The financial world we live in is just as wild, if not more, than the mountains and woods we walk through. We are told that the fundamentals of our economy are strong, but we can feel that something is wrong. My unique financial background and survival passion make Financial Survivalist and excellent place to learn and share.

Tuesday, November 8, 2011

Financial Survival Kit

I graduated in 2009 at the peak of the financial crisis. I remember in my last semester, standing in awe as the U.S. financial system crumbled. Even though I graduated Magna Cum Laude, I quickly came to the realization that my BS in Business Finance was worthless and would only depreciate. I might as well have gotten a liberal arts degree. I knew that the financial world was changing, and it would never be the same again.

I decided time was of the essence. I had to figure out where the world was headed, and fast. That way I could know how to take advantage of the change and ensure prosperity for my family. I began working at a Financial Planning firm and undertook a personal study of economic, financial and political history. Soon I found myself looking for ways to assure my financial survival. I ended up with what I call the Financial Survival Kit.

The Financial Survival kit omits the traditional BOB / 72 hour kit items, and just like an emergency survival kit is not a permanent solution to life and is not an investment guide. Rather the Financial Survival Kit is a way to survive our increasingly volatile financial world.

The Financial Survival Kit

1. Emergency Fund: This is one of the few things I agree with Dave Ramsey on; an emergency fund of 6-12 Months expenses. Keep most of it in an online or credit union savings account, because they tend to pay higher interest rates. I use Mountain America Credit Union. They pay one of the highest interest rates for a savings account (currently .17%). Through the combination of a large branch network and a checking debit card, I can have my money in a matter of minutes.

Because bank runs are still possible, you also want to keep at least a couple hundred for each person in your 72 hr kit. Some people feel comfortable with more. It's up to you, but make sure this is in small bills. I keep mine in junk silver. It will be accepted as US currency and or silver. However, silver is quite heavy.

If you don't have a 6 month emergency fund, get one! Do what you need to do in order to save this money. As Dave Ramsey puts it, "Rice and Beans, Beans and Rice!" That means even if you have to eat only rice and beans for a few months, do it!

2. Debt Free Lifestyle: Debt is enslavement. It hinders your freedom to make life decisions and inhibits your wealth building ability. For example, if you have large debt obligations, you might feel like you need a paycheck so badly that you would fear leaving a bad or abusive job. However, there is a difference between Good Debt and Bad Debt. Good debt makes you money and is usually tied to a safe and secure stream of passive income. Bad debt is an expense. It is a burden and should be avoided like the plague. An example of good debt is wisely acquired mortgages. Some examples of bad debt are; credit card debt, any type of title loan, car loans, boat loans, and pay day loans. Just remember that any debt used to consume is bad debt. If you have any bad debt, lose it! "Rice and Beans, Beans and Rice!"

3. Food Storage: Until recently, the most likely financial crises a family would experience would be income loss or a large unexpected expense. Either way, being able to fall back on food storage can be a life line. Having food storage on hand gives you financial and emotional security. You know that when the SHTF (Shit Hit's the Fan), you can still feed your family. I recommend enough food storage to feed your family for 1year minimum. This includes toiletries and food for pets. You can start by buying a little extra of the food you keep in your pantry. About the first three months of food should be made up of food you eat every day. You can rotate through that food as you cook and prepare meals on a daily basis. The rest should be long term storage. The cheapest place to get long term food storage is at the LDS cannery. You can find your local cannery at ProvidentLiving.org. You don't have to be LDS to get food there.

4. Seed Bank: Though gold will have it's place, in the event of total economic collapse, food will be more valuable than gold. As well as food, non-hybrid seeds will be very valuable. A lot of companies are promoting gold to protect your wealth in the event of total economic collapse. But gold is expensive and volatile. For the average person with not a lot of cash, seeds are an excellent alternative.

Seeds give you a source of food for future. They are not a sure thing, because some disasters will render your soil useless, but they will be seen as valuable and possibly tradable.

