The worst thing about a financial collapse is that you cannot predict when it is going to happen, how soon it will happen, or how long it will last for.
All you can do is take the steps needed to prepare for an economic collapse, embrace frugal methods, and start thinking about your bank and wallet as a survival tool, rather than a spending tool.
When the last economic crisis hit, the 2008 financial crisis, the world was shocked at the speed in which it set in. From what started as a meltdown in the US mortgage market, the rest of the world collapsed in a domino effect in rapid succession.
For most of us, that economic collapse was something we just weren’t prepared for, and for those that were not prepared, it was a very tough period.
The question everyone is asking now is ‘when is the next economic collapse?’. It could be this year, the next or in five years. But as many economists argue, we are due for one, and the next one could be much worse than the previous financial downturns.
Since the only thing we can do is ready ourselves for another economic downturn, we take a look at 8 steps you can start taking now to survive an economic collapse.
But first, let’s take a look at some of the basics, to understand why we need to prepare for an economic collapse.
What is an economic collapse?
Simply put, an economic collapse, interchangeably used with the term financial collapse, is a series of very severe economic conditions. Many survivalists and preppers say an economic collapse is the one thing that they are preparing for, as it includes several symptoms that place risk on our necessary needs, such as food, water, power, and safety.
One of the worst factors about a financial collapse is the fact that it doesn’t abide by a timeline. Natural disasters, for instance, while very destructive, are short, with their duration measuring only for days let alone weeks. This allows recovery efforts to commence almost immediately. Economic downturns, however, are unmeasurable in length and for most, will last a minimum of a year, with the aftereffects resonating for several years as a nation recovers.
During an economic collapse, some symptoms affect large companies and industries, with very visible signs, felt in the family home. For instance, common symptoms of collapse are high bankruptcy rates, widespread unemployment, hyperinflation, a spike in death rates (attributable to depression or other financial causes), social collapse, and a high increase in crime.
What causes an economic collapse?
Financial systems can be affected by a large number of different scenarios, and for the most part, a country can bounce back quite quickly with severe financial fluctuations going undetected by the majority of the population. But for the causes, they seem to be factors that can create a ripple effect in a country’s financial industry, resulting in economic loss shockwaves.
If we look back at history, one financial collapse is not like the other. Yes, their symptoms are the same and in the home, loss, grief, and stress are all experienced, but their causes remain unique.
The 2008 Global Financial crisis was triggered by factors such as the burst of the US housing bubble, easy credit conditions, fraudulent lending services, overleveraging, and shadow banking practices. This is different from Venezuela’s economic collapse, which has only been felt in that country and not across the world. In Venezuela, the causes of its economic crisis were caused by presidential policies and a fall in oil prices as well as several other contributing factors. Since its beginning, Venezuela has experienced severe spikes in crime, corruption, poverty, and hunger issues.
There have been some other economic downturns that have completely different causes but have all displayed widespread unemployment, poverty, hunger, and social chaos. They include:
- 1998 Argentine Great Depression
- 2001 Turkish Economic Crisis
- 2008 Icelandic Financial Crisis
- European Debt Crisis
- 2014 Russian Financial Crisis
The economic crisis is not just limited to societies, it can also be limited at an individual level. But, an individual can recover much quicker than a society, by making good choices for him or herself. Keep in mind, this his pernicious crisis can likely be prevented or minimizes with some planning. Avoiding certain situations and leaning towards safe investing strategies can make all the difference.
What are the warning signs of an economic collapse?
As we have seen above, a financial downturn can set in very rapidly, and before we know it we have lost our jobs, stores are shutting down, and we’re left high and dry. But there are some warning signs to watch out for. These are early indicators for a potential financial downturn and possible economic collapse.
Of course, your first source is to stay up to date with the news. All good survivalists are avid readers of politics, finance, and weather – the three things that can kick us out of our home or make us go hungry. So inevitably, they are the go-to sections for survivalists, and anyone else that cares about what happens in the world, and indirectly themselves.
According to Lombardi Letter, there are five signs that an economic collapse is about to happen. They are:
- Growing government debt: when an economy slows, the government usually steps in to help stimulate spending again, but with high debt, the government might not be able to make that injection.
- Stock markets trading at all-time highs: investors are taking more risk on the market, markets continue to trade higher meaning investments are bull-market driven and not research-based which could lead to a stock market bubble.
- Unemployment rate: eligible worker, retirement, and student rates all identify trends in people not contributing to the economy and could slow down economic growth
- Unstable government: this boils down to the leader and government team in the decisions and actions that may affect the economy in various ways
- Rising national debt: this means less consumer spending in the economy and more money spent on paying a debt.
