By Kevin M

I don’t normally write much on economics, largely because I think its one step above fortune telling—maybe. You look into the tea leaves (“economic data”), sift it around a bit and make predictions about what you think is happening and more particularly, about what you think WILL happen.. Hence the fortune telling analogy.

So why am I sticking my hand into this hornets nest of omniscience? Mostly because I write about personal finance, and I’m of the opinion that personal finance without some concept of economics is akin to taking off in an airplane without radar. How do you know what to prepare for if you have no concept of what it is you’re heading into?

Even though my crystal ball is still malfunctioning, I figure I’ll take a stab at what I think is happening in the economy and where I think we’re heading. Heck, even without it I doubt I can do a more laughable job than the people who do it professionally, also known as “economists”.

Warning: this won’t be light reading—and for some, it won’t be at all pleasant.

What I think is happening

We’ve had recessions in the past, many of them in fact, but I think most of us have an idea that there’s something different happening this time, something more ominous. My experience is that when the “little voice inside” is telling you something is wrong, it usually is. Here’s what I dare to think it is…

At the risk of sounding simplistic, we’re now experiencing the end of the Age of Bigness. Sounds goofy, I know, but please read through before dismissing it.

The end of the Age of Bigness is the flip side of the Industrial Revolution. When industrialization began, the apparatus for growing systems—let’s call them mega-systems—began to develop and spread throughout the industrialized world. Once started, they could leverage people, capital and resources in a way that enabled them to go on permanent growth trajectories. Consider the following.

Big Government. Up until 150 years ago, government was little more than a monarch of some sort, his ruling council and a small army that could grow only during war. Today we have all-encompassing government which not only makes laws and maintains national defense, but also provides cradle to grave benefits for the populace and is somehow involved in nearly every aspect of our lives right down to the most personal level.

Big Business. For thousands of years the economy of the world was based on cottage industry and family farms. Today we have conglomerates with operations in dozens of countries but loyal to none of them.

Big Education. Not even 100 years ago, one room school houses were the backbone of education, and career training was based on the apprentice system. Today we have statewide public school systems and university systems with multiple campuses and tens of thousands of students.

Big Media. Until radio came out in the early 1900s, the only trace of a media was the local independent newspaper. Before that it was gossip and the town crier. Today, not only do we have radio and TV, but most of it is joined in media conglomerates with global reach.

Big Healthcare. Long gone is the witch doctor or high priest, or even the country doctor. And increasingly, so is the local general practitioner. They’ve been replaced by expansive healthcare systems run as Big Business. The patient is sent from specialist to specialist, rarely having more than a few minutes with any.

These are just the most prominent examples of the modern age trend toward bigness, but there are others. Each provides certain benefits to the population, but the cost of maintaining the systems themselves is now exceeding those benefits. The de facto evidence is found in the perpetual rise in prices and the need to use debt to keep them afloat.

That system of bigness, I believe, is coming to an end and represents the source of the dislocations we’re now seeing and trying to deal with.

Evidence of mega-system failure at all levels is all around us. Consider the following:

• National governments are existing in a state of perpetual deficit—in the US alone, more than 40% of the federal budget is “funded” by borrowing

• Local governments have turned to police citations to fund operations

• Big healthcare runs almost entirely on government and private health insurance plans (as opposed to cash payments) which now carry premiums the size of house payments; tens of millions are going without them for lack of ability to pay

• Virtually the entire pension system in the US, both public and private, is facing a massive funding crisis

• The university system, which has exploded in size and scope, is funded largely by student debt that can leave the student with a six figure liability upon graduation

• The value of any system is in its simplicity, but mega-systems have become increasingly complex, often requiring thick manuals or the hiring of lawyers to navigate

• Most debate in regard to the various mega-systems centers not on improving them, but in keeping them afloat!

Far from being synergistic, maintaining The System is now both cumbersome and prohibitively expensive. Not only are the various sub-systems straining to keep themselves afloat, but the citizenry is struggling to comply with supporting them.

The Industrial Revolution-inspired model of increasingly large systems that facilitated growth for a century and a half is broken. “The System” can no longer fix itself and is an obstacle to progress. The System is now in survival mode.

Where I think this will lead

There might be a temptation to consider this as a bad news assessment, and while it is in the near term, I think it will ultimately lead to a better place.

We went from “smallness” to bigness during and since the Industrial Revolution, and now we’re likely to return back to smallness. Cottage industry, in the form of at-home self-employment will gradually replace big employment centers, as nearly anything done in a large organization can be done by a one man or woman shop from home and done at less cost.

The at home revolution will force more self-reliance and reliance on local community—where it had been for most of human history. Meanwhile, technology—the magic bullet many expect to solve our biggest problems within the scope of The System—far from fixing it, will hasten it’s end.

Consider what technology is doing and what we can reasonably expect it to do in the near future:

• Computers and the Internet—These technologies are already here and having a major impact moving into the world I’m describing. They have taken commerce out of the ivory tower and put it back in the home, launching a revolution in the modern equivalent of cottage industry.

• Electric cars—We’re not quite there yet, but we’re on our way. This has been talked about for 30 years but it’s finally hitting the scene for real. Current batteries for all-electric cars can’t sustain 100 mile charges now but they’re improving quickly. When a battery that can go 200+ miles between charges arrives for real it will break big oil and it’s monopoly on motor fuel, and empower the individual.

• Renewable energy—wind and solar—Again, we’re getting to the point where renewables will be cheap enough to compete with fossil fuels, and once that happens in earnest, utility monopolies will be broken and individuals will be empowered.

Consider the combination of electric cars with renewable energy generated from at-home solar panels or windmills serving as the power source; now combine this with the income generating capability that computers and the internet afford. All will enhance individual economic, political and personal freedom, but the decentralization will prove crippling to The System.

How things are likely to play out between now and then

It would be a massive advantage if we could jump from where we are now—with an anemic and declining economy—to the future I just described—but it won’t happen that way and that’s where things are likely to get a lot worse than they are now. Here is what we’re likely to see play out between now and the better future

1. System based debt structures are already unsustainable but will be even more so in a decentralized economy and will have to unravel; the meltdown since 2007 was probably the start of a process that’s likely to get much worse.

2. The System can be fully expected to dig in and resist its own destruction. Collectively, the majority will continue to look to The System for salvation—to their own peril.

3. Massive economic dislocation and disenfranchisement will occur as the unraveling of The System moves more quickly than the shift to individual reliance.

4. One man/one job will be coming to an end as income from traditional jobs continues to erode and workers are forced into involuntary self-employment and the pursuit of multiple income streams.

5. Contrary to popular belief and in spite of populist speeches by politicians, the state will resist—not facilitate change. Big systems are far easier to tax and to regulate than an economy based on tens of millions of self-employed individuals.

6. Government budget issues are likely to get worse, even much worse, as change moves through the economy.

7. Colleges and universities will be unable to provide educations relevant to a decentralized economy that runs on millions of unique businesses. Nor will they be able to compete with online training that will be only a fraction of the cost. Meanwhile The System has abandoned training or retraining. Self-study will become the preferred route to “higher education”.

Most of these aren’t even a stretch—we’re already seeing them play out to one degree or another. This is just a matter of projecting current trends out to their logical extremes.

Strategies

This is a time for neither blind optimism nor gloom and doom, but openness to change, flexibility, and a willingness to grow and take chances. Specific strategies are difficult to project since the situation is in a state of flux. But going forward, strategies that will attempt to work in this direction will make up much of the content on this website.

What do you think? Do you see any of this playing out? Do you see things going in a radically different direction? Or do you think that The System will ultimately cure itself and keep us on a more traditional path?

