The Positive Power of Choice

Major changes are coming for the lifestyle of the average American. The economic winter means less buying power and higher living costs. The bottom line is a serious reduction in disposable income for most Americans, and possibly the elimination of disposable income all together for many people. This means a forced change in the shopping, luxury and consumption habits of most Americans.

To get an idea of the effects that you and many other people may well be facing, imagine what it would be like to live on half your current income for the next five years. What would you need to cut out? What simply can't be paid? If you can't make the payments on high-debt credit cards, what will be like to manage the bill collector's calling? What luxuries, services and spending would simply no longer be available to you?

I'm not saying everyone's income is going to be cut in half. No, the changes in buying power and cash flow will be varied, but they will all be unwelcome. Sudden job loss. Extended unemployment. Lower wages for new jobs. Sky-high medical costs. Companies defaulting on pensions, leaving retired parents and grandparents needing help. Market wipe-outs of 401K funds. Loss of homes in the mortgage mess. And other horrible messes. It all irons out to be a net effect of a huge loss in income. Half of your current buying power is a realistic planning number.

There's no debt rescue through bankruptcy, either, in case you were thinking that was an option. With changes to bankruptcy laws that took effect back in October 2005, people can no longer simply wipe the slate clean anymore. You can't just discharge $30K, $50K or $100K of credit card debt these days. Instead, creditors now get to petition the courts for long-term, court-enforced payment plans, with interest. ["The New Bankruptcy Law", Nolo press]

All this to say that this is going to be serious. This isn't the recession of 1991 or 2001. This is one big storm, and we are all going to end up getting economically cold and wet to one degree or another before it's over. To quote Chris Martenson, "the next twenty years will not be like the last twenty years."

With that mind, there is something that you can do that will make a real difference to your personal future mood, capacity, confidence and outlook.

Choose to Adapt Now
The psychological impact of choice is subtle but powerful, especially over the the long term.

You have the opportunity right now to choose to reduce your living expenses drastically at your own command and timing. Or, you can wait and see what happens, and likely have even more severe reductions in your standard of living forced upon you at the whim of the economy, your employer, maybe a health crisis, and so forth.

The difference between these two scenarios are actually much more enormous than you'd first think.

The Costly Choice
When something is forced upon you without your choice, it creates an emotional base of bitterness and anger. It feels as though your lifestyle has been taken away from you. It is easy to feel victimized and some people will want to act out retribution, even if it is against the wrong people or organizations.

Even if you don't think you would react this way now, and even if you think you are an easy-going person that would tend to roll with the punches, a deep level of emotional effect will happen from changes like these. It will take time and energy to process and unfold these emotions, consciously or unconsciously, and that process will distract you from better activities and outlooks during a time when you need your best wits about you. Depression, resentment, blaming, loss of hope, and perhaps eventual resignation - these kinds of feelings only suck away your energy and ability to solve problems and make big choices.


The Empowering Choice
Or you could decide yourself that you are going to reduce your overhead, pay off debt, and get yourself to a point where you could live on half your income if you had to, and get there on your own schedule. Make cuts to things in the order you choose and at the moments you choose.

The difference is subtle but quite powerful. Even though, at first, it may not "feel good" to cut back spending and cut luxuries deeply, it pays off in spades year after year of your future. And make no mistake, it'll not be pleasant nor fun in any way. You'll need to cut back deep and hard. But the fact that you did it under your choice changes everything.

First, you'll feel good because you took smart action before "the storm hit." A little preparation goes a long way in crisis.

Second, you'll feel good because you chose the changes, even if it was only just the timing of them. That means you took control of your life, rather than the economic winter taking control of your life.

Third, by making these changes early, you'll actually command more resources and be in a better position than if you had waited: you can allocate some cash to savings, pay down as much debt as possible, and more, all while you still can. This avoids the "kick-yourself" scenario of "if only I had paid that off when I still had my high-paying job."

Forth, you'll come to understand that, if nothing else, you chose to avoid the morass of negative emotions and feelings that come unavoidably with forced loss. You will still have to deal with the change of lifestyle and big challenges, but you now have more resources, more confidence and a can-do outlook in the mix to meet the challenges.

Finally, when other people are just starting to suffer with the forced lower standard of living and shopping withdrawals, you'll already have adjusted. You'll be living a life that will be much more able to handle the changes without much affect on your already trimmed-down lifestyle.

Remember, it isn't just about you squeaking through this economic winter; people you care about will need help. Getting yourself in the strongest position possible means that you'll be able to help someone else when they need it most.

Flow with the Powerful River
For the next twenty years will certainly be very different from the last twenty years. Different rewards, different kinds of satisfaction, different ways of thinking, different levels of family and good friend relationships. Make yourself a winter fire and be a source of warmth for you and others.

Find Your Strengths

We are in for some re-arrangement of commercial services during this economic winter. For all kinds of reasons, corporate employment is proving to be a less reliable way to make a living. People that can exchange value in other ways than just "a job" are going to have a much easier time getting through the economic winter.

Anyone can learn to exchange value with others in so many ways, but it takes time and practice to get good at it. My advice would be: no matter how good you are it, start practicing and getting better at it now.

The first step in that process is to discover your strengths. It doesn't matter if your strengths are things that companies will pay for or not; what matters now is discovering what you do well that other people value. You may find some subtle things here. Keep looking and evaluating things you find.

