Next week is Tax Day, the 15th of April. As I was thinking about that, it struck me how driven we are by our calendars. Turkeys, we know, are raised in barns with no November page on their wall calendars — that would just bee too traumatic for them. Besides, any date past the end of October is only of academic interest, isn’t it?
When the calendar says it’s February 14th, we humans religiously cause the willful destruction of many rose blooms and consume millions of chocolate calories. Just because of a particular date on the calendar.
Chocolate manufacturers are happier than most, because on October 31, they have a second calendar date boosting chocolate consumption. Well, I guess meat packers are most fortunate, because they have the last weekend in May, the first week of July AND the first weekend in September to take all those sausages off their hands. Dates on a calendar is all it takes.
Tax day, as it has evolved, is turning into a happy day, as around 80% of American individual taxpayers get refunds. A lot has been said about whether or not it’s good to lend Uncle Sam your money, but it seems most people figure that the interest they give up is less than a Valentine’s Day bouquet, so why not enjoy the nice little surprise, even if it’s your own money?
Most of us are familiar with the recurring cycle of days every year, and we duly prepare for those. Because we know we’re going to “be good again” in the new year, we go for it during the holidays, to the dismay of the turkey population and pine forests. And, like clockwork, gyms overflow after New Year’s and SlimFast sales soar, as the nation tries to lose those delicious pounds it added during the holidays. That calendar, again.
However, as on top of those calendar cycles as we are, most of us are ignorant about the longer cycles in our lives, the ones that span multiple years.
Perhaps the oldest and most enduring story dealing with this aspect of life is the old Bible story of Joseph. As the story goes, Joseph irritated his brothers with his dreams, which, they thought, reflected delusions of grandeur at their expense. So they sold him as a slave to passers-by, who in turn sold him in Egypt, the world power of that day. He ended up in jail, framed for something he didn’t do. One day (or one night, to be more accurate) two fellow prisoners had similar dreams and Joseph interpreted those dreams for them. What made those interpretations unusual was that both contained predictions of their immediate future.
Joseph’s predictions came true, and both were released. Joseph asked one of them to remember him when he got reinstated to serve the king of Egypt.
Few do. I mean, when you’re hanging out at a fancy White House dinner, you’re not going to draw attention to that embarrassing stint in the slammer, are you? This guy didn’t, either.
Then it happened that the ruler of the known earth also had a couple of dreams. Long story short, Joseph was remembered and summoned, and he told the mighty king what he dreamt and what it meant.
The bottom line of the dream was that Egypt would have seven fat years, followed by seven lean years. Joseph then followed that up with some common sense advice: take advantage of the fat years to save up for the lean years. Because you’re the only one doing that, you can make a killing in the lean years. The king agreed, and everything happened as Joseph predicted.
The story contains a truth most people understand in concept, but few apply in their daily lives. Or should I say their yearly lives, because these cycles span multiple years.
You may have seen this chart or one like it before, showing the cycles of the American economy:
Fat years and lean years: cycles, just like that Bible story, right here in our own backyard. Unlike the Egypt story, though, today’s cycles are not seven years fat and seven years lean. Today’s cycles are shorter, not longer. In fact, the “fat years” in recent times have lasted from 4 to 8 years but, fortunately, the lean years usually last two or three years only.
That’s nice and interesting, but if you look at the last leg of the chart, you can see we’ve had 5 “fat years” since the last recession bottom in 2009. The past five years might not feel that “fat” to you but they almost certainly were better than the two years preceding them. (Interesting how fat so often has a positive connotation, isn’t it? But that’s a story for another time.)
Given that the time from a recession bottom to the next downturn is 4-8 years, and that we’re 5 years past the last bottom, what do you think? Have we reached the time for the cycle to make its next turn, that turn being down?
Nobody knows the future, and the past never repeats exactly, but it sure seems like if not now, then soon, doesn’t it?
What Should You Do?
1. Get rid of as much debt as possible. Nothing hurts like debt when economic hardship strikes. You can cut all your expenses, but you can’t cut debt payments.
2. Save up an emergency fund. There’s no exact number, but many people figure about six months’ expenses is a good target to shoot for. Even if you don’t reach the target, if you don’t shoot for it, you’ll have nothing.
3. Delay all major purchases. It’s funny how people are able to delay major purchases in the lean years, but they find it extremely hard to do the exact same thing in the fat years. The best wisdom is to delay those purchases in the fat years… and then make them in the lean years, when there are bargains everywhere.
4. Check your insurance coverages. In the fat years, replacement values have the nasty habit of going up when you’re not watching. Your policy may not provide for the full extent of those changes. It takes but a quick phone call to Grant to take care of that. Face it: when something bad happens, that’s the wrong time to find out there’s a gap in your coverage.
photo credit: David Castillo Dominici/freedigitalphotos.net