Dearly beloved readers, let me ask you a humble question: If you were fired tomorrow — yes, tomorrow — if you lost your job, what would you do? And say you're in late middle age and you lost your job, say, 10 years before you were planning to retire. What would you do?
Let's put it even more starkly than that: Assume you own your home and a place at the shore and you have a kid in college whom you are helping to support. What would you do?
Your spouse does not work any longer. You have a major nut each month that you have to pay for —mortgage, insurance, taxes, tuition, car payment, cable TV. You have to buy groceries and gasoline and car insurance — and you have become used to eating out a few times each week.
How long could you go without a paycheck ? How much liquid assets do you have that you can draw down to live on? How much do you have to live off until your retirement kicks in?
Then suppose you are really close to retirement and you can start getting your Social Security and your IRAs and maybe a pension. How much is that each month compared with how much you are spending each month?
How long can you live before you have to sell your home? And, by the way, where do you live then? And what if you cannot sell your home right away? What if you cannot sell it for a year?
What do you do?
I am asking this as I sit in the dreary business center of a hotel in St. Louis for a reason. For some karmic reason that I cannot fathom, several of my closest friends have lost their jobs within the last few months.
One was "downsized," and another two lost of their businesses and a fourth became ill. Although I had preached the good gospel of savings and careful investment to all of them, none of them, as it turned out, was prepared for serious economic adversity.
The one who is best off of all four can live for maybe a year without drastic cuts in his family's lifestyle. He will have to sell his home, at the least, and who knows what happens to the others?
This is to tell you, for the umpteenth time, that it is vital to save. There is no excuse for not doing it.
I am probably not the best man for this sermon because I spend way too much myself and so does my wife. But I have at least some slight idea of how to cope with an economic disaster: We have a home fully paid for and annuities and some other assets.
I know I have already talked about annuities and I don't want to be a broken record about it. But you must have an "escape plan" if things go bad. It does not have to be the perfect plan but it has to be a plan.
It must include an air mask you can put over your face and then your family's face if pressurization fails. You must assume that the worst can happen.
That means substantial savings in cash, stocks, mutual funds, index funds, real estate investment trusts — anything that will throw off an income or can be sold to yield cash. You must have a plan. To quote the smartest man on earth, Warren Buffett, "An idiot with a plan can beat a genius without a plan."
Here is an example: A few days ago on a flight from Spokane to Seattle, I sat next to a man who was well set up. He had bought small duplexes, then larger apartments, then small mobile home parks, then larger ones. Now he's in his mid 50s and has a large six-figure income from rentals. It is not glamorous, but he's all set.
He did it starting very small. It isn't complex, and he'll never be on the cover of Forbes. But he is all set, money wise.
Are you? Have you taken the small, simple steps of talking to your broker, your financial planner, your insurance agent, about financial security?
Look, this is not going to take care of itself. You have to do it. I am a fairly well-known guy in finance, and I have been in many magazines. But I never thought of a better plan than that Sea-Tac bound passenger had. Get some income earning assets and little by little add to them.
Mobile home parks, where you can blend your sweat equity with your money, are as good as great stock picks.
Just think how good you'll feel if the ax ever does fall.
Forewarned is forearmed — or "fore-invested." You do not ever want to be on that limb, twisting slowly in the wind.
Ben Stein is a writer, actor, and lawyer, who served as a speechwriter in the Nixon administration as the Watergate scandal unfolded. He began his unlikely road to stardom when director John Hughes cast him as the numbingly dull economics teacher in the urban comedy, "Ferris Bueller's Day Off." Read more reports from Ben Stein — Click Here Now.
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