How to prepare for economic collapse

Posted by Bob Harris on

No material item in this world causes more emotional turmoil than money. There are certainly few events that compare to economic collapse when it comes to overall chaos and uncertainty on a massive scale.
 
We write in depth about how to prepare for an economic collapse in our book and I’ll say here again: procrastination in this area will set you back significantly when something like this happens.
 
Regardless of your feelings about money, you need it to survive, in today’s world that is. Which is why understanding how to prepare for economic collapse could be one of the most important decisions you make, ever.
Dollar bill recession
 
Bob and I used to be financial planners, and helping people create financial stability was one of the most important things we ever did.
 
Why?
 
Because financial preparation is one of the most undervalued tools in an emergency preparedness arsenal.
 
Sadly, a recent survey by CareerBuilder says that 8 out of 10 Americans are living paycheck to paycheck, which obviously leaves no room for an emergency expense should something bad happen, let alone a savings plan!
 
Have no fear though, we are here to help. Let’s take you through some brief explanations of economic collapses and then go over some ways you could prepare yourself for them, if and when they strike.
 
Let’s get clear here: economic collapse is a real thing. Lehman Brothers was a 158 year-old institution when it collapsed in 2008 and there were plenty of people who thought that could never happen. There were also many other companies that went under during that volatile period.
 
So, if you find yourself thinking “meh, I’ll be alright.” Think again.
 
As we explain in our book, it can take countries years to recover from financial turmoil.
 
Consider Greece - years after their massive economic collapse (where there was a run on the banks) and 23.2% of the population is still living in poverty.
 
Even here in the United States, where we have prided ourselves as the economic powerhouse of the world for the past 70 years, it took years to recover after the major economic collapse in 2008.
 
So, when we think about insulating you and your family from financial crises, we want to be on the lookout for two things:
 
  1. What causes these crises in the first place
  2. How can you as an individual prepare for the next economic collapse
 
Although you will never be able to predict the future, understanding what causes an economic collapse will help you notice the warning signs of one in advance.
 
The bad news here is that there are so many different things that can cause an economic collapse and nobody can really say for sure exactly what has caused any of them.
 
Take Black Monday for example.
 
Monday October 19th, 1987 (AKA Black Monday), was a day in financial market history when markets all around the world crashed, for no apparent reason.
 
Okay, there was a reason, but even now we still speculate across any number of different causes: overvaluation, market psychology, insurance hedges, etc.
 
But the point is that any of these could have been the kicker that sent the economy over the edge.
 
Now, if you look at the 2008 economic collapse/financial crisis, the global meltdown almost definitely started in the subprime lending market.
 
Basically, people were spending a ton of money they didn’t have, and eventually when they couldn’t buy anymore, everything fell apart (we were in the largest debt bubble in history by the way, we talk about that in our book as well).
 
So what are the warning signs of economic collapse?



Crushing debt


Overvaluation seems to be one of the preludes here. Whenever things are at extraordinarily high rates (especially propped up by debt) there tends to be a massive decline in asset values almost overnight. Does that remind you of any particular situation? (e.g., the stock market right now?)
 
Okay, enough fear mongering. How on earth do you actually prepare for this type of event? Let’s discuss the answer to question #2 up above.
 
Let’s take it in 3 steps:
 
  • Save up some cash
    Like I mentioned above, the average American has very little savings, for retirement or anything else for that matter.
    In an emergency situation, money talks. Cash (if money still even has value, which we will go into later) will be worth more than a piece of plastic. Who’s to even say a credit card processor will be working? If the electricity is out, how are they going to run your card to buy food?

    You can keep it in a savings account, but I’d highly suggest getting a safe and keeping some in there too. The plastic rule goes for ATMs as well.
 
  • Diversify your assets
    This is for minimizing your losses during a huge financial meltdown, i.e. when the stock market tanks.

    Let’s be clear: you can’t time the market. But what you can do is spread your wealth around different financial institutions and pick a mixture of low risk funds that hold a largely diversified asset base in different sectors of the economy.
 
  • Stock up on food and other supplies
    In true economic collapse, money could be absolutely worthless and you could be out of luck if you planned on heading to the grocery store that evening to buy eggs and bacon.

    Don’t take chances, stock up on the important items like food and water. A good starting point for this is our Emergency Preparedness Kit.
    
Take these tips and get started today. You will be glad you did.
 
Also, go get a copy of our book which has even more info about preparing for economic collapse.
 
Questions or comments? Leave a comment below.

0 comments

Leave a comment

Please note, comments must be approved before they are published