The next collapse is potentially coming. A government cannot keep printing money while keeping the interest rates low and still expect to fight off inflation. What is happening now is called Modern Monetary Theory and I encourage you to read the linked article. As long as we continue to support the government with our taxes and other means of extortion, they will continue to be able to pump out aid to whomever they want. If they need more money, they just print more. If they think they are going to run short of money, they will just increase taxes. The workers are the lifeblood of this system and merely tools.
In short, the government does not care about you in particular. Just your contribution to their machine. They will spend the money how they see fit and give you crumbs. Oh wait, this sounds familiar. I think we have seen this happen in other countries that have eventually collapsed...
No matter what ends up happening due to this theory, your finances will be severely impacted. You still have time to be prepared for this. However, money is getting tighter already with inflated gas, lumber, and vehicle prices.
What do you need to do to get started preparing for a financial collapse?
You need to make a budget and figure out how to live below your means.This will be tough for many people because we love our little extras and luxuries. However, when more taxes get taken out of your paycheck or your employer-provided health insurance rises in cost again, you will not feel the pinch quite as hard.
Many people like their little extras (including me!). We honestly think we cannot live without four different streaming services, Amazon Prime, subscription services, food delivery plans, and more. To get by this, you need to do a cost versus time analysis:
- Make a list of all the extras in your budget and on your bank statement.
- List them in order of importance. What do you think you cannot live without?
- Over the course of a month, track how much time you actually use those services. Do you use them regularly? Do they get used right away or sit in a box for a while? Do you use all the food up?
- Be brutally honest with yourself at this point. This is not a time for your ego or your pride. You need to know if you can live without it or not.
- Does the cost of the item justify the time used? Sometimes, they do. You may watch a lot of Hulu at night. You may rely on those meal kits to make supper easier twice a week.
- At this point, you know what you can cut now and later. However, avoid the monthly cost justification. Those costs add up too. You can look at what you are spending overall in a month or how much you spend over the course of the year. Either way, you will be better off stopping the spending now.
You can dig even further into your finances and critically look at where all the money is going. How much are you actually home? What are you or your family involved in that is total money and time suck? Do your kids actually enjoy the activities they are in, or do they just like the social aspect? Are you purging money being involved in some sort of league play few nights a week? While all of this is enjoyable, you may need to make cuts to live below your means.
There are benefits to these cuts. You won't be driving as much, saving gas and vehicle wear. You won't have outside family obligations (sports, dance, music, lessons) that can take up considerable financial resources. You won't be eating out unless you use carryout or delivery. Even then, you will be home which means you won't have the expense of eating out. You won't have your normal coffee or drink runs.
What happens, though, when your income is also slashed?The problem with inflations, recessions, and depressions is that the job market is also sketchy. Jobs are scarce or do not pay well. While there may be a good number of jobs available right now, that can change quickly with business closures and downsizing. Many people also rely on many overtime hours to keep their budgets intact, which may not always be available.
Unfortunately, the government has a gravy train going on with welfare, unemployment benefits, stimulus payments, and more. People do not really have an incentive to work right now, but eventually, that train will come to a stop too. Even though the government appears to be working on a fiat currency and not needing your tax dollars, they need your tax dollars. When they need more money, they will end benefits and take it from the workers, even raising taxes to get more money.
Leaving below your means becomes very important now. You may be making good money now and working a lot of hours. However, the time comes, you may be facing the fact that you only have 60-80% of your normal income. That becomes tough in a hurry if you are not prepared for it.
Get out of debt.If you are looking at less income, debt becomes a major problem in a hurry. While you should be getting rid of any debt you have, start at the bottom. I do truly believe in using the debt snowball concept from Dave Ramsey because it works. You need to make a list of your debts from smallest to largest. You pay off the smallest debt and roll that payment into the next smallest debt. In the meantime, you still pay the minimum payments on the rest of your debts.
However, with what is going economically in our country, you need to take this a step further. You need to get out from under your student loans. Please do not believe that they will forgive your student loan debt. That will be argued for years in the legislature before that happens.