Can you offer any strategies to help us deal with these changes? If you’d like to write a post, either challenging my predictions, supporting them or proposing strategies, feel free to contact me at kevin (at) outofyourrut (dot) net and I’ll publish it.

If you’d like to start developing your own home business, check out my post, The Freelance Blog Writer Side Hustle. Even if you’ve never written professionally in the past, this post will help get show you how to convert your passions and interests into an income earning business that you can work in from the comfort of your own home.

Related Posts:

How Are You faring in the “Jobless Recovery”?

How Frugality Becomes Counterproductive

Buy a Business OR Build One From the Ground Up?

All Jobs are Temporary! (And What You Can Do About It)

A Successful Online Business Requires Realistic Expectations

Multiple Income Streams to replace One Man-One Job?

By Jacob Mojiwat

Being at sea for long periods of time can be isolating. You cannot access the Internet or reach your friends and family at a moments notice, but there is something wonderful about being out in a world that is just you, your crew, your boat, and the elements. I find that many of the principles I live by are ideas that I formed while I was out on these adventures, away from civilization.

Here are the main ideas that I’ve been contemplating lately, and find to be truly relevant in day-to-day life:

Sometimes you have to swim against the current if you want to get to where you are going

There are so many times in life when it feels as though everything is going wrong. They say bad luck comes in threes, but all too often it comes in a tidal wave, or at least a swiftly flowing current that feels as though it will wash us away. It is hard to swim against that current. It would be so much easier, and more peaceful, to drift along with it.

Maybe it would be easier to take a job that I don’t like rather than to keep struggling to make ends meet, while applying again and again for jobs that I truly want. Maybe it would be easier to stay in a relationship that my friends and family approve of, with a partner who is financially secure, rather than getting involved with someone I am passionate about who also happens to live a life on the margins of society, struggling to get by. Maybe it would be easier to easier to heat up a frozen pizza and spend the evening watching TV, rather than exercising and cooking a healthy meal afterwards.

The thing is, though, that if I drift with that current, it will wash me out to sea. Maybe I was hoping to explore a coral reef. Maybe I wanted to take some underwater photos. Maybe I just needed to get back to my boat. The current might be strong and really tugging on me, but at times, if I want to get to where I am going, I have to push back and find the strength in myself to swim against the current.

What always surprises me is that once I start swimming against the current, it is never as hard as I thought it would be. It isn’t a back-bending effort. Instead, it’s liberating and exhilarating to accomplish something that I set my mind, and body, to do.

At sea, it’s best to wear a life jacket

I don’t think I have to tell you why life jackets are important. They can save your life. We may think we don’t need a life jacket though, as I have gone boating many times with people who told me they were strong swimmers, the weather forecast was good, that the life jackets were too heavy, too bulky, too much of a nuisance. I just ignore them and tell them to wear the life jackets anyway. Why would I do that? I’m an independent thinker and I believe in swimming against the current. Why insist on a life jacket?

Because life happens, that’s why. You can’t really predict the weather. Even a strong swimmer can get hit on the head or faint or get sick. Likewise in life, at sea or on land, we all need an emergency plan. Especially if you, like myself, believe in swimming against the current. If you’ve done something that nobody in your support network of friends and family approves of, then you have to be ready to go it alone. And that means planning ahead and taking precautions. Don’t live beyond your means and always set aside a little money for emergencies.

Find a good friend or family member who you trust to be your emergency contact, in case you need help suddenly. Think ahead about the various ways in which life could take an unexpected turn and plan ways to cushion the impact when it does. I can’t predict the weather, but I can guarantee you one thing – life happens. And when it does, you’ll be better off if you’ve anticipated the unexpected.

The fishing is better after a storm

I love storms. The more thunder and lightning, the better. But there are times in life when we go through storms that are not exciting or fun. Storms that are more like hurricanes or tornadoes, that come through our life and wreck our plans for the future, leaving us marooned, stranded, or adrift.

I can’t tell you that there’s anything enjoyable about going through alife storm, whether it’s a physical and meteorological storm, or an emotional, financial, or occupational storm. But you know what they say about weather; if you don’t like it, be patient because it will always change. Once the storm is over, you can walk on the beach and pick up unusual seashells, or you can go fishing. If you can simply take time to relish the calm and be open to possibility, your intuition will guide you to something new and
wonderful.

There is something to be said for “no wake” zones

Nobody likes having to slow down. We all want to get to where we are going and in a hurry, in possible. This is particularly relevant to me as I am often running late. But in a no wake zone, we have to slow down – a lot. I guess this is what city people experience when they get stuck in rush hour traffic. It’s what athletes experience when they have an injury. It’s what parents experience when they have to stay home with sick kids and cannot go to work. Like it or not, you have to slow down.

If you have to slow down, whether you like it or not, then you might as well try to find peace with it. I’m not a Pollyanna or even an optimist, particularly. In fact, I can be as pessimistic as they come. But at sea you have to be practical and budget your resources. If you are in a situation where you are forced to slow down and take some time, then it makes sense to budget that time to rest and renew your spirit.

Later, when you are rushing forward and desperately trying to make up time, you won’t be able to rest. Rest, meditate, and take time to enjoy life when you can, or you will burn yourself out. Humans are not perpetual motion machines so we need to take time to do our own routine maintenance. Otherwise, you’ll blow a gasket later on when you don’t have time for it.

Even with a flashlight, you can only see so far ahead

My underwater camera has a flash that will allow me to take pictures even when it is very dark, but even with a flash, you can only see a certain well-defined area within the circle of light. Beyond that, there is nothing but inky blackness. In fact, using a flashlight to try to see better makes it easier to see the area right in front of you, but makes it harder to see into the distance.

Sometimes that is true in life as well. We all get lost or off track at times, even with GPS. Wise seamen know that even if you don’t know where you are, you are somewhere. Don’t panic – if a storm comes up, do what you have to and ride it out. Being prepared beforehand will keep you better off if you find yourself in the dark. Eventually you will find your way out again, so don’t be afraid.
 

I truly believe that living these principles of the sea in everday life, is the key to success. Slow down, be prepared, and when the unexpected happens, you’ll be ready for it.

Jacob Mojiwat is passionate about the ocean and water sports. Currently he is sharing the wonders of scuba diving in Malaysia with others. His company puts together Asia diving packages for an unparalleled diving experiences.

Controlling our tendency toward Creative Avoidance

By Kevin M

How is it that that some people seem enormously successful, yet astoundingly they have more free time than the rest of us? Have you ever noticed as well that some people who are incredibly busy are at best only moderately successful? Perhaps you’re one of them, always busy, but not having as much to show for your efforts as you think you should.

The typical human reaction to this apparent contradiction in the natural order of things is to assume that the successful person with all the time on his hands is a) lucky, b) has an “in” with important people, and even c) must be doing something unethical, immoral or illegal.

While each of those considerations isn’t beyond the realm of possibility, there’s a far greater chance that the successful person with all of the free time on his hands has found a way to
maximize his results while minimizing his efforts. He manages to do this by saying “NO” to unproductive tasks, either by making it clear to others up front that he won’t engage himself in them, or by simply refusing to participate.

Logically, isn’t that what we should all be doing?

Being busy won’t get you where you want to go

No one wins a prize, lands an important client or earns the biggest paycheck as a result of being the busiest person. Having been in that very position myself, I’ve learned that the busiest person in a company, department or family is often the organizational enabler, making it possible for others to engineer great accomplishments.

