War can be a devastating and costly event, not just in terms of lives lost, but also in the impact it can have on economies and financial stability. While we all hope for peace, it’s important to prepare for the worst-case scenario. Whether you’re an individual or a business, taking steps to financially prepare for war can help you weather the storm and come out on the other side with as little damage as possible.
In times of potential war, it is wise to have a financial plan that includes emergency funds, protection of properties and assets, diversification of investments, and the ability to liquidate assets if necessary quickly. It is also essential to monitor economic indicators, such as inflation and currency fluctuations, as impacted by war and its aftermath.
Despite the low likelihood of World War III and nuclear war, it is a good idea to prepare. Read on for financial decisions one should be willing to make under the increasingly probable war scenario.
- How Would War Impact My Finances?
- Creating A Budget in Case of War
- Diversifying Investments
- Protecting Your Assets and Business
- The Advantage of Holding Multiple Citizenship
- Set Up Your Emergency Plans Now
- What Is The Best Asset To Own During A War?
How Would War Impact My Finances?
Many investors and high net-worth individuals have historically depended on trusts and private equity firms to secure capital.
While these strategies are perfect for transferring your estate to your children and grandchildren in an era of peace, anyone who lives in a region with a lot of political and economic unpredictability needs a more innovative strategy to safeguard their children’s future.
There are many tragic instances in history of families losing everything to battle. The world is vulnerable to recession and depression during times of turmoil.
Banks may collapse when the currency depreciates. Your property could be trashed or destroyed, and the lives of your loved ones could be in danger, in addition to an insecure economic picture.
There is a genuine possibility that these things may occur in an emergency or war situation:
- Since your industry could not be operating, you might lose your job.
- You risk having some of your assets and property taken and repurposed for public use.
- The labor market may compel you to close your firm.
- The local currency’s value might plummet significantly.
Here is an example table showing how various wars throughout history have affected stock markets:
|Impact on Stock Market
|World War I
|1914 – 1918
|Significant decline in European markets; U.S. markets initially rallied but eventually declined
|World War II
|1939 – 1945
|Sharp declines in European and Asian markets; U.S. markets initially declined but eventually rallied
|1950 – 1953
|Significant declines in U.S. and international markets
|1955 – 1975
|Volatility in U.S. markets but no significant long-term impact
|1990 – 1991
|A brief decline in U.S. markets, but the overall impact was relatively small
|2003 – 2011
|The initial decline in U.S. markets, followed by a prolonged period of volatility
Now that we know this, we can put some plans to lessen any financial harm to happen caused by these occurrences. You may take several actions to be financially prepared for war while considering the risks mentioned above.
Creating A Budget in Case of War
At times of conflict, you won’t try any shopping therapy, so it also makes sense to cut down on other areas of your expenditure.
In addition to being in excellent health, having reliable insurance policies or medical cards can significantly lower your medical expenses and keep you healthy enough to do the work you need to perform to support yourself.
Although each of the suggestions below may vary depending on the situation, they all adhere to a few fundamental guidelines that you can use to improve any other aspect of your finances and help you weather difficult times.
Take calculated risks. Beyond hedging against currency changes, spreading your other assets across international boundaries also helps guard against having your property harmed or used as a weapon of war.
Be adaptable. When it comes to your enterprises, job possibilities, and investments, having various options reduces your risk and the likelihood that one failure will destroy everything for you.
Get ready. If you get knocked off your feet, having solid financial foundations like a diversified investment portfolio, insurance coverage, and emergency fund ensures you have a robust financial cushion to absorb the blow.
Live debt-free or as near to it as you can manage. This way reduces the debt you will have to pay during a financial crisis or when hyperinflation appears as one of the domino effects of a catastrophic event.
All that money had no value during a global war, let’s say World War III, because countries would inflate economies by using the printing press to pay for their armies. Hyperinflation sometimes occurs, as it did in Germany after World War I.
Paying for war reparations brought in an economic downturn. By the end of the first world war, the exchange rate had increased. Employees hastily made purchases before their money lost value when they received their pay.
Collect Real Assets
The examples of genuine assets to think about hoarding are:
- Real estate
- Numerous pairs of glasses
- Tinned food
Here are examples of investments profiting from the war:
- Businesses that make guns, fly planes, etc.
- Manufacturers of four-factor goods, such as those for food, water, medication, and so forth.
- Energy corporations like oil are commodities, and prices tend to increase during the conflict.
In the Russia Ukraine conflict, cryptocurrency prices plunged as gold prices rose. It is crucial to have actual items to trade, since cash quickly depreciates.
Sadly, a high-inflation environment will be disastrous for tenants who own nothing and have no social security.
Buy As Many Sovereign Bonds As You Can
Purchase bonds from the nation you believe will prosper and a nation you think will be able to pay off its debt, at the very least.
Since the United States has the largest army, the most complex financial system, and a global currency, it is considered the most sovereign nation.
The world found relative safety in the U.S. during the financial crisis of 2008–2009, which helped the U.S. currency gain ground versus other currencies.
When it comes to investing, keep in mind that everything is relative. As investors abandon riskier assets, equities will crash, and treasury bonds will soar.
Equities from emerging markets will likely decline more sharply than those from the S&P 500.
Horde Cash And Be Idle
Hoarding cash is perfectly acceptable if the uncertainty you are experiencing is just momentary.