Although those five economic collapse red flags are present in any collapse, there are also other things we can do to be ahead of a financial collapse disaster. And that is to look at what the warning signs displayed by the people involved in it all, America’s elite Wall Street executives and Silicon Valley entrepreneurs.
What are the world’s richest preppers doing?
A good sign of an economic downturn is when you see some of the world’s richest executives preparing for an economic disaster. You know things are about to go wrong if they are taking considerable efforts to protect themselves and their families.
Silicon Valley millionaires and Wall Street investors are buying big houses overlooking lakes in New Zealand and other underpopulated places in the world should they need the security of a hideaway to bug out to, should a severe financial downturn happen.
One of the world’s wealthiest technology entrepreneurs, and Trump advisor, Peter Thiel (co-founder of PayPal), became a New Zealand citizen in 2011 and has a large family mansion fitted with panic rooms on a homestead property. He plans to live out an economic collapse in that self-sufficient mansion in New Zealand, far away from Silicon Valley, when the early warning signs appear. Facebook Product Manager Antonio Martinez has five acres of isolated land in the Pacific Northwest where he has stockpiled food, water, generators, and solar panels with shelter as a bug out location.
On the Wall Street executive side, a member of an investment firm, quoted in the New Yorker, has a helicopter on standby at all times to take him to his underground bunker where he plans on living out an economic collapse with a self-sufficient garden, power source and food and water supply. Meanwhile, Mayfield Fund managing director Tim Chang has bug-out bags for him, his wife and four-year-old, and several established bug-out locations in regional areas.
How can you prepare for an economic collapse?
Let’s face it, we can’t fight an economic collapse, we can’t run from it either. Even if it were to be isolated to one country, such as in Venezuela, our savings would be very little in any other country, effectively trapping us and turning us into financial crisis refugees. The only thing we can do is prepare for an economic collapse and be a little more frugal when the going gets tough.
So let’s take a look at the 8 steps you can take to prepare for an economic collapse.
1. Learn simple economics so you can identify early warning signs
The list I provided above on economic collapse red flags to look out for is not a complete list, there are an endless amount of warning signs that you will be able to see if you regularly view financial news on the stock market’s performance and the nation’s economy.
Basic understandings of economics will help you in not only noticing an early downturn but will help you identify possible safe havens for your money and economic minefields that you should avoid.
2. Cash is king
When you have cash, it’s buying power that many might lose. When I mention cash, this also refers to money in the bank. Just make sure that whatever investments you have, you can quickly liquidate them should you need to and secure the cash. I would recommend not having investments in anything that takes longer than a week to withdraw. As you have seen in the past, an economic recession can set in in the blink of an eye and some resources may not be valid for liquidating due to early bankruptcy.
If I can give any advice to financial collapse preppers out there, it would be to get your savings in a safe place. Savings and checkings accounts should always carry a certain amount of emergency money as these can be withdrawn quickly. This is much better than having all of your money in a term deposit account that provides restrictions on when you can withdraw your money.
Also try to have a set amount of cash on hand, especially if you are picking up warning signs of a recession. This amount of money will be able to act as an emergency stash until you can withdraw the money in your account and have your assets liquidated.
3. Start building an emergency cash fund
An emergency fund should not be in credit, it should be from the cash you saved in a savings account from your monthly income. You can file this in any savings account with your bank (most allow for a free account to be opened). This fund is essentially a do not touch fund, or as some prefer to call it, a SHTF fund. Make sure you have enough money to at least allow you to buy tickets to another country and support yourself and your family for a month.
This type of fund allows you to leave a country before the US dollar becomes weak and should provide for enough time to get a job in that country until the collapse has resided.
4. Start being more frugal with your monthly bills
When you have no money coming in, the worst thing to have is money coming out on expenses that you don’t need. Start minimizing your bills by going through them each month with a highlighter and seeing where most of your money is going. Is there a way to limit that? Perhaps the power is a little higher than it should be and the air-conditioning or heater is being left on?
Practicing sustainable methods such as organic gardening, generating your power, and utilizing your own space is a great way to also lessen monthly expenses and become more self-reliant in case of an economic collapse where regular comforts might not be reachable in the same manner as we are used to. You can invest in solar panels or grow your produce to supplement your food expenditures. This is also a growing trend as a lot of people are pushing towards self-sufficiency and off-the-grid methods.