Here are the questions to ask about something you find that you think you might do well:

- How long have you been doing it?
- How does it affect/help other people?
- Why do other people need or appreciate this?
- Have others asked you in the past or are asking you currently to do this?
- Do you own all the tools needed to perform this service / goods offer?
- Are there other benefits you receive inherent in doing this?
- Do you like doing it?
- How good are you at it, compared with others in your "trading neighborhood"?
- Does it connect to other parts of your life, weaving into your hobbies, jobs, and activities?
- Does it hold a deeper meaning for you?
- Who (or what type of person, or what type of profession) would hold this service in the highest value (i.e., would really appreciate this service?)

A note: it's okay if this service hasn't really been noticed or appreciated by people directly in the past because we can change that in the future.

Start with things you currently do for money. Then run through things you like doing but maybe haven't done for money. Then find the things that people have asked of you in the past and really appreciated. Then look at things you've always wanted to do but always had something in the way.

If you are getting stuck, you can always take a look at things you respect or have appreciated that others do or have done. Look at it from their perspective. For example, pick a painter or artist whose work impresses you. Run through the questions as if you were the artist. What are the answers like? To learn some wisdom, do this perspective exercise as someone you know who is successful and happy at what they are doing for work, and for someone who is unhappy at what they are doing for work and compare the answers. Its fine that you are just imagining their answers because you are doing this exercise to learn about your own beliefs and values, not necessarily theirs.

Finding your strengths is an ongoing process. Initially, it may take a few weeks or months until you feel you have found the right ones for yourself. Keep at it and be curious and open at what you find. In a few years, you may well discover another.

Find what you are good at and enjoy, and this will become a basis for value exchange with others. Not only will people appreciate and respect you and what you do for them, but it is a nice way to live and love. It is a good way to be a warm winter fire.

Hopi Wisdom

Cycles of crisis are as old as human history. Some societies just feel them, some know them through models, stories and traditions. Some don't pay much attention.

Here is some wisdom from the Hopi Indian tribe. While any culture may have its own odd beliefs or customs to us, this piece has universal human wisdom about any time of crisis.

A Hopi Elder Speaks
"You have been telling the people that this is the Eleventh Hour, now you must go back and tell the people that this is the Hour. And there are things to be considered . . .

• Where are you living?
• What are you doing?
• What are your relationships?
• Are you in right relation?
• Where is your water?
• Know your garden.

It is time to speak your Truth.
Create your community.
Be good to each other.

And do not look outside yourself for the leader."

Then he clasped his hands together, smiled, and said, "This could be a good time!"

"There is a river flowing now very fast. It is so great and swift that there are those who will be afraid. They will try to hold on to the shore. They will feel they are torn apart and will suffer greatly.

"Know the river has its destination. The elders say we must let go of the shore, push off into the middle of the river, keep our eyes open, and our heads above water. And I say, see who is in there with you and celebrate. At this time in history, we are to take nothing personally, Least of all ourselves. For the moment that we do, our spiritual growth and journey comes to a halt."

"The time for the lone wolf is over. Gather yourselves! Banish the word struggle from you attitude and your vocabulary. All that we do now must be done in a sacred manner and in celebration."

"We are the ones we've been waiting for."

-- attributed to an unnamed Hopi elder
Hopi Nation
Oraibi, Arizona

What's Happening?

Kids. Work. House and yard. Pets. School. Most Americans have too much to do to become competent securities analysts, economic advisors or sociologists in their spare time. We leave those jobs to the professionals who are trained in those fields. We do our jobs, we expect those folks to do theirs.

All this news. Financial Crisis? Recession?

"You mean like the financial crisis of the late 80's, when the 'Savings & Loan' scandal supposedly cost American taxpayers $153 billion?(1) I didn't really feel that. I'm not sure it really affected me; my bank wasn't one of the ones that went under."

"You mean like the economic recessions of 1982, 1991, and 2001? I got through those alright. A few meals of Top Ramen, sure, but we got through it."

Many Americans perhaps barely noticed those episodes, and as the years go on, even for those American that were affected, the memories of the layoffs, inflation and difficulty finding a new job have mostly faded away. After all, we've seen all that came after. Those times don't seem so bad now; they are over.

The good news is that, yes, all recessions - even the grandaddy of them all, the Great Depression - come to an end sometime.

The bad news is that the economic crisis of 2008 isn't your average once-in-a-decade recession. This is one of those once-in-a-century economic storms. This one has just started, and we are going to see things and have to deal with things that we haven't had to deal with ever in our lifetimes before.

We can do it. We've done it before as Americans, our spirit shines through every challenge and crisis. We're tough, we can take the hits and we can figure things out quickly.

We do still have kids, work, house and yard, pets and school to manage, though. We still don't have time to really study what went wrong in the complex financial instruments and derivatives markets. We still don't have the time to study what is really changing at a sociological level, and figure out what we need to know to make this a shorter crisis, to recover as quickly as possible, and to reconstruct things so this kind of economic catastrophe doesn't happen again.

That's where this blog can maybe help. Key concepts, boiled-down and short explanations of what is happening and how it affects things, and plain ideas on how the average American can best weather this crisis.

We are entering a season of economic winter in America. It will likely be the longest and coldest economic winter you will ever experience. Some moments of winter are cold and icy, and others are like ski lodge fires with mulled cider. With a focus on what we can do to understand and help each other, we can all be fires of warmth and aid in the upcoming winter.

Here's to creating healthy, happy hearths of winter fires.

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(1) These numbers apply to losses incurred between 1986 and 1995, the most expensive phase of the crisis. See The Cost of the Savings and Loan Crisis: Truth and Consequences, Timothy Curry and Lynn Shibut, FDIC Banking Review, FDIC Banking Review, volume 13, no.2, December 2000. With thanks to Ambit ERisk for the reference.