Wednesday, March 11, 2015

Battening down the Hatches

One of my recent posts received about twenty times the normal traffic.  I take that as evidence that there are many other people out there who believe that too many people have been promised far more than reality will be able to deliver. 

It would not be a big deal if the over-promising had been isolated cases that impacted limited islands of the population.  But in fact it has been systemic and long running:  Social Security, Pensions, Medical Care.  No one will be untouched.

Sane people live in the world of "is".  Crazy people live in the world of "should".  As a person who is nominally sane:
-I do not expect any more laws of thermodynamics to suddenly be discovered.  We will not be saved by solar, hydro-electric or frog-farts.
-I do not expect a single scintilla of pain to pass over me because "I am special".  If anything, I am the caboose of the Baby Boom and it will be a rocky, rocky road for my cohort.
-Planning and timely actions can ease the pain.

The Plan


Complicated plans fail.  The only plans that succeed are the plans that are made before the proverbial bullets are whistling overhead, plans that are simple, mechanical, "no-brainers" that cannot be gamed.

Timing


It is critical to have a viable plan "in the can" before the bullets whizzing overhead.  That means the planner must make some assumptions about how long they will have to prepare before game day.  Clearly, one will prepare differently if chaos will come through you front door within ten minutes as opposed to ten years from now.

This is very, very, very much a case of packing your own parachute.  You take your money and put it on Red 19 and spin the wheel. 


This is the graphic shared by Borepatch.  It was put together using standard assumptions.  That is, assumptions that give every benefit of the doubt to the decision-makers.   That all decision-makers are wise, caring and fully aware of the consequences.  That all speed bumps and potholes are already known and backed into the data.


A prudent plan involves having all of the hatches battened down well in advance of the storm.  That leaves time for trial runs and tweaking of the plan.  If the experts (who have a vested interest in making it appear that they have a handle on things) predict things will get goofy in 15 years, the prudent planner might work with a five or seven year "getting ready" stage.

Success is not contingent on correctly guessing when the fertilizer will hit the ventilator.  Success is having a coherent plan that can be hastened or relaxed as events unfold.  There are no perfect plans, only workable ones and unworkable ones.

Let me repeat, absolute knowledge of when things will go to crap is not critical.  A person looking for excuses to do nothing will dismiss planting a half dozen fruit trees because they might not be bearing fruit when it gets ugly.

A pragmatist will note that even if the trees do not produce a significant amount of fruit for five year....those fruit are likely to taste just as good and be just as valuable even if the time horizons of the resource and the need did not magically fall on top of each other.

Fixed Cost


Frankly, fixed costs are not fixed.

Long term assets like vehicles and homes are usually classified as "fixed costs".  But a fun-loving couple will likely trade in their Corvette for a minivan if the ultrasound shows triplets...and they will do it in just a few months.

Brigid, one of my daily reads,  off-loaded a McMansion about 8 years ago when it became clear that it did not have a place in her vision for where her life was going.  She took a beat-down on the investment.  And she would have done even worse hanging on to it, making the hefty payments and being unable to move on to the next stages of the adventure we call life.  She got out from beneath the "fixed cost" of that house.

So the first rule in battening down the hatches is to get light on your feet.  Attack your fixed costs.  Dump the excess ballast.  Simplify.  Consider trimming out some of the hobbies and safe queens that are money sinks.

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