Building a Financial Fortress

Given that the stock market bear has just jumped out the window and many personal investments (including our family's) have recently dropped in value significantly, I want to mention a few thoughts and ideas I've had on how to secure ourselves financially. Many of these ideas are things I'm doing currently or are thinking about doing soon. Hopefully these steps can bring a little more peace of mind during these crazy economic times.

First off, we need to pay a full tithe. What is tithing? We read about it in Malachi in the Bible and in 3 Nephi in the Book of Mormon. In those verses, God promises us that if we pay tithing (which literally means "tenth" - hence 10% of our income) he will open the windows of heaven and pour out blessings that we will not have room enough to receive them. This principle works! I have lived it and felt the blessings it brings.

Second, we must know how to do things that we can make money doing. I.e. we need to have a solid educational background, or at least valuable experience in, a job or field that will make us money. Having a strong educational background in either formal education or in a high-demand trade, is a big hedge against an economic downturn. Always learning and improving our skills is a must in a fast-pace economy.

Third, we must live below our means and save as much as possible. This means that we hate debt! Debt is like prison. It is the devils way of keeping us up at night. It leads to marital stress and emotional pain. It is a ridiculous solution to a made-up problem. I.e. we always think we "need" a new car, we "need" a bigger house than we can afford, we "need" a bunch of new clothes, we "need" a huge TV that we got from Best Buy on credit, etc. Now, don't get me wrong, debt is necessary in some rare but important cases such as buying a house, getting an education and buying real needs in emergencies like transportation food and fuel. My point is that so many people think it's normal and okay to finance two cars, to pay the minimum balance on the credit card and to max out your monthly cashflow (income) on financed things and forget about saving. I hate that I am paying the bank hundreds of dollars every month just on interest for our house. I'm grateful that our house is our only debt liability but it just makes me crazy that I owe somebody thousands of dollars and if I can't pay it, I can't keep living in our house. It will be incredibly nice when I can say "I OWN this house, not the bank, not my parents, I do and nobody can take it from me!" Hallelujah when that day comes. And if you own your house outright, way to go!!

For more on this, I would suggest reading Dave Ramsey's book "Total Money Makeover." A friend told me about it and it's a great read!

Fourth, we've got to protect what we have with insurance. I am a big fan of insurance - but the right kinds of insurance, not that whole life insurance garbage. Every husband but especially father should have life insurance. If you are relatively healthy and you get a term plan, it is really affordable. For $450 a year, if I die, my wife gets half a million bucks! She might just be giddy at the funeral for that amount! I would actually like to up the amount to around a million, because half a million invested in cd's at the bank can only yield up to $25,000 a year. That's not much considering we live off more than that right now.

Other types of insurance that we ought to have are disability and the other obvious ones like car, and health. Disability insurance is just another safeguard against the possibility of becoming disabled and not being able to provide for our families anymore. I just barely applied for disability insurance that would cover us at $2,500 per month until I'm 65. While $2,500 a month isn't a ton of money either, at least its enough to cover a small mortgage and some other neccessities.

Fifth, we must diversify our investments and hedge against inflation. I once heard a story about a man who buried $65,000 in cash in the back yard in case he needed it. Well, that was about the worst thing he could have done. The U.S. dollar is ALWAYS decreasing in value. That $65k he buried could have bought a lot more at the time he buried it than at the time he dug it up! When I was young, we had this guy in our community that was certain the government was going to collapse and the dollar would be worthless. We used to make fun of him by saying that he probably has gold and guns buried in his back yard. Well, now it's us that look silly. If he had really buried gold in his back yard when I was young (mid 90's) he would have had a great investment that would yield nearly a 30% increase today!

Recently I've been thinking that I might want to have a little physical silver or gold (around $1,000 worth, not much) in a safe place like a safe deposit box or something. That way, no matter what happens to the dollar, I would own something of intrinsic worth, something that has always been rare and used as currency since the beginning of time.

I've also been more and more drawn to CD's. Warren Buffet said that the best way to make money is to never lose it. While he knows what he's doing in the stock market and how to not lose money with stocks, I don't. But I do know how to get a CD that I know will not lose value but will only gain value (probably at barely over the rate of inflation, but hey, at least its cash that increases in value).

Sixth, in general we need to be ready for any possibility. Having stockpiles of food storage (while it sounds crazy to most people) can bring incredible peace of mind. My wife and I are starting to buy canned items in bulk and store them on a rotational basis. We buy tons of storable food but gradually draw out of the storage to cook with normally. If any of you are accountants, its a FIFO inventory process. It works really well because we buy much more than we consume and hence our food storage continues to grow.

There you have it. I hope that you are able to build for yourself a financial fortress that will protect you when the waves of economic change come crashing in!