You also need to pay off your vehicle and recreation loans. Next, you should pay off your mortgage sooner than later. You are trying to get rid of the debt and this is still debt. I know people will disagree, but you need to look long-term on paying off your mortgage. How much of your budget is your mortgage? If you are a two-income household and lose one income, can you still afford your mortgage? If you are a one-income household, can you afford your mortgage at all if your income is slashed? The safest bet to pay down your mortgage.
How do you combat rising expenses and prices?With inflation, the prices of goods go up. Many factors influence the price of goods, but inputs and transportation/handling of the goods are usually the main culprits. Sometimes, good old-fashioned price gouging is also to blame.
How do you combat this? Multiple small things that add up:
- Set a strict budget, but allow for increased expenses. Again, living below your means makes this work.
- Limit shopping to necessities.
- Limit your entertainment and eating out.
- Meal plan and shopping from your fridge/pantry first
- Buy generic.
- Stock up when items are on sale.
- Drive less and combine errands.
- Learn to fix and mend your things so you are not buying new all the time.
- Shop used goods first.
Get prepared at home.You knew prepping was going to be a part of this and you weren't wrong! By being prepared at home, you can ride the wave of financial uncertainty for quite a while. What do you need to do to get prepared?
- Start storing more food and creating food stockpiles. I would plan for three months to start and shoot for a year of stored food. If that seems like a lot, just remember that you may not be able to afford groceries for a week or longer.
- Set up a rain catchment unit(s) to help keep the water bill down and harness some natural resources. You can take this a step further and put a cistern on your property as well.
- Store food for your pets and small livestock.
- Start gardening and planting perennials to help provide your own food.
- Keep up on vehicle maintenance to avoid more problems down the road.
- Stock up on soap and other household necessities for at least a year, if not longer. Many of these things do not expire or lose quality for a few years.
Learn skills and become self-sufficient.
One of the keys to riding out a financial downturn or collapse is doing as much for yourself as possible. You need to learn skills to do as much for yourself as possible. Learning how to fix and mend your things will help you save and stretch your money even further. What skills should you contemplate learning?
- Sewing and knitting
- Mending clothes, sheets, bags, zippers, and more
- Vehicle maintenance
- Canning, freezing, and dehydrating your produce as well as all your food to not waste
- Wiring and plumbing
- Appliance repair
- Cooking and making food from scratch (bread, jams, etc.)
- Keeping small livestock (chickens, rabbits, etc.)
- Hunting and fishing
- First Aid
- Bartering and trading services and goods
Lose the ego and pride.
One of the biggest problems when being prepared is to be too arrogant or egotistical. You will hear that someone will never do this or that because they have too much pride. When it comes to saving money and surviving during economic downfalls, you have to develop a mindset of "I will do whatever it takes."
This is not a time to keep up with the Jones. This is not a time to be foolish with your resources. If you lose your job, you might have to take a job with less pay or you may be overqualified to do. If you need more money, you might have to take a second job. You may need to move to a smaller house, a different area, or live with relatives until you can afford those things again. You may need to move to find work.
At this point, you need to establish stability. You also need to become humble. Being prideful and arrogant can cause many problems for yourself and your family. For example, you may live in a beautiful house in a tony area with a monthly mortgage of $1500. You or your spouse loses their job. You are fine for 2-3 months with savings, but now the savings are getting low. You cannot afford to pay the mortgage and buy groceries too. The sensible thing to do would be to find a cheaper place to live and sell/rent this house. However, you think you will lose respect for moving to somewhere "less." You want to stay where you are so you do not lose standing. In the meantime, the savings run out and food becomes scarce. Your family is starving for you to save face. Your pride and arrogance are causing family problems and more. Is this worth it? Over your house and your pride?
Something to remember with all this information is that a financial collapse does not usually happen overnight. They happen slowly over time with lots of signs telling us something isn't right. That is happening right now. We know that something isn't right and we need to get prepared for it.
Being proactive now means the financial collapse will not hurt so bad when it happens. If you talk to people who survived the Great Depression, some people were affected more than others. In the rural areas (and even some towns and cities), people went on like business as usual. They were already thrifty and creative to make ends meet. They were already raising large gardens and keeping small livestock. People did move to where the jobs were hiring. People did live with relatives until they could get back on their feet again. While there were still problems, people did their best to work through them with creativity and flexibility.
Thanks for reading,
If you are interested in being more self-sufficient or getting started in homesteading, check out my new book!