My Prep Story Part 3 - The Mortgage Business & Saving

The next stage of my life involved finding a business that I would enjoy, find fulfilling and that would keep me local to the North Bay Area. Only a couple of months after I left the graduate Economics program at UC Davis, I was introduced to the mortgage business. Actually, I chose the mortgage business, and was lucky enough to decide to enter that business in early 2003. As many of you know, 2003 was the middle (and as it turned out, the end) of what was then called "the Refi Boom." So it was very good timing for someone who wanted to get into that business. It took me less than a month to find a job and I hopped onto the roller coaster ride that was the mortgage business of the last decade.

The thing is, I saw the writing on the wall almost immediately. By that I mean that it was clear to me that the mortgage business was in a pattern that was unsustainable, with interest rates at all time lows and production volume at all time highs. That volume simply couldn't survive even a modest increase in rates, not without wrenching changes inside mortgage origination outfits like ours. From talking to others working in the business, it was clear that companies in the business were more than willing to cut loose large numbers of its employees when times changed. I don't know whether I thought I'd be one of the lucky ones that was kept on or if I liked what I was doing too much to leave the business. Maybe it was simple inertia. Anyway, I stuck around and started building a network of contacts in the business and buckled down to work loans.

Even prior to entering the mortgage business, I'd always been a saver. I'd always geared that saving toward future goals like higher education and my retirement. The mortgage business changed all that. I really started socking money away from day one, knowing instinctively that I needed to plan for the ups and downs of this oddly counter-cyclical business. I had heard about various gurus that recommended having six months worth of expenses saved up just in case you ever became unemployed. I took this to heart and decided to take it even further.

At the same time, I read and became enthusiastic about the ideas of Robert Kiyosaki of the Rich Dad, Poor Dad series. The key advice I took from Kiyosaki was that even as an individual and employee, I needed to maximize the amount of my personal income that was "dropping to my bottom line", meaning money that I would be able to save and invest. My personal goals became two-fold, 1. To maximize the amount of cash flow from from my assets (using Kiyosaki's definition of assets) and 2. To increase over time, through my assets, the number of months that I would be able to go without working to a point where I could "retire" on my own cash flow and savings. So I started systematically setting aside a certain percentage of my income every month in accounts for savings and investing.

This savings cushion served me well when I was laid off for the first time from the mortgage business toward the end of 2003. Yes, that's right, I was laid off less than a year after I started. And you're asking yourself why I didn't just leave the business right then and there? I almost did. In early 2004, I found work at a little telecom place in Petaluma as a temp while my wife was pregnant with our first child. If they'd offered me a permanent job in what I felt was a timely manner, I probably would have taken it. But they didn't, so I left in June as the birth of our child grew near. And a week later, I was working at another mortgage company. Back on that roller coaster and loving it.

Once back in the business, I redoubled my efforts at saving and investing. Having that first layoff experience under my belt convinced me even more that saving money and also developing available credit were essential to my survival in the business that I had grown to love. I knew that periods of unemployment were a likelihood for anyone in the business and I became a professional saver. We also resolved to keep our expenses low. Over the next three years, the temptation to buy a new car and especially a home, could have been very dangerous for us. The parking lot at my office was filled with giant SUV's, and much of the talk in my office revolved just as much around my coworkers' mortgages and homes as it did around the clients we were helping to obtain HELOCs. However, when I ran the numbers (which I loved to do), I couldn't get them to work. Even on the amount I was making as a loan officer, I couldn't see how I could afford to buy a $400,000 to $500,000 home. And I wasn't about to move an hour away to where homes were more reasonably priced at $300,000 (which would still have been quite a stretch for us). So I kept saving and investing.

My cash flow plan wasn't working out as well as I'd hoped and I still was nowhere near that goal. My savings plan was doing quite well, though. I had what I thought was at least a year's worth of expenses saved up and I was continuing to look for ways to invest. And I had a strong foundation of available credit which I knew I could draw upon if the need, or a strong investing opportunity arose.

My Prep Story Part 2 – September 11th and its residual effects

I know September 11^th was a life-changing event for many people. Many died. Many others lost loved ones, performed acts of heroism or later went to war. Nothing so monumental happened to me directly. Nevertheless, the events of that day had a profound impact on my thinking over the subsequent months and years.

The most obvious impact was a significant shift in my thinking about starting a family. Ever since I’d finished college, my primary focus had been my career. I’d worked for several years toward a graduate program in Economics with the purpose of becoming an academic or consultant or both. My wife and I had married in 1998, but we agreed to wait to have children until we were both settled into our careers. In September of 2001, I entered the PhD program in Economics at UC Davis. But given what I’d seen on September 11^th, the prospect of spending another five to seven years in graduate school and the likelihood that I’d have to then move to some faraway city to pursue the life of an Economist just didn’t match with my vision for myself and my family.

It was significant that I was also struggling with the academics at Davis and I recognize that as a factor in my decision to leave the PhD program in the summer of 2002. But I still consider the stark blow to our illusion of safety and continuity to be the key factor. It was clear to me that even in this country, any one of us could be killed suddenly, violently and with no way to escape. Now, I know as well as anyone that that’s always been true. People die every day in various accidents. But September 11^th brought that death directly to my television. It made death real and current in a way that a hundred awful car accidents couldn’t. So it wasn’t long before my wife and I were planning to have our first child, and after that our second.