Even if high inflation is causing cash to lose buying value, it is still preferable to losing real money in the stock markets.
Hoarding money is the most straightforward and sensible thing to do in uncertain times.
Yet you should avoid paying off debt in total since you will still have monthly obligations after doing so. In unpredictable times, liquidity is most beneficial. You have more options the more liquid you are.
Purchase Stocks And Properties
History suggests that investing in the S&P 500 at the commencement of a war is generally lucrative. The preferred asset class during a conflict is real estate.
Real estate often retains value, while equities fall during a conflict because investors turn to hard assets for security.
It often recovers along with the economy after the war, frequently gaining from significant government infrastructure expenditure.
Real estate is about as near to a “heads I win, tails you lose” situation as there is if the invading nation doesn’t seize your property.
Protecting Your Assets and Business
If you are not in the military, it stands to reason that your existing civilian employment may no longer be available.
To be ready for times of great uncertainty, you must adhere to the following:
Keeping Your Job Safe
Develop an industry that is resilient enough to weather times of economic downturn.
They include sectors like low-cost retail, education, technology, positions in the federal government like national guard or service members, and the healthcare sector.
If you already work in one of these fields, your chances of keeping a well-paying job are vital.
If you are not in these trades, you may look at your existing skill set and determine how they could contribute money in a time of conflict.
It is okay to attempt to change your career trajectory to one that is in an area more prepared to withstand uncertainty if you can afford to do so.
Keeping Your Assets Intact
Your current assets, which are material possessions like your house, vehicle, and other property, run the risk of being seized and put to use for the benefit of everyone in the event of a conflict.
Your liquid assets, on the other hand, including a savings account, equities, bonds, and so on, run the danger of seeing a big decline in value.
Ensure that an Insurance Deposit Plan covers your bank accounts. If it is still intact and not confiscated, your tangible properties are actually valuable in these times, particularly if they have inherent worth, like a car or piece of land.
Transfer part of your investments to investments like rare coins or gold, which tend to remain high in value, if you want to be sure that your assets stay intact.
You might attempt to buy and keep your properties in a different, more secure nation to protect yourself against asset confiscation.
Keeping Your Business Safe
Sadly, you could take a big blow in your established company and can’t position them to serve the recession-resistant sectors.
This blow entails firing your employees, stopping production, or selling off your capital if circumstances worsen.
One way is to evaluate your supply chain and ensure it is sufficiently varied.
Ensure your suppliers are dispersed throughout many marketplaces in the area so that, should one become seriously damaged, it will only significantly influence your pipeline.
Another thing you can organize is to register your company abroad.
Doing this may protect your company from damaging domestic economic effects. You should be able to endure warfare relatively unharmed if you keep your overhead costs low and concentrate on making your firm as lean as possible.
The Advantage of Holding Multiple Citizenship
Proper preparation to safeguard your possessions may shield your family from this kind of stress. You boost your chances of surviving a war without losing everything by spreading your financial assets and citizenship worldwide.
Global mobility is made possible by having various citizenships and the ability to travel on demand with fewer limitations; worldwide asset diversification is a crucial wealth preservation technique.
You will be ready to defend your loved ones in times of peace and conflict if you take a comprehensive approach to your finances.
Set Up Your Emergency Plans Now
A medical emergency is one of the highest costs that may catch a family off guard and throw them into financial chaos.
Putting off house repairs because they are expensive might lead to cascade issues that become worse over time.
Everyone understands the need to set up and maintain an emergency financial fund, but there is a dilemma on how much money to save and where to save it.
Depending on the circumstance, the best course of action is to:
- Defend against overdrafts, cover more minor emergencies, and cover any budgeting irregularities, save aside at least one month’s worth of income in the emergency fund. These emergency funds should be a combination of cash, linked savings, and checking.
- Increase your emergency fund to account for high costs and probable job losses. This outstanding emergency fund should be in a high-yield savings account or other accessible low-risk investment.
- Only add what you will need for the first two phases. You should invest more of your money, diversify it, and reduce your expenses.
To prepare financially, establishing an emergency fund should be your top financial goal before paying off any debt.
What Is The Best Asset To Own During A War?
It is difficult to determine the single “best” asset to own during war as different assets may perform differently depending on the type, duration, and severity of the conflict.
However, history has shown that certain assets tend to hold up better than others during times of war and geopolitical turmoil.
One asset that is often considered a safe haven during times of war is gold.
It has been used as a store of value for centuries and tends to hold its value even during periods of economic instability and political uncertainty.
It is also a globally recognized and accepted form of currency, making it a valuable asset to hold in times of crisis.
Other assets that may perform well during war include real estate in safe locations, such as properties that are far away from conflict zones or that are located in politically stable countries.
Additionally, defensive stocks in sectors such as healthcare, utilities, and consumer staples may hold up better than other sectors during times of war, as these companies tend to provide essential goods and services that are in demand regardless of the geopolitical climate.
One of the pillars of good prepping is financial preparation. Any catastrophe or calamity will be challenging if your emergency fund is not in order.
Preppers often want to achieve self-sufficiency, and having enough finances is one aspect.
When SHTF, you can find yourself in a difficult position if you depend too much on other people or safety systems for you and your family’s financial preparedness.
Put some money down, settle debts, make a budget, purchase fewer items, look for bargains when you do, invest wisely, and diversify your investments.
After you master the fundamentals, your life will be considerably less stressful and well-prepared!