Surviving a financial depression; both emotionally and economically.
The newspaper headlines are gruesome for just about everyone. There is a flavor for just about everyone; financial depression, mental depression, economic financial depression, financial bailouts, the largest bank failure ( Washington Mutual ) in history and job losses. Meanwhile millions of Americans are faced with government tax foreclosure sales. It is very important for you to seperate the financial depression from the emotional depression. I would encourage everyone to take the below 12 question self-test, view the results and recommendation:
Click here to take the Depression Self-Test
Don't be ashamed to seek professional help. Without stable mental health, you will not be able to cope with the stress and anxiety of the current depressed economic environment. Here is some sound advice from Scott of the Powerline blog tiltled Depession Monopoly:
Lawrence B. Lindsey, ( Director of the National Economic Council from 2001-2002), and the Assistant to the President on Economic Policy for the U.S. President George W. Bush. Lindsey played a leading role in formulating President Bush's $1.35 trillion tax cut plan, convincing candidate Bush that he needed an "insurance policy" against an economic turndown. He left the White House in December 2002 and was replaced by Stephen Friedman after he estimated the cost of the Iraq war could reach $200 billion.
In "High Anxiety" , Lawrence Lindsey invokes the original Depresson-era Monopoly rules to explain the current economic environment. Along the way Lindsey inserts "a digression into economic self-preservation in a game of real-life Depression Monopoly" with advice that should come in handy:
"First, readers would be well advised to actually sit down and write up a budget if they have any doubts about whether their current income is covering their bills. Just to be clear, expenses include not only the minimum payment on an item like a credit card, but all the charges incurred in the month plus the minimum payment. And income does not include any draws on saving or home equity lines of credit. I once went through a budget exercise with a struggling 20-something and asked why he didn't have anything budgeted for gasoline for his car. His response was that he simply put it on his credit card so it didn't count as long as he was making the minimum payment.
Second, people should make sure that they have at least three, and ideally six, months' income saved in a place where they can get at it readily like a bank account or money-market fund. This is on top of items like retirement saving and college accounts.
Third, once this threshold is met, it is doubtless a good idea to start reducing debt, particularly on credit cards and auto loans. These are about to get much harder to obtain as the credit crunch inevitably spreads from the commanding heights of the financial sector into the consumer credit arena. It will not be surprising to see the limits on credit cards lowered sharply, fees for holding cards rise, and auto loans tough to qualify for. The goal for households should be to be able to use credit cards for convenience only--paying the bill in full each month--and to have the ability to pay cash for larger purchases like a car.
Finally, for those lucky enough to meet the above criteria, where one deploys one's assets becomes a serious matter in the current environment. There was a saying in the 1930s that you should not have all your eggs in one basket. It meant spread the assets around. In the calm environment of the last few decades this dictum was rejected for the convenience of one-stop financial shopping.
You might want to consult a financial adviser or at least inquire at the institutions where you have assets what the insurance limits are and under what circumstances your assets can be seized by creditors of the institution. This means asking questions about deposit-insurance limits, the assets backed by money-market funds, and whether your investments are in custodial accounts."
COMMENT: Scott, thanks very much for your thoughtful and timely post.



