How to Beat the Financial Monsters


True Horror.

I won’t look at it.

Instead, I press my nose to the window and squint eighteen stories down. There’s a news van below. I swivel to my computer screen to search the news, leaving a vapor of breath on the window.

They’re reporting about a death. “Blood in the Streets!” “Panic!” “Thousands Chopped!” The headlines scream.

I don’t have the stomach for this. I can’t look at it.

“Zombies!” shrieks another headline. I hurry and shut my door. There’s no lock… but curiosity overtakes me.

I look at it.

The toll is told in cold numbers. Down 56%. Hundreds of thousands of my own money, bled away. Just when I was about to click off, I hear it.


I grip my mouse, barely clicking off my browser before it comes again.


I open my drawer. I see highlighters. Pens. Paperclips. I’m looking for…I don’t know. Something, anything to put off the inevitable.


“Hello?” I answer.

“Come to my office.”

As I get up, Ed’s phone rings next door. Through the wall, I faintly hear Ed say, “Ok, I’ll be there.”

Minutes Later…

My fingers quiver as I dial her number. I whisper into the mouthpiece: “I’m cut.”

My eyes moisten. My bottom lip throbs.

“I’m sorry…will we still have insurance to cover my prenatal visits?”

(It was 2008 and the end of the world was at hand. Or so it seemed. Bear Stearns, Merrill Lynch, and Lehman Brothers died. Banks that were alive but basically dead were called zombies. Other, healthier ones chopped tens of thousands of jobs. My fund was reeling from what many consider to be one of the worst investments of the decade. Everyone in my class or below was cut. I’d lost my job and half of my net worth while my wife was expecting our first child. It was a mean year.)

Chances are, you have some scary stories about your finances as well. It’s so frightful that you can’t bear to think about it. Fear not!

Let’s identify these creepies and find their weakness.



(Um…no thanks money monster ghosts!)

Ghosts: Don’t Make Them Real

Your stock market losses aren’t “real.” They’re ghosts that just float around —until you sell them for a loss. Don’t let these ghost losses trick you. If your money is in a well-diversified fund, don’t sell out. The ghost losses have already frightened you; don’t make it worse by making them real. (Please read the disclosure at the end*)

How to Bust the Ghosts: Grab Your Proton Packs.

  • If you’re more than 5 years away from retirement and if the market is still down, start buying back. Buy more if you can. Buy when there’s blood in the streets (even when it’s your own). It’s the best buying opportunity in years.
  • If you are close to retirement and the market has gone back up before you can reinvest, put your money in safe, interest bearing securities (CDs, Treasuries, etc) and use those realized losses as a tax shelter. You can use those losses to offset gains you’ve taken during the year and can be deducted from your income and carried forward (yes, even $916 million dollars). For example, if you’ve realized a loss of $11,000 but also realized a gain of $4,000, you can offset those gains. Since there is $7,000 remaining ($11,000 – $4,000), you can apply $3,000 of that as an income reduction (so if your income tax bracket is 20%, then you save $3,000 x 20% = $600) and use the remaining loss in future years. Consult a good accountant first as tax codes can change and taking these losses requires some forms and calculations you may not be used to.
  • If your losses are from individual stocks, this is going to be harder to assess. Determine if there’s an industry-wide/technology shift that has destroyed the way this company can do business forever. If so (say you own shares in a taxi company or VCR rental company), take the losses and the tax shelter now before the stocks go to zero. If it’s due to periodic cycles/commodity price swings, but the underlying industry still has a reason to exist (like oil refiners), use this opportunity to buy when they’re cheaper.

Count Dracula: Don’t Let Him Suck You Dry

Your house can be a vampire that sucks everything if you’ve overbought. A house is the biggest, most expensive thing you’re ever going to buy. That means it has the greatest potential to help or hurt your finances.


How to Out-Count the Count: Grab the Garlic.

