"10 Expenses You Need to Cut Now for the Upcoming
Economic Depressionv- The Reckoning Will Arrive Quietly!"
by John Walter
Excerpt: Editor’s Note: "Economists say nobody can date a recession, which is true and also the least useful thing they tell us, since a household does not need a date so much as a margin. What people can date is their own tightening - the cancelled service, the second car listed on a Saturday morning, the pantry that abruptly acquires a system and a rotation - and that tightening is already underway in ordinary kitchens where the arithmetic gets done after the dishes are washed, months ahead of any official confirmation.
Two questions sit under everything that follows: how much fixed weight can an ordinary family carry before one bad quarter becomes a ruined decade, and who decided the answer should be as much as a lender will allow? The second matters more, because nobody actually signed off on it, and because the answer has been quietly wrong before.
This piece is long on purpose, and it is written for people who would rather move early than move under duress. (Major sites are warning of a possible economic collapse in the coming years - watch this video to find out why.)
Cutting Weight Before the Storm: Why Households Feel the Break Long Before Economists Name It: The last time the ground shifted this way, in 2008, the earliest warnings came from the least credentialed places. The mortgage broker stopped returning calls. A neighbor sold a boat in June, which nobody thought about until October. When a plant trimmed overtime without announcing anything, the men on the floor noticed before the memos did. By the time the official word arrived, the decisions that would decide how the year treated each household had already been made by whoever made them, and everyone else spent two years catching up to a reality that had been visible, faintly, for months. Something similar is in the air now, minus the convenience of one dramatic event to point at, which makes it harder to argue about and considerably easier to ignore.
Being right about the future is less valuable than being early about your own exposure, and nobody needs a forecast to notice that fixed costs have crept up to meet income, that a savings account has been quietly subsidising the gap between the life a family leads and the one it planned, or that the whole arrangement rests on a single signature continuing to arrive. What follows is not a prophecy and does not pretend to be one, only a triage list ordered the way you would move if the ground started to give - fastest cuts first, then the slow, heavy, invisible ones that take years rather than weeks.
Four things are worth pinning down before the list, because they explain the order, and why some families will barely feel a downturn that flattens others.
▪ Fixed costs do not shrink when income does. A mortgage, a car payment, a card minimum and a nursery bill keep arriving in full whether or not the paycheck behind them arrives at all, so the damage in a collapse gets done by obligations rather than by prices. The family that can bend its obligations survives a shock that snaps the family carrying more of them, and income rarely decides which is which.
▪ Two households earning the same salary can sit in opposite positions. One holds a mortgage coverable on half a paycheck, drives something paid off and keeps a few months of cash within reach, while the other needs both incomes, carries a loan on the second car, services a card balance and keeps almost nothing liquid. From the street they look identical; only one has room to move.
▪ Cash is not the same thing as net worth. A retirement account feels like a cushion until it has to be tapped in a falling market, and home equity feels like one until the sale drags on four months and the buyer offers less than the last comparable. The only genuine cushion is the boring sort: money sitting somewhere reachable, doing nothing impressive, ready on a Tuesday.
▪ The window to act closes before the layoff, not after it. Once the notice lands, everyone in town is selling at the same moment, lenders tighten in unison and the family that waited pays the price of the crowd. Move while the paycheck still exists and you sell into a functioning market; move afterwards and you sell into a queue.
Here is where the last two collapses get specific, since generalities have a way of sliding off. Between 1929 and 1932 American equities lost roughly 89 percent of their value, around nine thousand banks failed and took depositors’ money with them, unemployment climbed toward a quarter of the workforce, national income fell by close to a third, and the federal government eventually shut every bank in the country for a week in March 1933 to stop the runs. Thirty years of habit dissolved in three, and the men who came through with their dignity intact were mostly the ones who owed the least. In 2008 the mechanism was faster and narrower but just as brutal in the personal register: Lehman Brothers filed on 15 September, credit markets froze within days, the S&P 500 fell about 57 percent from its 2007 peak to its March 2009 low, roughly 8.7 million jobs vanished and home prices dropped by around a third, leaving millions owing more than their houses were worth and unable to sell or refinance their way clear.
(A sequence that actually happened, and deserves remembering, because it answers the question of whether money in a bank is really money in your hand. In December 2001 Argentina froze bank withdrawals under a set of limits the press called the corralito, and savers discovered that the balance on the statement was real but unreachable; when the currency peg broke weeks later, dollar deposits were converted at a rate savers had not agreed to. In March 2013 Cyprus imposed a haircut on uninsured deposits above €100,000 to fund a bank rescue, and money that had been guaranteed in ordinary conversation turned out to be a claim rather than a possession. In June and July 2015 Greece closed its banks and capped ATM withdrawals at €60 a day for weeks, and pensioners queued outside branches for their own money. None of these was a collapse of the kind the history books describe, and every one of them was a collapse for the household living through it.)
What the record keeps saying, in the grand versions and the small ones alike, is that pressure arrives as a sequence rather than a single blow. Employment goes first, in hours cut before jobs are lost and overtime that quietly stops, credit follows as approvals automatic in spring are refused by autumn, and assets come next, when the house and the fund that were meant to be the safety net turn out to be worth less than the family believed. Fixed obligations, which never tightened at all, keep arriving in full at the worst possible hour, which is why they matter more than the things people argue about. The trouble with the interval between the first sign and the general recognition is that families make their biggest decisions inside it, in the dark, on the reasonable assumption that the last ten years will run for ten more.
So the work is to shed weight now, while the ground still feels solid and selling is still easy. The order below runs from cuts that take an afternoon to cuts that take a year, and it runs that way deliberately, because the small fast ones create the margin that the big slow ones are paid out of; skip the sequence and the margin never appears, since the other costs keep absorbing whatever surplus shows up.
What follows, then, are the ten places a household bleeds, and what to do about each. Two dots, and then the list:"
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