7 Survival Principles for an Era of Irresponsible Government

OK, suppose our esteemed representatives in Washington remain gridlocked. Suppose they continue to scare people with talk about reducing Social Security benefits even though Social Security is only a modest part of the ongoing fiscal mess? Suppose more government borrowing and spending isn’t the cure?

What do we do? What actions can we take to protect ourselves and our future?

The prudent answer is simple and remarkably un-dramatic. It recognizes that politicians don’t lead, they follow. Most of the time, they follow quite slowly. That’s where we are now. Left or right, they haven’t figured it out yet.

We need to lead. We need to change our behavior. We need to do the right thing even when our government continues to be wrong and stupid. Here are seven survival principles we can all exercise to increase our personal security and maybe even lead our country to safety:

Borrow less or nothing.

The goal here is simple— do whatever it takes to reduce the amount of income committed to loan and credit payments. This means eliminating credit card debt, paying off car loans, paying off student loans, etc. The 5, 10 or 20 percent of income that had been going to those loans and credit cards can then be used to build a cash reserve. The money can also be used to pay down a home mortgage. While consumer lending made our consumption driven economy possible, our goal should be consumption- without-credit.

For some, this will mean deferring the purchase of a house or condo. This is a sea change but it makes sense. For decades we benefited from maximum consumption because the value of our houses, and even some of our toys, increased with inflation. That game is over. Today, most of what we buy depreciates very rapidly. For the moment, this includes houses.

Spend less than you earn.

This is easier for some households to do than for others. As a certified senior, it’s almost inevitable for me. It was not so easy when I was a 30 year old dad. Our government can try to borrow its way to recovered wealth, but we can’t. We can’t print money. We have to earn it. We gain strength from being able to get through the week, month, or year without needing to lean on a lending institution. We gain even more strength by having ready cash, simply because it is so rare.

Search for maximum flexibility.

Find strength in flexibility and adaptation, not in institutional guarantees. In the new edition of “The Black Swan,” investor Nassim Taleb nails it with this simple principle: “Compensate complexity with simplicity.” Our society may be very complex, but we can compensate with simplicity and adaptation at home.

Retain more of your investment return.

Our financial institutions have proven a nasty truth: For them, we’re just red meat. Worse, our government has given them continued and protected hunting rights. So it’s them or us.

Be on your own side. Do everything possible to take back what’s rightfully yours— as much as possible of the return on your savings and investments. That means using index mutual funds and exchange traded funds for your retirement savings. It means moving checking and savings accounts to a credit union.

Learn to share. Focus on local and family.

It’s very difficult to make the entire world a better place. So pick small projects that have a well-defined beginning, middle and end. You’ll discover the gigantic non-money economy of community. The more connected you are, the safer you and yours will be.

Expand your skill portfolio.

The world of work encourages us to specialize. This reduces our flexibility and increases our dependence on others.  But the more we have in our skill portfolio, gained through education or hands-on learning, the more things we can do to be helpful or earn a few dollars.

Get energy-efficient and energy-local.

Do whatever you can to reduce consumption of imported energy. For most, that means increasing car or truck MPG, or driving less. Oil, not imports from China, is the biggest single threat to and drain on our economy.

And remember the best definition of wealth I’ve ever heard: You are wealthy when more money won’t change where you live, what you eat, what you wear, what you drive or who you sleep with