Keys To Surviving Cruel Financial Winters

   There is an ancient Chinese curse that goes, “May you live in interesting times.” We are now living in interesting financial times due to the current global economic mess. The experts and economists are mainly engaged in finger-pointing, which does no good. Others are claiming that they saw it coming. Since the world economy is cyclical, everybody knew it was coming.

   I have an advantage for dealing with hard economic times. I grew up in a small town in north central Montana. The economy came to a halt every winter. Unemployment grew to 11 percent. The temperature dropped below zero. The goal was to keep your family fed and warm. I learned to always be prepared for winter.

   The preparing for winter skill set stayed with me through college and when I started my practice in 1975. The economy was slow from 1972 until 1976. I started right smack at the bottom with no student loan debt. I was also afraid to trust the economy enough to go into debt to start my practice.

   I started in an old office building with used equipment. The rent was $125/month. I was prepared for winter.

   The economy began to grow. I signed a mortgage on another old building, which I remodeled with borrowed money. The monthly payment was $100 for the building and $350 for the remodel. This worried me but my practice was growing along with the economy.

   I talked with my banker in 1977 about my concern that many were increasing wealth by buying and selling real estate. He gave me a very sage piece of advice that saved me from the financial disaster that was just around the corner.

   He told me that some of his smartest banking clients were having trouble paying their loans. Their creative borrowing practices included balloon payments and adjustable rates.

   We all know what happens when the balance tips and property suddenly becomes worth less than the principal of the loan. My friend advised me to pay off my debt as rapidly as possible. The years 1979 and 1980 were characterized by 22 percent interest rates. I entered 1980 nearly debt-free. I was prepared for the winter.

   None of us can know what will happen with the economy. I have always made economic decisions that factor in the worst possibilities. That philosophy worked well for this current financial fiasco. I am completely debt-free. My retirement portfolio is circling the drain but is in the hands of a good manager who has not done any panic selling like I did in 1987 and 2001.

   Do not take economic downturns personally. Everybody else is in the same mess.

   The upside of a bad economy is that it becomes the base for future growth of the economy. Prices stabilize like we have observed with oil. The cost of housing and real estate falls to allow new investors into the market. Manic greed fades.

   There are a few things to keep in mind as doctors. Our patients are having the same struggles. I have always been willing to tweak the cost of my care for those who need help. They are the people who helped me grow and were loyal to me when things were good. I want to keep them around for when things get better again so I do whatever I can to continue providing care despite their ability to pay. They really appreciate this.

   I never “cheese out” on my employees when things are tough. Good motivated employees are a godsend in difficult economic times. I do not cut hours, wages or incentive bonuses during tough times. Employees who have helped me navigate difficult financial waters have become some of my most loyal co-workers.

   Never “cheesing out” has meant taking myself off the payroll a few times. I keep track and pay myself back when things improve.

   I like to keep a savings of non-retirement funds to help get through rough times. I keep it in a mutual fund money market account to keep it at an arm’s length. It is too easy to dip into emergency funds that are easily accessible. I have to think about what I am spending and then send a letter to the fund manager requesting a transfer. That is too much work and I usually find a way to make ends meet without dipping into the money market.

   Credit cards are the death of a financial plan. I have one or two so I can rent cars, fly on airlines and check into hotels. They get moldy from never seeing daylight.

   Start preparing for the next economic downturn now even though this one is not over. Think about “preparing for winter.”

Dr. McCord is a Fellow of the American College of Foot and Ankle Surgeons. He recently retired from practice at the Centralia Medical Center in Centralia, Wash.