, watch movies or listen to music, visit your local library and for free bring home books and CD's.

Also, don't be too proud to go to a food bank. Things are already so bad, that in the U.S., food banks feed 12% of the population in whole or in part. That's 37 million people, and their numbers are growing. In addition, clip coupons, join membership clubs and shop sales.

Then take all the money you're saving and put it in an FDIC insured account. Those accounts pay almost nothing but at least you will still have the money as you strive for $20,000. When it comes to Wall Street, don't trust them. It's a rigged game just as it was two years ago before the financial panic that led to the bailouts.

One more thing. It is crucial that you develop a marketable skill or cross train at work so you become indispensable. This could keep you employed.

But remember, life is about more than money. Meditating or visiting a park can bring you relaxation and pleasure and both are free. So is the company of friends.

As in the Great Depression, together we will get through this financial catastrophe and hopefully build a much better nation than the one that throws its money away on endless weapons and wars, and one that bails out big campaign contributors at the expense of working class America. This financial collapse is the only way to get the mass of U.S. citizens involved and restore representative government.

Dick