Sadly, the busiest person in an organization isn’t even the person most likely to be promoted. That’s quite possibly because the decision makers want the busy person right where she is, cleaning up and plugging holes for others. Every organization needs just such a person doing exactly what she does right where she is.

There’s nothing wrong with being diligent, with being the “go-to” guy or girl in your organization, but if you want more out of your job or career, or want to break into something completely different, you’ll need to get over your addiction to busyness and focus your efforts primarily on activities that will put the most money in your pocket—majoring on the majors!

In order to do that, we need to learn to say “no” or to otherwise disengage ourselves from unproductive activities.

Majoring on the minors

When your income is thoroughly dependent on accomplishing a relatively small number of major projects that define your career, all that efficiency you develop on small tasks becomes counter productive.

We can become so comfortable handling a large number of small tasks in assembly line fashion, that major projects can “get in the way”, always being relegated to the bottom of a never ending To Do List!

Being massively efficient in getting small tasks done can produce a false sense of security. We’re busy getting a lot of details taken care of so we feel as if we’re productive. But if we finish many small tasks and by the end of the day we haven’t completed that one major project or closed sale, we’ve failed to make meaningful progress. A complete shift in mindset is required.

Getting out of the weeds

We’ve all heard the term, “you can’t see the forest for the trees”, and that’s basically what happens when we get so caught up in the details of our business that we’re deep in it, but never on top of it. In that position we’re unaware of the big picture and thus unable to work it to any real advantage.

What can we do to get out of the weeds and centered on majoring on the majors in our careers or businesses?

Establish priorities. At the risk of being redundant, the priority must become the priority! All other distractions need to be delegated, discarded or otherwise minimized. The reality of life is that there will always be endless details that need to be attended, and we need to find ways to manage these. Succeeding at one major activity has more life transforming potential than accomplishing a dozen minor tasks efficiently.

Clear away the clutter. Look for ways to simplify life. We buy things and involve ourselves in more activities than we can comfortably accommodate. In business, if something isn’t working, get rid of it. Also eliminate business activities that are only marginally useful. The key is to clear your desk and your schedule to spend as much time as possible on activities that put money in your pocket.

Focus on the major objective. Our major objective has to be in front of us at all times, otherwise “urgent but not important” tasks will continue to dominate our time and energy. Only by concentrating our most productive time and efforts on life changing activities can we hope to get from where we are to where we want to go. The objective must be central in our thinking and planning. Use placards or computer screen savers posting your major objective so you’ll always be aware of it, then prepare to always work the details around the objective.

Concentrate on the one or two things you do best. Most of us can do one or two things very well, but when we get caught up trying to do too many things, we become the preverbal “jack of all trades, master of none”. While the rest of the world works 40, 50, 60 hours per week and more, many successful people work only 20-30 hours. But the entirety of that time is spent working on activities that put money in their pockets. We can’t balance the trivial with the meaningful, because the trivial has no constructive limit. And no matter how much of the trivial we work on, it won’t change our circumstances.

Jack Canfield, Mark Victor Hansen (see ad banner to the left of this post) and Les Hewitt, success coaches and authors of The Power of Focus: What the Worlds Greatest Achievers Know about The Secret of Financial Freedom and Success (available at Amazon) had this to say on the subject:

“Working harder and longer hours will not solve your dilemma…You must invest most of your time every week doing what you do best, and let others do what they do best.”

“Remember, your bottom line income is directly linked to the amount of time spent in our areas of brilliance.”

Manage your time. Learn what times of the day you’re most productive, and dedicate that time to your major objective. It’s not always a matter of time invested, but the quality of the time that makes the difference. If you’re a morning person, block out the first four or five hours of each day for your major objective, and hold detail work for later in the day. The key is to give your major objective your best time.

Guard your non-business activities. One of the often ignored “details” in life is what we do in our non-business time. In trying to accomplish anything worthwhile, we may have to give up some un-productive spare time activities in favor of greater effort at our major objective. One of the biggest time wasters is television, but it has plenty of company in the form of computer games, shopping and various gadget obsessions. Simplicity requires that we eliminate as many non-essential past times as possible. Upshot: once we begin succeeding in our major objective, we’ll have even more time for non-business activities.

Take charge of “people issues”. Do you have people in your life who always need your attention? You know, the type who always seem to have a crisis going on. And always said person comes to you to help them weather the storm. The problem is that their storm never seems to end, and neither does your involvement. If you have people like this in your life, you may need to find a way of gently moving them out of your way. Immediate family are your obligations, but friends, coworkers and extended family are another matter entirely. It’s one thing to help someone through a crisis, but quite another when their entire lives are one giant crisis. This is draining emotionally, and it will take away from your major objective.

 
The key is to focus your best time on your goals—to major on the majors—to minimize attention to never ending detail and learning to say “no”, either literally or figuratively, to people and activities that take you away from that objective.
 

If you’re making a significant change in your life, what are some methods your using to keep you focused on majoring on the majors?”

By Kevin M

Recently on OutOfYourRut I’ve been writing a series of posts centered on employment alternatives–self-employment, side businesses and soft employment (part-time, temporary or contract work). The purpose in discussing these alternatives is based on my belief that the weak employment environment we now find ourselves in may not be temporary, and longterm changes need to be implemented in order for us to survive in a job market that may look very different from what we’ve know for most of our lives.

( Photo by Phil Campbell )

Though connecting employment weakness to the recent recession is the standard line, doing so fails to give proper recognition to longer term trends which have had an even greater effect on the job market than we assume. Globalization, advances in technology and rising healthcare costs have marginalized much of the labor force in countries such as the United States. While technology has been eliminating jobs at home, wage arbitrage has been taking place globally, in a competition that high wage/high benefit labor bases, such as that of the U.S., are at a competative disadvantage versus low cost/unbenefited work forces in third world countries. We can protest that it’s unfair competition all we want, but it’s also the reality of our time.

Though the evidence is all around us, I stumbled upon a recent article that addresses the longer term job outlook more directly.

In 9 Careers on the Way Out (Yahoo Finance, January 29, 2010) Stephanie Powers provides a list of careers that are gradually disappearing and provides detailed reasons driving the eliminations, which I’ve summarized below.

• Bank Tellers: ATM’s and online banking.
• File Clerks: Computerization and environmental conservation are eliminating paper files.
• Telephone Operators: In a word–voicemail! But email and texting are also exacting a toll.
• Data Entry Clerks: “The ability to integrate systems and make various systems exchange date automatically also reduced the need to for a person to translate or manipulate data.”
• Mail Clerks: Bar codes and email.
• Photo Processors: Digital photography and self-service kiosks.
• Travel Agents: We can book our own trips on the internet.
• Watch Salesperson: Cell phones make great watches, and you can make and receive calls on them too.
• Video Store Clerk: Online movie viewing and cable companies with user-selected movies.

That’s a pretty substantial list, but just off the top of my head, I can easily add a few more:

Tax Preparers: While there will always be a need for preparers for complex income tax returns, for most taxpayers a user friendly $30 tax software package is becoming increasingly preferable to paying a $300 fee for third party tax preparation.

Customer Service: Technology has enabled an increasing number of these jobs to be moved offshore to lower wage countries.

Manufacturing Jobs: This is a trend that began at least four decades ago, and shows no sign of reversing. Robotics, offshoring of factories, and NIMBY (Not In My Backyard) policies are the chief culprits here.

