Preparing for the Road Ahead

We are heading into economic unchartered territory for most people, as most of don't really remember what a real financial crisis feels like. 2008 was a little bump in the road into comparison to the early 90s and this looming crash might dwarf that due to the increasingly connected global monetary system.

This interconnectedness isn't just because of the way we consume similarly globally, it is also because of the way investments are made globally into all kinds of corporations, global and local. This means that if one large investment node fails, it has a very large knock-on effect through the entire economy, with very little insulation and padding, as each is competing on the edge all the time, pushing to maximize returns, otherwise they will not attract investment capital.

As said, due to our age, most of us haven't experienced a real economic collapse before directly, at least where we are the ones being relied on. I know for me, I was pre-teen for the 90s crash, so my experience of it was listening to the news and my parents talk about the struggles, having to refinance the house, as interest rates on mortgages were more like credit card rates.

As a child, these things were worrying me and likely left a negative impact on my relationship with money going forward, but as a parent - this must be even harder.

For those that remember being poor students, times were still okay. As long as there was enough money for eggs, tuna and noodles after drinking the majority of the income away, life was good. It was okay because there weren't people depending on us at that time, no one needing our income to keep their belly full. But, as we get older, take on more financial obligation and start families, things change quite radically, even at the best of times.

At the worst of times though, this creates an additional stress, because while I can go hungry, I am going to do all I can so that my daughter won't. This isn't an issue for me personally right at this time, but it "approaches a problem" the more the economy collapses and things destabilize, and it is already a problem for many of us.

Because most of us haven't experienced this kind of hardship earlier, we don't really know how we are going to react under this kind of financial pressure. It is similar to going the other way, where people who have wished all their lives to be wealthy, win the lottery and find that they don't know how to manage their wealth, often ending up in worse positions a few years later.

It is a massive global economic stress test

And I suspect that many of us are going to find that we fail. It isn't that we are necessarily going to lose our houses and the like, but we are probably going to psychologically struggle, often with the worst of our personality shining through, at a time when we would likely need the best from ourselves.

Life is easy when times are good and we only have to imagine what we would do in the bad times. But for anyone experiencing bad times themselves (at any general time), they will say that "you just don't understand what it is like". But, from those depths of stress, does the person experiencing it really know what it is like, or only what they feel based on their own skills and capabilities?

For those who have prepared well (or are lucky), economic collapse isn't difficult at all. If anything, it is a good time, as it is filled with opportunity to prepare for the better economic times. Wealth might be made in the up periods, but the foundation is laid in the down times and that means, economic downturns are an opportunity to lay thicker foundations.

I am not in that category.

While not totally unprepared, I am also going to be among those who suffer financially, mostly because rather than saving money and investing, we have kept moving along with our renovations. The upside is that we haven't taken on additional debt for this, it is all out of our pocket at the moment. This means that as long as we can maintain our jobs, once the outgoing money on labor and material stops, we will have some extra in our pockets to invest or more likely, cover the insanely increased energy costs we will face through the winter. Not ideal, but not the worst.

However, that feeling of stress is still there and it weighs heavy on my mind as to how I am going to react under various conditions and if my defaults are going to hold up under the pressure. A lot of people shrink away in stressful times, in the same way that in bear markets, investors hibernate, even though it is a good time to invest and trade, if willing.

We can act quite differently than what we might have expected from ourselves and often, it is not in our best interest at the time, nor for our future positions, where we behave in ways that do more damage than good. It is the same as high stress in any field - we do not perform at our best.

Coping with stress is a learnable skill, but it really has to be done before stress arrives. Knowing that we are very likely heading into a difficult economic period, I think it is valuable to at least start coming to terms with it emotionally and really imagining what it is going to be like practically. That way, we might not be well prepared, but at least we won't be completely unprepared when it happens and at that point, we might have enough bandwidth to do something positive for the future, rather than retract back into our shells to ride out the storm.

Just like these images here - it isn't overly clear. We know where the road is headed though and as we travel further, we get more insight, but not a lot of time to react.

Taraz [ Gen1: Hive ]