  • If you don’t own a house yet: The Count’s greatest trick is making you forget to do math. He’ll give you an arbitrary 28% of gross income rule for affordability. Don’t take him at his word. Outwit and outcount him by looking at your budget, adding in the hidden costs like higher utility and maintenance costs, higher insurance, and taxes (this process of adding a new scenario to your budget is called “pro forma budgeting”). If your pro forma budget shows that you can afford this house and allows you to save, then ask yourself: Is this house more than I need? Buy based on need, not ego.
  • You own a house and it’s bleeding you dry: How do you know if there’s a vampire on your neck? It’s when you find you can’t save. There are a few options:
    • Increase your income. Consider a new job or start a side-hustle.
    • Decrease expenses. Don’t know how to do that? Go here to start a budget.
    • Bite him on the neck. If you’ve owned your house for several years and have paid down a good amount of your mortgage, consider refinancing, especially during a period of low-interest rates (like now) and if the rent you can get for that house is at least equal to the mortgage + taxes + insurance. Then, move into a cheaper house while renting out the newly refinanced house. Then, depreciate that house (which lowers your income and gives you a tax boost). He’s been sucking your money dry for years. Time to extract some money from him, ruthlessly. Suck that sucker back. 

Dr. Jekyll and Mr. Hyde:  Don’t Allow Mr. Hyde to Grow Strong

“Hyding” behind that pretty plastic rectangle is a monster. If you aren’t watchful, it will morph into a monster and devour your last dollar.


How to Expose Mr. Hyde: Find the Potion.

  • Identify if you’re dealing with Dr. Jekyll or Mr. Hyde. You know you’re dealing with a debt monster if you have to borrow from your credit card just to pay off your other debt (this is known as a debt spiral).
  • Enter the Virtuous Cycle: cut your expenses → apply savings to debt payments above the minimum → expenses fall → apply even more savings to additional debt payments until debt goes to zero.  (You can learn how to do this from our FREE Financial Boot Camp).

Where Are We Going, Where Have We Been?


That’s where we’re going. I might as well have written the word “death,” since it inspires the same dread.

I don’t know precisely when it’s going to happen, but likely in the next 5 years. The stock market will drop more than 20%. Large companies will go bankrupt. The headlines will be scary.

We’ve been there before.

And you’re still alive. Some of us just barely. Want to come out stronger next time? Eat candy.

When the market does drop big and everyone’s shutting themselves in, go out and collect candy.  You’ll experience some of the best gains of your life when the market recovers.*

Happy Endings


I lost half of my wealth at the worst possible time.

… But I made it back many times over. How? I didn’t make my ghosts real (realize my losses), I out counted Count Dracula (bought a house a fraction of what the calculators told me I could afford), and kept Mr. Hyde in check (maintained a zero credit card balance). And then I went aggressively into the market when everyone else was running away.

For the prepared, recessions aren’t Halloween. They’re Christmas.

The best part? None of what I did and what I recommend is hard to understand. Anyone can do it. The hard part is taking control of your frightened emotions when everything inside you screams to sell out when the market crashes.*  When your hope/ego entices you to buy that big house. When your heart tells you that you need those shoes even though you don’t have the money for it.

I didn’t do anything special. I didn’t apply any financial witchcraft. I just saw the recession as an opportunity.

So while we’re waiting for the next recession, take this chance to get your finances in order so that when it does come, you can go collect some candy.

*I am not recommending any stocks or investments, just providing a common sense perspective.  All photos courtesy of the phenomenal Douglas. Follow him on Instagram @jedimasterbuilder!

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  • daehder October 31, 2016 at 12:38 pm

    Great post and I just love the way you used the lego people photos to provide a sense of comic relief – well done.

    • justmakingcentscom October 31, 2016 at 1:45 pm

      Thank you! The topic is scary enough, so I needed to provide some levity. Thanks for stopping by and come back soon!

  • Zakiya October 31, 2016 at 2:37 pm

    This is a brilliant list!!!!!! I know, the exclamation marks could be extra, but for real, thanks so much!

    I find that home ownership is seen as a beacon to show financial stability, but for many in my age group (late 20s) – renting just seems so much more fiscally responsible. You can save more, you have freedom of movement, you don’t pay for repairs, and if shit is hitting the fan financially you aren’t trapped into a 30year neckhold.

    • justmakingcentscom October 31, 2016 at 2:44 pm

      Renting is a great option, especially if you invest the money you save.

      Thanks for dropping by and come again soon!

  • Bryan Stoudt October 31, 2016 at 4:47 pm

    Another great post. Thanks, and looking forward to the one on Hillary & Trump!

    • justmakingcentscom October 31, 2016 at 4:54 pm

      Thanks Bryan! I had fun writing this one. Not as much fun writing the next one!


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