A governor, or speed limiter, is a device used to measure and regulate the speed of a machine, such as an engine. I have taken that concept and applied it to finance. You put in place a governor that limits the speed at which you could potentially lose money.
Here is how I apply it:
We purchased our park model trailer for cash. We could only guesstimate our expenses. Now I can see how much they are. My goal of $860 a month (which I determined back in 2006) was pretty good!
All numbers are per month.
HOA dues = $58.33. This covers sewer, water, use of the lodge, road maintenance, etc.
Electricity = $110 in the winter, $20 in the summer. We use two electric space heaters during the cold months. Looking into a wood burning stove.
Propane = $37.50 for heat and cooking
Gasoline = $30 thanks to driving a Prius
Food = $400 since we dine out a lot and buy from the health food store. Can't grow anything w/o a hoop house.
Insurance (home, auto, health) = $308.33
Of course FED money printing, stock buybacks, and mergers play a huge role in sending stocks higher, but the number one factor is the way market averages are manipulated!
The components of the S&P 500 update periodically. Between 1/1/2005 and 1/1/2015, 188 index components were replaced by other components. In other words, drop the companies going bankrupt and replace them with companies in their growth phase.
Take me as an example. I have paid in $69,058 as of 1/1/2011. Assume I could request a check for that amount right now and not collect Social Security at retirement.
If I live to 75 (male life expectancy from wiki) and retire at 62. I would receive $828 every month for 156 months from Social Security. That is $129,168.
The government saves $60,110.
Over the next 20 years, 74 million boomers will retire. If my situation is "typical" the government could save $4.45 trillion!
I know it sounds crazy, but negative interest rates are showing up everywhere. That means you pay the bank to hold your deposits.
That is why my previous 3 posts talk about how holding cash on your own is the best thing to do right now. More people are pulling their cash out of the banking system because they lose nothing by doing so. This actually contracts the money supply and crushes the velocity of money. This is why we are in a deflationary death spiral despite central banks printing money.
The central planners won't let this happen. So the plan is to eliminate CASH.
And if you are concerned about holding all that cash (theft, fire, etc.) consider putting some into bitcoin!
Be sure you read my previous posts here.
Housing, transportation, and food are the best areas to save money. We decided to turn our existing home into rental property (a $400/month positive cash flow) and move to a much nicer part of the country. We got this place for 56K. HOA dues are $650 a year!
Zero Coupon Bonds ~ bonds that are stripped of their interest. Since bond quotes and purchases are difficult to find from the Internet (another conspiracy as far as I'm concerned), I'm using ZROZ as a proxy.