MORTGAGE WORKERS! Being a refugee from this industry has put me in a position to know. The industry has always been cyclical, but there’s something close to a concensus that it isn’t coming back to anything close to where it was a few years ago. Apart from the housing bust and mortgage meltdown, regulators and advocacy groups have long taken aim at “yield spread premium” or YSP, and viewed it as a form of illegitimate profit. And their efforts have succeeded in creating a patchwork quilt of state and federal predatory lending laws that are squeezing the profit out of the business. (YSP is back-end compensation paid to mortgage brokers and originators in exchange for slightly higher rates, but it’s also the reason why borrowers no longer need to pay points up front.) Take the profit out of any business, and the business will wither and die. The mortgage industry will survive in some stripped down form, but it will likely do so with far fewer sales people and independent brokers, both of whom have traditionally represented a large share of the industry’s employment base.

Admittedly, some of these jobs have traditionally been lower paying, and because of that some might argue that their disappearance won’t have a material affect on the rest of the job market. However, what these jobs do accomplish is providing employment at the lower end the job market, and cronic unemployment in that sector will reduce the market for goods and sevices accross the board, affecting even higher paying job classes. Meanwhile manufacturing and mortgage employment have been the foundation of middle class life in millions of households and are going the same way. Am I sounding a false alarm or is something bigger playing out than we like to think?

Can you think of any other career fields disappearing from the employment scene? Since individually we can’t solve the nations employment problems, what steps can we take to prepare ourselves to suvive and hopefully prosper in the transition?

Recent articles on OOYR related to this topic:

Starting a Side Business – Why Now is the Time

Steady Paycheck VS. Self-Employment; Which is Right For You?

By Kevin M

What if the economy isn’t turning the corner? What if the “Great Recession” isn’t a recession at all, but the early stage of a longer term economic devolution?

I consider this as more than a reasonable possibility. As much as we might cling to the notion of “business as usual”, the history books tell us that long term cycles are periodically broken by the onset of a new eras. The fall of the Roman Empire was one such turn; the onset of the Industrial Revolution was another. Closer to our own time and place were the Civil War and the Great Depression. All of these events changed not only the rules of the game, but also the way the majority of people lived. And they were hardly isolated incidents.

I’m reading Survival+, Structuring Prosperity for Yourself and the Nation, where author and website host Charles Hugh Smith spells out the “Great Transformation” that we may well have entered already. The evidence to support his claim isn’t hard to find.

Making the case for the Great Transformation

Smith outlines a substantial range of stresses in the economy which are already underway and thus beyond our collective ability to reverse, including:

• A contracting middle class. The socio-economic backbone of the economy is under pressure from an ever increasing cost of living, shrinking job opportunities and more recently, from less generous credit availability.
• The end of cheap energy. The economy has been built on cheap energy, but new sources are increasingly coming at higher cost—deep sea oil drilling and tar sands conversion being prominent examples.
• Unsustainable levels of credit. The sub-prime mortgage crisis, which began three years ago, continues on, and has now expanded into nearly every other credit sector.
• The United States is a high cost economy. We are increasingly unable to compete successfully with lower cost countries in an expanding global market.
• A media culture which feeds a state of permanent adolescence and denial.
• Unrelenting healthcare costs, growing at 2-3 times the rate of economic growth on average.
• An aging population with its attendant pension and healthcare costs.
• A badly overextended public sector. At all levels, government is swamped with public demands to spend money it doesn’t have to solve every societal or economic ill.
• An increasingly unfathomable web of complexity at all levels of the economic system: “the unspoken idea that things are too complex to modify in any meaningful way”.
• A population largely disengaged from the political process and the true issues by diversion into “low level conflict and anxiety by the media”

The list reads like doom-and-gloom, but most of these problems are growing faster than the general economy, a trend which even an optimist must admit cannot be sustained.

Structuring Prosperity

Smith contends that our problems have grown so enormous that “the system will not reform itself” and that change will be forced on us by circumstances rather than engineered into existence by popular choice.

In Part Two of the book he outlines what we need to do as individuals in order to live prosperous lives and to lead the nation into a world with a very different set of parameters than what we’ve known in the past.

He makes reference to what he calls The Remnant, the very small percentage of the population who see the changes coming and who adjust strategy and tactics consistent with the new reality. It is that small group—no more than 4% of the population—who will emerge and lead a reluctant population into world which has great potential to be better than any we’ve known to date.

He recommends “radical self-reliance”—accepting the end of the Savior State and taking personal responsibility for one’s health, livelihood, education, energy, food, retirement and pursuit of happiness”, suggesting the following:

1. Turn off your TV (and it’s myriad influences) and start experiencing real life
2. Develop multiple income sources; have a back up skill, trade or income source
3. Diversify, counterbalance and be flexible and opportunistic with investments (“when gasoline is cheap, buy a futures contract”) – no single investment vehicle will work in all environments
4. There is no security, always have a Plan B
5. Democracy requires active engagement; participate beyond voting by serving on committees and contacting representatives at the local level where our actions can make a real difference
6. Adopt a radical savings strategy—live beneath your means, develop independent income sources and save as much as 50% of your income
7. Lead a “low cost/low debt lifestyle” which will afford the ability to be flexible and mobile as circumstances require
8. Cultivate close ties with community and network sources for both business and social interaction

His concept of “hybrid work” has immediate value. It’s described as “…one finger in the wage economy, one in growing food (no matter how little), another in creative pursuits, another in (for example) trading childcare for eldercare, another in hedging/investing to preserve purchasing power, another in helping to develop locally owned distributed energy as either a technical innovator…investor or provider of labor (local enterprise)…”

These tactics would work well in any economy, but would certainly have greater relevance in an economy marked by rolling recessions or worse.

Not a doomsday or survivalist scenario

Critics may argue that this is just another doomsday book, looking to sensationalize the nations problems for personal profit, but the degree to which Smith makes the case that a transformation of major proportions is indeed underway is hard to dismiss.

Others may confuse the word “Survival” in the title as synonymous with survivalist which is categorically untrue. He devotes a significant amount of ink to explaining why any survivalist strategy is an empty venture. On page 62 he addresses the survivalist cults with the following…

“Another enduring myth of the American culture is “living off the land”. Many of my correspondents who hunt and fish report that when discussions of financial hardship arise, many of their acquaintances say they will simply bag some deer and go fishing to feed their families. Sadly, what was possible in the remote, largely unpopulated America of the distant past is not possible for a nation of dwindling wilderness and 300 million mouths to feed.”

Smith’s emphasis on the need for reliance on family, community and networks runs completely counter to the “go it alone” credo of the survivalist movement.

Smith spends a great deal of the book making the case for the Great Transformation. And well he should—with the recent rise in the stock market, the media and much of the population have already relegated the recession to a serious but also typical cyclical downturn from which we will emerge stronger and richer than ever. The case against this viewpoint cannot be accomplished in a few words.

This is the view of the economy that I have. The recession we’ve just experienced is unlike any we’ve seen in my lifetime. It was not caused by an energy shortage, terrorist act or a spike in interest rates, but by the sudden slowing of an economy running into a wall of structural stresses. There is no evidence that those stresses have been corrected in any material way.

The current mini-celebration over the dramatic rise in stocks since March and in reaction to various metrics showing firming in certain areas of the economy may be causing people to slip back into their more comfortable and familiar pre-recessionary practices, and I think this book sounds an alarm to look deeper and more critically at where we are and where we’re heading based on the trends.

If you’re interested in Survival+, Structuring Prosperity for Yourself and the Nation by Charles Hugh Smith–and I strongly recommend it—it’s available at Amazon.com

What’s your take? Is the Great Recession over, or is it actually a part of a longer term trend, like the Great Transformation? And if so, how should we be preparing for it?