As for how to prepare given the threats of the September 11^th plotters? My take has always been that the next big attack, if there was to be one, would be something different, something unexpected. That was what made September 11^th so devastatingly effective. We couldn’t conceive of it. Oh, we’d heard of hijacking before, but who had ever thought to use the hijacked plane as a weapon to kill people who weren’t even on the plane? My personal experience was that I needed to see it to even understand what had happened (our introduction to the event was on the radio). Once used, the technique of hijacked-plane-as-missile-strike is no longer inconceivable and once it is conceivable, it is easily preventable. I have always thought that al Qaeda would come to the same conclusion and switch the plan for their next attack to something else. I think that’s been borne out by the evidence from their subsequent attacks.

So what was there to do to prepare? Nothing for an individual like me or a family like mine. Just stay away from major cities and landmarks wherever possible since those seemed the most likely targets. Without really planning anything, that’s all I’ve done preparedness-wise regarding September 11^th. But I now have two small children to support and protect and a legacy to provide. I’m still figuring out how to do all of that, but I am happy to have my two little ones and I don’t mind that it was a horrible event that got me kicked into gear to bring them into the world.

My Prep Story & The Origins of Fortress Beverly Hills

I’ve been thinking about my own preparedness story and trying to figure out where to start. Like in my fiction writing, I usually formulate ideas best around visual imagery. The story connects these visual images. So I want to start in April 1992 with this image.

This is a close approximation to what we saw from the vantage point of Westwood and UCLA during the Los Angeles Riots just after the Rodney King verdict. Plumes of smoke in the distance. Were they getting closer? Was that Beverly Hills on fire or West Hollywood? What would happen if any rioters tried to come up through Westwood itself? Would the Los Angeles Police stop them? What about the National Guard? None of my roommates or friends wanted to speak these questions out loud, but that’s what I was thinking.

We also saw these images on TV:


Looting, beating and burning. Chaos. Uncontrolled, unbounded, senseless and mindless chaos. Okay, maybe the looting wasn’t mindless. But the violence and the fire-setting were, to my eyes, just pent up rage being released. I didn’t condone it or agree with it, but I understood what was going on. The problem came when I started to imagine what might happen if it continued to rage out of control. What would stop the rioters and firebugs from taking out there anger all over town, including the part of town that I, my girlfriend, my good friends and classmates and my place of residence were? Would I end up beaten to a pulp like Reginald Denny who we saw on TV? Would we be killed or burned or just scared by the rampaging mobs? We holed up in the dorm at UCLA or our apartment in heavily populated Westwood. I suppose we thought that there was more safety in numbers. There certainly was no thought of stocking up on guns or food. We hadn’t planned ahead for any of that. At least no one I knew had. So we sat and watched things unfold on our TV. I couldn’t shake the notion, even then, that the LAPD and later the National Guard were letting the rioters take out the bulk of their anger and frustration on the “lesser” parts of town and that if anything really serious ever took place up our way (which just happened to be nestled next to both Bel Air and Beverly Hills), that the rioters would all of a sudden run into a force that would stop them from proceeding using any means necessary. Ultimately, we were safe because we were close to the rich folks. I don’t know if that was true, as it turned out – I did hear later that there was damage in Westwood only six or eight blocks from where I lived – but the idea obviously stuck with me because I made it a centerpiece of my novel Fortress Beverly Hills: http://bit.ly/byMrxm.

Fast forward seven and a half years. The next time I really thought about prepping was in the months leading up to January 1, 2000. My wife and I were living in San Rafael, California in a one bedroom apartment :I was working at UC San Francisco as a computer programmer. As the only computer-savvy person in my division, I was tasked with preparing the computers for the year 2000 changeover. To be honest, I had no idea what I was doing and even as 01/01/00 approached I still was not at all confident that what I had done was sufficient to protect us. I was pretty sure that anything that could go wrong with our computers and data could be repaired in the new year, but I wondered…. If I was feeling unsure of how ready the computers were in my office, what about the people asked to do the same job with some of the more important systems out there? What about the transportation systems, the medical infrastructure, the police? What if any of those systems shut down at midnight on New Year’s Eve and couldn’t get back online? My imagination was running wild with unpleasant scenarios. One was that the nation’s air traffic control systems, which I had heard were woefully out-of-date, would go down and no airplanes were able to fly. Airports full of hungry, cranky people sleeping on floors and uncomfortable chairs. Travelers stranded far from home with no knowledge of when or how they would get back to their families.

Another scenario was that the police would be crippled and unable to function due to outdated dispatching and crime-fighting systems. Combine that idea with the notion that the traffic lights could go haywire. Who would ensure the nation’s roads and cities were safe for travel if the police were shut down? And would gridlock trap everyone in place, unable to move to safety or avoid hazardous situations or people?

How should we prepare for these imagined scenarios or any others we hadn’t conjured up? We didn’t have a stocked up pantry, weapons or protection in our little apartment. Our solution was simple. We went to my in-laws in Santa Rosa. We knew they had a full pantry and a well with fresh water. They had extra room for us if we needed to stay for longer than just the night of New Year’s Eve. And it was geographically removed from the great masses of the San Francisco Bay Area. As midnight fell and the following morning emerged, we watched carefully for any signs that things had gone terribly wrong.

As it turned out, Y2K was a false alarm. But my mind became alert to the kind of disasters that could shut our system down either temporarily or permanently.