I am one of the many people in our country who has lost income due to the Covid-19 shut downs. I work in automotive manufacturing and 90 percent of our orders have dried up since the end of March due to the OEMs suspending operations.
Fortunately, we are prepared for a loss of income and, while I don’t like not working, we haven’t had to deal with the fear and stress of not being able to cover expenses. I believe strongly in the process we went through to protect ourselves in the event of job loss. I’ll summarize this process below and I strongly encourage everyone to make the same preparations so you’ll be ready for the next crisis.
Lay the spiritual ground work.
In order to be ready for a crisis you have to build a worldview that values looking to the future and making preparations. This is called “wisdom.” If these values were not a part of your upbringing, or maybe if they were over-emphasized, you may have a hard time understanding why they are important or how to put them into practice. It will be very helpful to choose a role model or belief system that can guide you. I have found the principles of Christianity from the Bible to be very helpful both in planning for very practical hardships like being laid off and in exploring more philosophical questions.
Learn to predict the future.
You can and should learn to see what’s coming. Did I predict that a fast-moving virus would cause large portions of the worldwide economy to shut down? No but your predictions don’t need to be that specific to be useful. You don’t need to know exactly when the storm is coming or what form it will take. You just need to know that at some unexpected moment things will change. You can know this because it’s always a possibility for all of us. Whether it is a national or international event or something specific to just you we are all always at risk for life to interrupt our income. If it is nothing else, let Covid-19 be a reminder that the future can always be predicted to this extent: hard times will come and you need to be ready.
Live on less than you make.
It is actually possible to prosper in good times and bad but to realize this goal one basic principle must become inviolable. What flows into your household must be greater than what flows out. If you make any decisions between now and when things return to normal let one of them be this: that you will live on less than you make every single month for the rest of your life. There simply is no way around this if you want to be ready for hard times and prosper over the long term.
The marketplace is riddled with financial products designed to allow people to purchase what they don’t have the money to buy. There are a number of problems with borrowing money but what it basically boils down to is that debt ties up your income and you lose the freedom to use your money to build your own net worth and create security for your future. Some will claim that you can use debt in a measured way to leverage your income but I have personally experienced that “the borrower is slave to the lender” and I would just rather my income benefit me instead of the banks. We have therefore chosen to live without debt. We have no credit cards, no car payment, no finance payments. The only exception we’ve made to this principle is our home mortgage. I think this is essential to being ready for a financial emergency.
Build a big emergency fund.
Many people I know feel pretty good about having a couple hundred dollars stashed but most households need much more than that even to cover their expenses for just a week or two. Real stability means having a serious cushion and then a cushion for your cushion. We have roughly five months of expenses set aside so that if our income literally evaporates we can afford our necessities for as long as it takes to get the money flowing again. Have you ever imagined being able to run your household for half a year with literally no income? It’s a great feeling and it is very attainable for those who make it a priority.
There’s an old saying: “If you stay ready, you don’t have to get ready.” Being ready is a very peaceful feeling. I hope that many people will come through these shut downs determined to be ready for the next crisis.