By Kevin M

Starting a new business is often a process of navigating a series of challenges. The greatest ideas can land in a ditch for unforeseen reasons. In fact it’s often not a bad concept that causes a new business to fail, but a lack of staying power. Starting a business should be thought of as a long term plan and not a get-rich-quick scheme.

Motivational author and speaker Robert Ringer provided a user-friendly re-definition of the concept of positive thinking as positive thinking through assumption of a negative result. You don’t assume failure, but you anticipate problems and prepare for them.

There is a constructive difference between true optimism and blind optimism. True optimism is based on solid planning—it springs from preparation and planning. The more common blind version rests on vague concepts like an idea that’s “too good to fail” or “I’ll succeed because I’m me, and I believe in me”. That kind of hype can quickly vaporize in the face of an empty bank account or a failed business deal.

So what kind of preparations will stack the deck in favor of your new business venture and generate a sense of true optimism?

1. Pick a business you know

If you start a business in a field unrelated to your experience and skills, you’re basically throwing a dart hoping it lands in the right place. The more closely a proposed business matches the work you’re doing right now, the greater the chance of success.

What if a business interests you but you have no related experience or skills? Begin the business as a sideline or work for someone else in the business as a part time employee, until you gain the needed understanding, experience, skill set and contacts. This is also a good way to gradually convert a hobby into a business.

The side line idea is what I’m doing with OutOfYourRut.com. It’s a side business, and I’m learning by doing it, and from what I learn from other bloggers along the way—a kind of earn-and-learn program. I think this is the best course for most would be entrepreneurs.

2. Know your competition

Knowing your product is critical but you also need to know what your competition is offering. I’ve worked in sales jobs where management did a solid dog-and-pony show on their own products, but mostly tried to ignore the competition as if it were irrelevant. No matter how confident we are, competitors are never irrelevant and they can’t be ignored. Chances are any prospect you’re courting is also entertaining bids from your competition, and you will need to know what they’re selling.

Knowing your competitors’ weaknesses can enable you to raise doubts in the prospects mind about what’s being offered, or to play your strengths against those weaknesses. Equally important, knowing your products and those of the competition can position you as an industry expert, and that can be reassuring to customers who are unsure and looking for a confident voice.

One of the best ways to understand your competitors is to contact them posing as a customer. You can do this if you’re new in the field and unknown. This is usually a better way of learning about them than reading product or marketing information. It can also provide insight on the give and take you can expect to experience with your own customers.

3. Get ready to sell

Many people recoil at the idea of working in “sales”, but if you start a business, that’s exactly what you’ll be doing. You have to be good at pitching your product or service to a skeptical prospect, to hear NO again and again, and to be fully prepared to get back up and sell to the next guy after the last one shot you down. That’s sales no matter how it’s labeled.

Many years ago I did contract work for a very successful CPA, a man who was expanding his business in the middle of a deep recession, who often said “I’m a salesman first and an accountant second”. That’s the reality of self-employment, no matter what field you’re in.

If you don’t have a sales background, take a sales course, get sales CDs and DVDs and prepare to develop (or improve) your sales persona.

4. The magic of marketing

Though “marketing” and “sales” are often used interchangeably or in conjunction with one another, they’re very different functions. Think of marketing as the process of getting customers to call, visit or email your business, and sales as closing the deal. A customer who calls you is a lot easier to sell to than one you have to call first.

Find out what successful competitors are doing to market their businesses, keeping in mind that you probably won’t have the cash flow to maintain a comparable marketing program. You’ll need to be creative to do what they’re doing for less money.

As a start up, the best approach will be to look for marketing methods that will cost little or no money at all. Marketing efforts must be consistent and sustainable so stretching your dollars will be crucial. The key isn’t so much how much money is spent on marketing, but rather how many people you can reach with your message, again and again.

5. Have a Cash Flow from the start

Cash flow is the single most important element to the success of a business. Without it there is no business. The sooner you develop it, the better the prospects for success.

There are at least three ways to have a cash flow when starting a new business: 1) continue working at a full time job, running the business as a side venture, 2) run the business full time, but supplement income from unrelated sources (i.e., part time or contract work), or 3) buy a business that already has an established clientele and cash flow.

Pick one, keeping in mind that the third requires capital, as well as a risk of loss of that capital should the business fail. As well, the cost to acquire a business is generally commensurate with the volume of the cash flow you’re buying.

6. Have a savings cushion

Having several months of living expenses tucked away to carry you through the first few months of operations raises the prospect of success a few notches.

Financial planners recommend three to six months savings for most people; if you’re going to start a business you’ll want to be at the higher end of that range at a minimum. This isn’t for business capital, but for living expenses until the venture becomes self sustaining.

If you don’t have a cushion, you may be able to build one relatively fast. It would be time well invested to delay the start of your business until this is accomplished.

7. Keep your parachute in good working order

This may seem like the ultimate counter motivation, but having a Plan B, in case the venture does fail, may provide the confidence needed to pull through lean times. A sense of doom over potential failure will not be a constructive traveling companion. Customers can often sense fear and might take their business elsewhere.

You’ve undoubtedly heard the saying “never burn your bridges”; this is fundamentally more important if you’re trying your hand at entrepreneurship. Returning to a previous job can be a welcome port in a storm should the worst happen. Never bad mouth previous employers—you never know when you might need a job or a reference! Otherwise, stay active in your business networks and keep an ear to the ground for possible parallel opportunities.

Having a ready parachute is much like the analogy of owning a gun: it’s better to have it and not need it, than to need it and not have it. Confidence is a big part of success, and just knowing you have other options can eliminate the fear of failure.

If you’re starting a new business, you’ll need to be optimistic in order to even make the effort. But make sure your optimism is based not on hope alone, but on tangible plans that will increase your chance of success in very real ways.

By Kevin M

Unemployment ticked down in November for the first time in many months, some of the big banks have announced plans to pay back TARP money given to them early in the financial crisis and Wall Street is on the rise—a classic recovery is underway!

Or is it?

Before you think of this as a gloom-and-doom post, please read through to the end and you’ll see it’s anything but.

I’ll agree that there’s a clear uptrend in many near term indicators, but I doubt that’s the real story. Economists and many politicians and industry leaders are understandably anxious to trumpet any sign of good news, anything that will get us past the gloom of the moment. But that focus seems to be notoriously short sighted.

We may be moving toward some sort of end of this recession, but my take is that the recent financial crisis is a symptom of bigger problems, and does not represent the crisis itself. We can cure this recession but never deal with the longer term issues that caused it in the first place, and as a result, we can expect more of the same very soon.

The longer term issues are my primary inspiration for choosing to establish OutOfYourRut.com. I don’t believe that many of the problems we’re facing are temporary, and changes in our attitudes and actions in regard to careers, money and many things that have nothing to do with either, will have to take place in the coming years.

As a nation, and even as a world, I believe we’re in a deeper rut than most of us can accept. While we look to collective policy changes to bring us through the transition, it is at least as much our responsibility as individuals as it is a matter of national policy. Probably much more.

The trends shaping the future

I’m claiming no access to a crystal ball here, but I think we can make some reliable projections about where things will go in the next ten to twenty years based on very definite trends that have become entrenched in the past decade or two. We can’t know for certain what will happen in the future, but in order to prepare for that future we need to have some understanding of how things are reasonably likely to play out. The only way to do that with any degree of certainty is to look at the underlying trends already in motion.

