This post was written by Marie.
If you are invested in the market, you know it has been a roller coaster ride the past week. Today (8/10/11), the DOW Industrial Average cascaded down another 500 or so points – the third significant drop in the past week. Are we on our way to an actual depression (as opposed to the Great Recession)?
Even if you aren’t invested in the market, you wonder if this will ripple down to you in the form of more job losses, higher prices, inflation, benefit reductions and belt cinching.
What Should You Do In a Market Downturn?
At times like these my first tendency is extreme and it is to drop back into survival mode. Do I have enough food, water, heat, light and shelter to last through depression like conditions? Can I meet my sanitary needs if sanitary sewer and water infrastructures collapse? How will I defend my homestead if intruders invade?
Am I just weird or do some of you also react that way?
In fact, my first draft of this article was going to detail just that. If you want to read up on that stuff, plenty of it was written in 2008 and 2009. Here are a few links.
How to Prepare for the Coming Depression
My next tendency is to try to figure out how I can benefit from the situation. Because I recently retired, the stockpile of cash I collected in preparation for retirement is still sitting there. Is now the time to put that in the market and make it grow?
Why Not Do Both?
In the end, I will do a bit of both. I will prepare for the worst, but plan and take action for the best.
It’s Time to Re-Stock for Emergencies
I will go to the bank and stockpile some cash. I will re-stock the pantry and re-fill the water jugs we keep. I may replenish our supply of fuel oil, matches, candles, lamp oil and wicks. Most likely that is as far as I will go.
Occasionally, hubby and I have discussed digging a well, building an outhouse and putting in another wood stove and I have on rare occasion considered buying a generator. Although useful when needed, these to me are somewhat extreme and we won’t go so far as to execute them unless our country’s situation degrades considerably.
This Is An Opportunity to Build Family Wealth
Some of you may know that I am on a mission to build wealth across generations in my family. A dip in the market such as this can provide an excellent opportunity to do just that.
Using the older generation’s (ye gods how did that get to be me!?) wealth to invest for the future benefit of the next generation is a key concept introduced by several authors of books about the super wealthy – books such as Strategy for the Wealthy Family by Mark Haynes Daniell and Family Legacy and Leadership by Daniell and Sara S. Hamilton as well as Family Wealth – Keeping It in the Family by James E. Hughes, Jr.
This economic downturn is just the ticket to accomplish some of those actions.
Actions I Could Take to Build Family Wealth
Here are some of the actions I could take and financial goals I can set during this downturn in the economy to benefit the long term growth of our future family members:
- Set up a family investment partnership or company, fund it and help the grown kids invest it’s assets.
- Give cash gifts to my adult children with suggestions to buy in the down market.
- Sell gold and silver and invest the proceeds.
- Buy real assets (such as artwork, antiques, tools and etc) at reduced prices and hold to sell later.
- Hold family conference calls to discuss the situation and opportunities with our adult children and their spouses.
- Dollar cost average that saved up cash into emerging companies that I think will flourish in the next fifty years.
- Be available to provide counsel to our adult children and their spouses (if they are interested) to compare the situation to others we and our parents lived through.
- Write down my life experiences on economic downturns for the future benefit of my grandchildren.
- Write a book about our experiences during the Great Recession and the Great Recovery and the aftermath of it and offer it for sale.
- Share what I know of the family history during the 1920 – 1930’s depression and prior recessions with our children and grandchildren.
- Share tips on surviving economic downturns within the family.
Do you think this is the start of a new recession, a slide into an actual depression or just a temporary blip in the economic landscape? How do you think it will affect you? How can you benefit from it?