5. Essential Product: In dire economic situations, from a depression to all out economic collapse, the individuals that survive financially are the entrepreneurs. Not just any entrepreneur, but ones with products that are considered necessities of life (ie food, shelter, clothing, etc). Also essential is the ability to change the price of the product along with inflation.

I didn't have such a product, so I thought long and hard. I decided what I would do is purchase a multi-family home (shelter), and live in one of the units. If done properly, not only will the rents of the other units cover all expenses, but your rent will be paid for and you'll make a little money. In the event of economic collapse it is likely inflation will be a factor. You will be able to pay off your mortgage with inflated dollars, and maybe barter for rents if necessary. If inflation isn't a factor your food and seeds will still be worth more than gold. Have some extra of that to sell if needed to pay your mortgage. See "Real to Protection Against Inflation."

6. Self-Reliant Living: Chances are nothing completely devastating will happen on a large scale. However, economic booms and busts are certain. One of the best ways you can protect yourself and your family is self-reliant living. If you can grow your own food, produce your own power, and purify your own water you are a long way towards prepping for anything. You also are very close to what most people consider retirement. In the post, "What is Retirement" I talk about reducing expenses to meet passive income. Doing this frees up free time and allows you to do what you want (ie retire).

So there you have it. Your Financial Survival Kit. Remember our economic situation is ever changing, and as such this Financial Survival Kit is a constant work in progress. Just like wilderness survival, you are always improving your skills. As I do so financially, I will continue to update this page. If you have any suggestions, please email me at ben@financialsurvivalist.com or comment below.

As always, be smart and thrive.

4 comments:

  1. This is great Ben. A really good nuts and bolts look at some bare essentials to fall back on. I love your assessment of your degree.

    As one guy put it, "you may as well wipe your butt with that pretty little piece of paper..."

    Cheers

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  2. Thanks Danecarp. Education is really important, but there is a difference in knowledge and a degree. No one has a crystal ball, but with this Financial Survival Kit you have a good foundation for any market.

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  3. Benjamin, this is a nice overview, with being debt-free at the core. That is essential. We all should have a piece of the rock if we hope to weather a financial storm.

    I agree with the 6 months of expenses as an emergency fund, but would feel much more comfortable with one year, just like a food supply. Some folks feel good about $1,000 as an emergency fund, but that won't carry two people for more than a month in most cases, so something more like ten times that is a better number to shoot for.

    In addition to ample cash, I'd suggest acquiring other tools, resources and materials so you can create marketplace alternatives for things that are just too expensive. A vegetable garden and a chicken yard represent two such alternatives. Also, think wood heat, generating your own electric power, hunting, fishing and trapping, and having the ability to fabricate, repair and maintain essential items around the house.

    Also, having some resources in abundance will provide something to sell or trade with others who have needs. Whether it's fuel, water or food, when it's rationed or unavailable, it becomes a good item for bartering.

    So many things involve money so a wise move is to be well versed in a wider range of activities instead of being a specialist. The specialists will need to trade their skill, if it's in demand, or they're going to be forced to pay for things with money that may be in short supply. With additional skills, one can be more self-sufficient, create sideline income, and trade services for other needs - all of these minimize use of cash reserves.

    Anyway, for those who live an "off the grid" lifestyle, they won't need near as much preparation, but for others, it's time to do some what-if thinking, planning and preparing. A good place to learn from is the Great Depression - things weren't unaffordable, it's just that people didn't have work, so they had a difficult time paying for things they couldn't grow, raise or create on their own.

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  4. Clair,

    You are absolutely right that gaining other self reliance skills is essential, and will help create essential products for trade. I get asked all the time, "What should I do to prepare?" My goal of the "Financial Survival KIt" was to seperate finance from all other forms of survial and preparation, and to give people a place to start. If you don't have these things, you shouldn't be buying gold.

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