Rather than focusing on the recent financial crisis and the attendant recession, let’s review some trends which have been in motion over at least the past 10 years, and hazard some reasonable guesses about the future that an ordinary person without a degree in economics can make, whether the economy recovers or continues in an impaired state in the short run:

• The cost of the most things will continue to rise; the most important ones will rise faster.
• Big companies will continue to swallow up smaller ones.
• Large companies will continue to reduce payrolls in the attempt to achieve/preserve/increase profitability. You will be affected by this even if you’re self employed because an unemployed worker is an impaired customer.
• Companies and industries will continue to shift jobs to lower cost overseas locations.
• Advancing technology will create, redefine and eliminate jobs and industries.
• Foreign competition is here to stay, and in certain industries that competition will have advantages we can’t match.
• There is a wave humanity moving between countries that dwarfs the settlement of- and migration to- the Americas between 1500 and 1900, and it’s affecting everything.
• Money and capital are flowing all around the world and are no respecters of national borders. Punitive actions by one country against a company will result only in it’s migration to another.
• Technology is accelerating the pace of everyday life.
• Information and communications are flooding the world, extending, enhancing and even corrupting the content we receive.
• The cost of both healthcare and pensions are rising at unsustainable levels.
• World systems are becoming more intertwined and interdependent to a degree that’s poorly understood.

Proof in the news stories that don’t make the front page

In a recent Bloomberg article Volcker Says ‘Basic Structure’ of Economy to Impede U.S. Growth, former Federal Reserve Chairman Paul Volcker, said,

“…imbalances in the structure of the U.S. economy pose a bigger challenge than the financial crisis and will impede economic growth for some time. “We have another economic problem which is mixed up in this of too much consumption, too much spending relative to our capacity to invest and to export. It’s involved with the financial crisis but in a way it’s more difficult than the financial crisis because it reflects the basic structure of the economy.”

Note the emphasis on the basic structure of the economy; worldwide government policies flooding the world and the banks with money have done nothing to change the basic structure—and problems—of the world’s economies. Adding debt and printing money will assure that the first trend listed above—rising prices—will continue into the future, adding even more stress.

This policy continues even with the economy showing at least some signs of life. Last week, in recognition of a $12.1 trillion debt by the end of 2009, Congress is poised to raise the U.S. national debt limit by an additional $1.8 trillion, in line with borrowing expectations for 2010. That would put the cumulative national debt at about $14 trillion one year from now, or roughly equal to the size of the country’s total gross domestic product.

No matter what happy spin might be put on that development, the fact that we need to borrow that much money just to keep the ship afloat is not an encouraging sign.

At the very same time, Spain is courting a 19% unemployment rate going into the holiday season. Meanwhile, the national credit ratings not only of Spain, but also of Greece, Ireland and Portugal have been downgraded by the credit agencies this year, and further downgrades are expected. Governments have gotten quite comfortable borrowing what their nations cannot earn and pay for, and that trend shows no sign of reversing.

In case we might be tempted to dismiss these as “foreign problems” it is a fact that we are no longer insulated from the troubles of other nations. In order to avoid a domino affect, the countries in relatively better financial shape will be faced with the choice to either pony up money to moderate crisis in these counties, thus adding to already large debt positions, or to let them collapse and see how that plays out. There are no longer any island nations in the world, not even the United States.

I’m not nearly the first person to declare this, but the post World War II order is deteriorating, and we’re moving quickly into its uncertain aftermath. Many, perhaps most people see these developments as problems that need to be solved and often attempt to do so by politicizing them in an attempt to create a more favorable outcome or to stop them entirely.

Let me suggest that this is probably a complete waste of time and creative energy. These are shifts of historic proportions and are not subject to the whim of politics or legal constraint. Efforts to contain or reverse them will be little more than the proverbial finger in the dike.

Taking the High Road

So if I’m right in what I’m projecting, what course of action do we choose to deal with it?

For the foreseeable future, “security” of any sort is likely to be an elusive commodity. I think then it boils down to eight basic steps:

1. Broaden our income sources,
2. Spend less money,
3. Save more money,
4. Eliminate debt,
5. Reach out to more people, even if they don’t look like us, act like us or even speak our language,
6. Take better care of ourselves,
7. Draw closer to our faith, families, friends and communities, and
8. Change our attitudes to embrace change rather than to resist it.

These steps are simple in concept, yet revolutionary in application.

As much as we might like to look to the system for salvation from our economic woes, the ultimate solution is truly staring back at us in the mirror.

Most of the structural economic problems we face are being made worse by attempts to defend the status quo from change. But if the status quo were so successful, it wouldn’t need to be defended. Resisting change is expending negative energy; far better to recognize change, understand it, embrace it and make the trend our friend. Only then can we begin to create a positive future.

As individuals, we can and must accept this challenge. Governments, industries and various other institutions ARE The System, and systems are self-defensive in nature. It is unlikely that we will be able to rely on any of these in making the shift to the new reality more pleasant or positive. However, in this the age of the internet, advancing technology and the virtual global flow of people, money, industry, information and ideas, we each possess unparalleled opportunity to advance our own lives and communities, even if the bureaucracies dig in and resist.

Investigate the ten part series on this site, Ten Ways to Survive a Down Economy, for tactical suggestions from this little corner of the blogosphere.

And going forward, ignore the hype and the headlines, study the trends, and make a concious decision to prosper!

What do you think? Am I looking in the right direction here, or am I all wet? If I’m right, what are some ways you can offer to deal with the trends unfolding before us?

STRATEGY #10 TO SURVIVE A DOWN ECONOMY

By Kevin M

When careers and money become questionable foundations in our lives, what’s left? It’s often only in bad economies that we even entertain the question.

In 10 Ways To Survive a Down Economy (published on Christianpf.com June 1) we listed ten strategies to help us deal with the bad economy. Our topic for today, the final strategy, Strategy #10:

Seek fulfillment beyond your work. In a world where careers are no longer either peaceful or progressive, self actualizing through your work may not be the path it’s been in the past. Fortunately, there are plenty of opportunities to find fulfillment outside of work. Take more active roles in regard to your health, family, faith and community.

When times are good, and jobs, money and credit are plentiful, there’s a tendency for us to become self-contained. We self-actualize through our work, and surround ourselves with the things that prosperity enables us to afford. But when the foundations of that life are shaken or even dismantled, where do we turn to find comfort, platforms from which to rebuild and a sense of self-worth?

Self

The word has an almost negative connotation, but during prosperous times when work is plentiful, it’s easy to define ourselves principally by the work we do. But is that who truly who we are on the inside? And if our work has been downgraded, or is completely gone, then who are we? Now is a good opportunity to spend some alone time, purposely visiting (or revisiting) the question, who am I and what do I stand for?

When we’re on the fast track at work, a certain go-along-to-get-along mindset tends to seep into our lives. Things are going well with work, we’re making money—and all of that is good—so we need to put this or that aspect of our lives on the back burner for later. But maybe now IS later!

Spend some quiet time thinking, or talking with family and friends about the type of person you are, what you may be suited for, and to consider and discuss some plans you may have been nursing but never had the time to act on.

Family

Men are especially guilty of putting excessive time into our careers, and claiming to be doing it for our families. While this is necessary to a very large degree, we sometimes pursue career success in the name of our families without ever stopping to see what it is that our families want.

Recessions are a good time to take this issue up with our families. Hard times inadvertently help us to find more time to be with our families. If you’ve lost your job or your business has failed, one silver lining is that you’ll have more time to spend with your family. Take advantage of this. Find out what it is they want from you, have some fun and build some memories. A period of unemployment may be a financial negative, but it may also be a time to bond with family in a way that will strengthen the family unit and build cherished memories that will last a lifetime.

