Grandfather’s Advice

“Sure Grandpa. But we aren’t in war now”. I must have said that sentence a hundred times. I never thought much about it until recently. The old man’s rules of thumb just keep popping in my head whenever I see the n-th comparison of today’s crisis to that of the 1930s. All of sudden his ideas don’t seem so ‘old fashioned’ anymore. Here’s a couple of grandfather’s rules that are worth revisiting.

1. Spend less than you earn

Well what can I say? Try convincing the Americans! To date they spent consistently more than they earned (and so do an increasing number of Europeans by the way). The fallacy that made it all possible was credit. But now the chickens are coming home to roost. Be prepared to find yourself in an uncertain and doubtful state when you try to explain your spouse that they can’t buy stuff unless they saved up for it.

2. Have a stash of cash

It’s quite amusing to see how depended we’ve become on plastic money. It’s not unusual these days to see somebody pay for a can of soda and sandwich with a credit card, indicating that many people don’t even have $10 in their pockets. That’s fine as long as the ATM keeps working. It becomes disastrous when it doesn’t or when there’s a line of 1000 people in front of you trying to get their money out or when all banks close for more than a week.

3. Be paranoid about government

Governments have the right to put you in jail and confiscate your assets. Therefore don’t have all your assets in the country you live and think of a personal exit plan should the shit hit the fan.

4. Stock food

Now that’s really silly isn’t it? That’s what I thought until I saw that the super market shelves in Iceland got emptied in only a few days.

5. Buy hard assets

Money is worth nothing more than the paper it’s printed on. That’s not much, so better keep your net worth in assets that have real value. What good does a million dollars in a bank account do, if that’s the kind of money needed to buy a stamp? Yes that did happen before, many times.

Am I panicking? Nah, not really. In a few years time we’ll probably look back at this period and have a very good laugh at it. But as my grandfather used to say: “It’s better to be safe than sorry”.  This time I think I’ll take his advice.