How to Rise from the Fall


Here is a way to avoid “Trading Down” and moving up instead.

Merri and I love our life on the farm, growing our own vegetables and fruit, raising trout, living the simple quiet life and sharing it with others via AIRBNB.

We are enjoying life more as the pressure on much of the middle class gets worse.   The loss of life’s quality has created divisive politics in America and around the world.

We don’t hear much of this out here in nature.

The politicians and big businesses are making a few people rich by preying on the middle class.  Yet there is not much of that going on in the woods.

Beginning this decade we began to feature the danger of Trading Down.

In 2009 our message posted at this site said:  Remember this phrase “Trading Down?”   This economic fact is having a dramatic impact on finances right now.  One result is that many Americans will move abroad where the cost of living is lower.  Others will tighten their belt.  Many could suffer.

An example of the many insidious ways our lives will undercut is that airlines will reduce the size of  airplane seats and cut back on service. 

airplane-seats

Airlines were even looking at seats that would leave passengers standing.  This is an image of  proposed airline seats on low cost carriers.

Billions of people outside the USA are entering the middle class.  This will accelerate “Trading Down”.   Almost a billion Indians and Chinese are getting ready to be able to afford their first air travel.  Standing up might seem impossible to those of us who were raised with the concept of champagne flights… but this new wave of consumers has just come off ox carts or bicycles at best.  The stand up flight is a big step up for them.

Where would you aim your business, at the 60 million declining boomers or the new upcoming billions?

Since that prediction the elimination of service by airlines has grown in spades!   Cuts have ranged from charging for baggage to reducing seat size to ignoring seat assignments and even dragging passengers off planes.

Don’t expect a turnaround to “Trading Down” anytime soon.

A recent article in USA Today. “Low Wage Jobs to grow in Next Five Years”  (1) shows why this problem will get worse.

The article points out: Technology and globalization will continue to reshape the labor market, paring some middle-wage factory and office jobs in particular.

Around half the jobs lost will be among middle-wage jobs, and these will not be quickly replaced.

“Middle-wage jobs are having a harder time growing in the new world economy.”

Trading Down will make the lives of millions worse.  Some of my friends who have been in the global business as long as I have think that the world is headed for an economic collapse.  ATMs won’t work, credit cards will be denied and banks will be shut, taken over by some  government agency.   Gas stations will run dry, store shelves empty and it’s even suggested that stock markets will close and Social Security will default.

Certainly, I do not think events will be this dramatic, though it could happen.

I believe instead that there will a steady decline in purchasing power for the middle class.  A few of the benefits of modern life could no longer be affordable.  Vacations could become a luxury affordable for only a few.  New vehicle purchases could end for most.  Debt pay off could be unthinkable.   Credit card debt could create a form of slavery for the majority middle class.  Borrowers could be charged high interest, but the same banks that lend will pay next to nothing on savings accounts.  There could be little cash left for emergencies and building up any retirement savings will be just unimaginable and not very useful anyway.   Medical care will deteriorate even further.  Many could die in waiting rooms and regular dental work will become a dream from the past.  Increased medical costs could become the second form of slavery.

All of this is “Trading Down” and more people, than not, could see their lives deteriorate because of  it.

We can either complain about it or do something about it.

Don’t join in “Trading Down”… use the trend to live a richer life instead.

The lower end of the middle class is a growth sector but millions will still lead less abundant lives due to the trading down phenomenon.

There are many ways to profit and increase your life despite trading down.

For example, because Merri and I had already seen trading down coming we had moved away from busy communities to Smalltown USA.

One distortion created by trading down was a move by the middle class to Central Florida.

Tighter lending practices meant that more people would be trading down by renting homes rather than buying.   Florida remains the sunshine state and sunshine always attracts people.   This seemed like a no-brainer.

We began buying houses that would be good rentals for middle class professionals.  The real estate market was devastated.  Houses could be purchased for much less than construction costs.  Prices were low enough that rents created a reasonable return.

This diversification in our portfolio has been based on our belief in “Trading Down”.  The investments have paid off also. We have seen strong rental demand from working professionals:  police, firemen, nurses, postal employees and retirees who now prefer to rent rather than own.  Plus as the populations swell, the capital value of these rentals has risen.

The sharing economy is part of the trading down process.   Rentals are booming but trading down has become so powerful that many middle class, especially younger, cannot even afford to rent their own apartment or home.

Numerous large real estate developers are embracing the concept of “co-living.”  These rent condos where they share communal kitchens, bathrooms and common spaces.

In New York, one century old developer has created compact apartments, typically just over 1,000 square feet. They have three substantial bedrooms and walk-in closets. They have a stylish shared kitchen and small entry area with enough room for a table and seating.  There is a shared washer and dryer in a closet, and two full bathrooms that are equipped with roommate-friendly features such as doors with indicators showing whether the bathroom is occupied.

There is no living room, but tenants enjoy co-living-type shared amenities-such as lounges, fitness centers and rooftop terraces, as well as regular group activities like wine tastings and yoga.

More people also share second holiday or getaway homes.  Rather than owning a cabin in the mountains or at the beach, people share the homes of others when they want to enjoy nature.

We have jumped into the sharing economy at our North Carolina farm.   We made a couple of our cabins, previously used for seminars, available through AIRBNB.  That has worked really well and now we have four cabins we use in this program.

These are just a couple of examples of what Merri and I are doing to rise up due to trading down.

You may hate the idea of living in the middle of a forest.  You might not want to grow crops or raise fish.  This is not the point.

Merri and I made these investments and make this effort just because we love it.

Look for distortions created by “Trading Down” in areas of interest for you.   Find your passion in the forces of change that create “Trading Down”.  Turn those passions into profit.

When you find value this way, your lifestyle can be one that’s on the rise instead of on the fall.

Gary

(1) www.usatoday.com: Low wage jobs grow over next 5 years


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