Community

How many of us have neighbors we don’t even know? That’s a sad statement on our times, but also fairly typical as we increasingly immerse ourselves in electronic media such as wide screen TVs, computer games, cell phones, I-pods and the computer on which you’re reading this post. There’s real utility in expanding our networks of contacts beyond our immediate communities via those media, but we shouldn’t use those networks as a virtual replacement for those of the flesh and blood variety either.

We may not think of it in this way, but the physical communities we live in are our most basic networks. While were searching the World Wide Web for networks around the globe, one already exists right outside the front door. When we’re consumed with work and looking to expand virtual connections, there’s often little time left for involving ourselves with the people and circumstances in our most immediate environments.

People who are physically present are also in the best position to provide direct help. Watching each others kids, running errands for one another or helping with a major repair project on the house or car when we can’t afford to pay an outsider, are examples of things we can’t get from the worldwide web. Never are we more dependent (and interdependent) on the people around us than when we’re experiencing a crisis.

But community is something which must be developed and practiced on an ongoing basis, and in order to have a network of willing helpers, or even just people to be with us to listen during times of trouble, we first need to be willing participants in that community. If you suddenly find yourself with more time on your hands due to job loss or reduction in hours, or even just a fear of what the future may hold, seek greater involvement in your local community. One of the very best ways to find helpers in that community is to become a helper yourself. We can all help one another in so many capacities, and that’s the basis of any successful network.

Faith

It’s become common these days to dismiss faith in a higher power as “old world”—something people believed back when no one knew any better. Against the backdrop of science, technology, all encompassing careers and an admittedly very impressive entertainment establishment, it’s easy for faith to seem irrelevant. But humanity has practiced religion from its very beginnings, well into the last century and still in many quarters all over the world today, so we can’t be quick to discount it’s relevance.

When a job loss or some other disaster befalls us, God can suddenly seem closer to us, in much the same way that we can never realize how many stars there are in the night sky until we find ourselves in a place without civilizations lights. Absent our usual props, we can become more open to the possibility of a higher power and the implications that it carries for our lives.

Being a person of faith, I’m biased here. But one of the most liberating things I’ve come to learn in my own faith journey is that it isn’t all about me, and it isn’t all about here, and it isn’t all about now. The world, the future of civilization and even my very life don’t depend on my plans and endeavors working out the way I expect them to. And you know what? It’s OK. A higher power will reset the pins even if I somehow knock them all down, and life will go on. Even if things look dark right now, at some point they’ll get a lot better.

Seek out faith, or reacquaint yourself with it if you grew up with it and fell away. Few endeavors in life can provide the comfort and sense of self-worth in the face of catastrophe that a solid faith walk can.

Health and fitness

Often when we’re in career high gear, and up to our necks in tasks, agendas and phone calls, a few things slip past us. A big one is health. Let’s face it, taking care of ourselves takes time, time to prepare healthier meals and to exercise. When our schedules are packed, it’s easy to let these efforts slide. With the slowing of the business treadmill, there may be more time to devote to taking care of our bodies.

Ultimately this is a good thing. Though we don’t normally think of health and fitness in financial terms, in fact they carry a huge impact. If we can work to improve our health, many other plusses will come our way. Better health equals more energy, self confidence and a better outlook on life. All of these are assets in what ever we plan to do in life, including getting back on the career and business treadmill. We can prepare our bodies now for the next shift in the economy, which ever way it goes.

Causes

I’m not deep into politics, but we all do our share of complaining about the political system. In truth few of us ever get truly involved. There are issues all around that disturb each of us, and we can get involved in the political process as a way of making things better. I’m not talking about pushing for a change in national political agenda, but there’s plenty that can be done at the local level where our voices can be heard. And sometimes movements get started at the local level then go national. When work is all consuming, there may not be time to get involved, but in the current slowdown, that time may be available.

Consider getting involved in charitable work as well. We may not have money to give to help others, but we all have our time and effort. Just like with faith, working to help with activities that are completely beyond our own lives helps us to realize that everything in our lives doesn’t and shouldn’t revolve solely around us.

Bonus points: involving ourselves in political or charitable activities may not provide us with a job or income, but either could put us in contact with people or circumstances that can.

Hobbies

I saved this one for last not only because it’s the most fun, but also because it may also be the most productive. Most of us have hobbies – activities or interests usually having nothing to do with our career paths. But what ever we may work at as a career, it’s our hobbies which often define our passions. And it’s from those passions that future directions, including careers, can be found.

If you’ve recently lost your job, feel certain you will or have hit a ceiling above which you don’t expect to rise anytime soon, now may be an excellent time to look to the future in the things that you like to do. You spent years of your life working at something you may not like much (or might even hate); if that’s come to an end, maybe it’s time to look closely at doing what you love. Inventory your list of hobbies, interests and passions, and consider if there may be a future career lurking somewhere in there, even if only as a side business. If we can work at something we feel passionately about, our careers may not feel so much like work. Many people begin new careers and businesses doing just that.

If it seems as if career and finances have taken a turn for the worse, maybe it’s time to take a closer look at these “softer sides” of life for answers.

STRATEGY #5 TO SURVIVE A DOWN ECONOMY

By Kevin M

In the dreary job market of the moment, people are having difficulty with two major areas in particular: keeping a steady income flow and increasing that flow. The increasing level of unemployment is not only eliminating jobs, but it’s also putting a lid on raises and promotion opportunities. This is in large part, the driving force behind the credit crisis and the epidemic of foreclosures and bankruptcies. Is there a way to deal with it without taking unnecessary risks?

In 10 Ways To Survive a Down Economy (published on Christianpf.com June 1) we listed ten strategies to help us deal with the bad economy. Our topic for today, Strategy #5:

Be prepared to cultivate and balance multiple income sources. You may have a full time job and a part time business, or vice versa. Think of your work in terms of an investment portfolio, in which diversification adds strength. There are probably several jobs you are potentially good at; always be on the lookout for new opportunities.

Why increasing income or broadening the income base matter

Recessions produce a storm cellar mentality, a time when most people become concerned primarily with keeping what they have. But even if you keep what you have—your job and your current income level—you’re still falling behind. Official consumer price index (CPI) numbers aside, most of us realize that it costs more to live each year. Health care costs, education, utilities, real estate taxes, auto insurance, car repairs and many other expenses that we pay for products and services we can’t live without have been rising much faster than published numbers suggest. Meanwhile, gasoline and food costs bounce in unpredictable patterns. And what about preparing for retirement? If it often seems overwhelming it’s because it is!

If you’re in a job or business in which options to expand income are limited, it may be time to look outside the box for solutions. If you have a job that’s stuck in neutral, a part time job or side business may be the only way to increase your income. If you have a business already, it may be time to consider working in lines that are unrelated to what your business does as a primary function. If you can take on business lines that run in counter cycles to your main business, one for which peak season occurs when your mainline is in slow season, you may have found a solid way to even out your income stream.

Additional income aside, adding multiple sources will help to strengthen your income base, making you less vulnerable to job loss or income declines. Just being involved in different lines of work can often open doors to opportunities that would never surface if you stay exclusively in your regular occupation. Think wide, rather than deep!

I’m not saying that this is going to happen, but I will suggest the possibility…we may be on the edge of a time when job and income security can no longer be trusted to a single job or employer. We’ve known since well before the current recession that we don’t have anything like the job security workers enjoyed a generation or two ago. In fact, it’s now close to impossible to plan as much as a five year stint with one company with any certainty.

It’s worth noting that major changes often take root in society years before they’re even identified and labeled. True, we’ve been operating in an environment of one worker/one job for decades, but there’s more than a remote chance that a change to multiple income streams is in the pipeline already. Recessions often amplify and accelerate trends that were developing before the downturn hits. We can’t know for certain if that’s the case right now, but it may be worth some preparation just in case.

I’m having trouble keeping one income source, how do I get a second, or a third?

While it might be tempting to throw up our hands and resign ourselves to the fact that the economy stinks, and there’s little to do but hold on to the job or business we have and hope to tough it out until the next recovery comes and lifts all boats—including ours—but is that a plan or just a hope? I’ll dare to suggest that we need to be proactive, even now when opportunity seems to be hard to achieve. For the following reasons there may be more opportunity out there right now than there has been in a long while…

1. Many companies can no longer afford full time employees and are hiring part timers and outside contractors
2. With large numbers of people unemployed and underemployed, non-traditional work arrangements are becoming more common and accepted than ever
3. Un-/under-employment is advancing networking as the unemployed and marginally employed band together seeking opportunity
4. The internet has enabled would-be entrepreneurs to market to people across the globe at relatively low cost
5. In nearly every industry, large enterprises are in retreat, opening markets to upstarts and smaller competitors who can offer a better way
6. New trends—like thrift, energy efficiency, and cleaning up the credit mess—are emerging creating opportunities that didn’t exist two years ago
7. Financial hardship is causing both people and organizations to seriously consider new ways of doing business that they wouldn’t have entertained in more prosperous times

Each of these factors represents a single overriding dynamic: change. And each presents an opportunity either to stabilize or increase our incomes.

Worried that you job is in jeopardy? Offer to stay at your current job at reduced hours, making up the income loss with a similar arrangement with another company. Did you try a business idea a few years ago that didn’t make it? Maybe it’s time to dust it off and try again—a lot of the competition has quietly disappeared. Have a product or service that you haven’t had much luck selling locally? Maybe you were thinking too small; start a website, link it to other websites and try peddling to the whole world—you can have a marketing budget of zero, which will give you the staying power to keep at it until it works. Not having any luck finding a new job? Get connected with anyone and everyone you can on the social networks—Facebook, Linked In, etc.—and start looking for an *opportunity* rather than a job.

The point is, part time jobs, job sharing, contract arrangements and side businesses are out there, but require a bit more thinking than in the past. Start looking at situations from outside the box, and the opportunities may be more obvious. The part time side business you start today—yes, right here in the middle of the worst economy since the Great Depression—may be your full time career a couple of years from now.

By Kevin M

If you’re living paycheck-to-paycheck, and struggling just to get by each month, that situation won’t improve until you reach the point where you have a cushion to back you up. You might think that the pressure would be eased by an additional income source, but the problem with higher income is that in a short time it tends to get swallowed up by Lifestyle Inflation—the more we earn, the more we spend.

Some financial types recommend paying off high interest credit cards before beginning a serious savings account. They cite math equations pointing out the numeric absurdity of carrying high interest credit cards (13% or more) while earning close to nothing in interest (1-2%) on savings. On paper, backed up by numbers, this looks very compelling.

But I disagree. Completely. Life is not a math equation! You will not wean yourself from credit cards until you learn to live without them! And you won’t be able to live without them until you become fully self-financing. That will mean living at least a little bit beneath your means and having a pool of savings to tap for the things you now charge on credit.

Filling an empty bank account

The most important step is to get started. Most people don’t have savings because they’ve never made that crucial first step. That step can be more effective if it’s accomplished quickly, that way circumstances (and fatigue!) don’t wear you down before you accomplish your goals. The following will help you to get some money into your savings account in anywhere from a few days to a few months.

Sell your stuff Most of us have garages, basements or spare rooms overflowing with stuff we seldom or never use. Sell as much as you can. Take the better stuff, those items small in size but relatively high in value, and sell them on Ebay (see Marsha Colliers’ Starting an Ebay Business For Dummies if you’re unfamiliar with the process.) Everything else, sell through a garage sale. You’d be amazed the “junk” you have that someone else might be willing to pay a few bucks for! You can probably raise several hundred dollars doing this.

Sell your BIG stuff Selling stuff usually isn’t a big deal, but selling big stuff is where things get tough. By big stuff, I mean a second car (if you can get by with one), boat, motorcycle, ATV, camper or even a second home. If you’re struggling with finances and you’re serious about getting out from under, anything that isn’t necessary to your survival has to be fair game. Ask yourself which would give more peace of mind, the big thing or an equivalent amount of money in the bank? My money is on the bank; get your financial house in order, and you may be able to buy a bigger, better replacement later.

Bank a bonus We all have almost limitless needs and wants for our money, and that will never change. But what has to change is your determination to take control of your finances. Since you’re accustomed to living on your regular paycheck—even if it’s a tight squeeze—when you get a bonus, immediately deposit it into your savings then forget you ever had it. Doing without some of your income is the only way to become a regular saver; that’s often easier to do with income windfalls. The sudden boost in your bank balance should also be a great motivator to keep the cycle going.

Take a part time job—temporarily. While it would be admittedly difficult to work full and part time jobs simultaneously for an extended period, doing it for a few months might be very doable. Get a seasonal part time job, working it just for a few months so you can juice your savings account. The trick is to continue living on your regular income while putting the checks from the part time job straight into the bank.

Make minimum payments on credit cards and redirect the extra to savings. A lot of financial people advocate making more than the minimum payment on credit cards as a way of accelerating payoff. That makes abundant sense, but if you’re looking to build a savings cushion so you don’t have to rely on credit in emergencies, it might be better to make minimum payments on the cards, directing the extra that you would pay into the bank. This isn’t a long term plan, but only something you’d want to do until your bank balance reaches a level at which tapping the credit cards would no longer be necessary.

Forego some luxuries until your savings reach a desired level Often, our money isn’t finding it’s way into our bank accounts because we have some expensive hobbies and past times. Try giving up your golf game for a few months, canceling some memberships you have, or going cold turkey on buying new computer games. We’re not talking about cutting necessities here, but preferences. This isn’t forever, but in a few months time you can probably save several hundred dollars without even leaving your house! If you’re bored, just think about how much more you’ll enjoy your golf game when you’re back out on the greens playing, knowing you have money in the bank. Is that worth waiting for?

Go on a spending diet. This is a variation of the suggestion above, only you’re not targeting any specific outlays. Look at your entire household budget, and decide to cut your expenses across the board for a few months. If your household budget is $4000, and you can cut it by 10%, you’ll save $400 for one month, $1200 for three. You can cut some expenses less, others more, but the key is to hit the overall target.

Take on a side project or contract job There are all kinds of jobs we can take on depending on our talents. You can take on special projects at work, or contract for another company on the side. You can cut a neighbor’s lawn for the season or paint a friend’s house for less than a painting contractor would charge. You can tutor others in subjects you’re strong in, teach English to immigrants or offer instruction in a sport or instrument you play. Inventory your skills to determine what you can do here; everyone has skills in one or more areas that they can sell to others.

Any one or a combination of the above would enable just about anyone to accumulate a few thousand dollars in just a few months. If you’ve never had a decent sized savings account, you might feel great liberation at seeing a balance sufficient to cover your living expenses for a month, or two, or maybe three. I’d be willing to bet you’d be a little less concerned about your pile of monthly bills and you’d be sleeping better at night too.

Once you get a few thousand put away, you’ll begin to sense hope in your finances. You can then begin to build on that hope, first by continuing to save out of your regular income, even if it’s just a little bit, and also to resume paying extra on your credit cards. It’s amazing how much more quickly credit card balances go down when you aren’t adding fresh charges to them.

In short order, you’ll begin to feel some control over your finances, and maybe even begin to envision…prosperity!

How are you building your nest egg?