A few of the people that have already moved to unpopulated areas are running gardens on their properties that can completely sustain their whole family all-year-round. It doesn’t take long to learn urban gardening skills or country homesteading skills and they are both very fun and rewarding tasks.
5. Generate an additional (collapse-proof) form of income
Our writer from Venezuela was an engineer but started making cheese, learned to use a CNC crafting and cutting kit, and became a freelance writer for various websites as a way to find alternative income when his country’s economy collapsed.
Diversifying the income, and distributing the money in the accounts you believe you may need, and even your means to receive money is crucial. In an economy like this, I believe that keeping the 20% of the monthly income in silver would have worked, but Venezuela is not a place where preppers and people concerned about taking the direction of their future are plentiful, so a trading network would have been pretty difficult to set up.
Many try starting an at-home business to ensure they have a bit of extra cash each month aside from their normal job, and as a fallback when times are tough and they have faced job loss. Of course, those skills would have to be essential skills required in a collapse, which could be things such as sewing, gardening, building, repairs, selling your foods, accounting, and other things that households would regularly require.
6. Get out of debt
If you have considerable debt, build a strategy to get out of it as quickly as possible. In the case of a financial collapse, there will be multiple job losses and widespread income loss. The sooner you remove debt the sooner you can remove the worry of having to pay debts when you have no source of income.
As a method to manage any debt you have owing, try the following:
- Create a spreadsheet budget plan in excel or online using a free budget calculator
- Use a column for incomings and another for outgoings.
- Create another column for your debt repayments and list their interest rates as well
- Identify and rank each debt by their interest rates from high to low
- As you find you have savings in the bank, pay off the debt with the highest interest rate
- When that debt is paid off completely, move onto the next one.
7. Make sure your passport is current
Should the country be at a point where it is about to take a steep dive downwards, it might be time to get out and spend some time abroad. This is a common move for many economic refugees as they wait for their country to regain financial security.
Your passport should have enough remaining time, with at least a few years on it so that you can avoid unnecessary complications with having to renew a passport overseas. Also, research countries that you might choose as a refuge destination and research their visa laws, as well as any possible employment there.
8. Start prepping
If a financial collapse does occur, you are going to want to start prepping so that, should an economic downturn occur, you have enough food saved up while you either grow your food in the garden to supplement it or find another source of free food. Chances are you will need food more than water as water will still run, but stores may close down and shelves may empty quite quickly.
Part of our guide to start prepping involves identifying a bug-out plan, location, a suitable bug out bag and bug out contents. If a true economic collapse was to occur, there will be a high increase in crime rates, social disorder, looting, and likely clashes with law enforcement and military. It is a safe option to consider leaving busy urban areas as these are most likely the areas that will be prone to violence.
9. Use Websites and Apps Now
In this age of technology, the best way to prepare is to make use of the applications and websites available to you. There are many investing applications to store money. Here is a list of best investing applications to consider.
Fidelity Investments is a well-known investment brokerage. The firm charges a fee or commission for executing buy and sell orders submitted by an investor. These brokerage accounts are operated through licensed firms. Through this, the investors deposit funds and buy investments. Fidelity has almost 200 investor centers around the United States. They assist customers on iMessage, google assistant, and Facebook messenger. The fidelity mobile application is fresher and easier that bring excellent trade executions and exchange-traded fund (ETF) research on the mobile screen.
The Robin Hood application has been very significant in the online brokerage industry since it launched in 2014 as a mobile application. It allows customers to buy and sell stocks without paying any commission. It offers an abundance of research, news, charting, and educational resources. It is successful because it allows individuals to open accounts with very little funds and gives them access to their entire platform.
The Acorns application is a newer kind of investment. It automatically links debit and credit card purchases while investing from them. It has 650 thousand members most of which are millennials. People can easily invest spare change to the next dollar on all purchases. Acorns do not charge a commission but they can charge one dollar per month fee on some accounts.
The Nutmeg application, which was launched in 2011, is a cheaper investment platform. It focuses on ETFs and tracker funds to provide wealth management services. The portfolio invested, as well as the different countries and industry sectors invested in, are reviewed regularly by Nutmeg. Even if the markets fluctuate, the portfolios will have the same exposure to each asset.
The TD Ameritrade mobile application is one of the most powerful platforms on the market. It gives a succinct brief on the market, as well as stock and portfolios. It allows the person to trade in foreign currencies and many other complex options. Large investment selection makes it the number one application. You’ll have access to research and top-notch customer support.
10. Expand your Skills
It is important to learn skills that can serve as an alternative to the individual’s job, should you lose your job. And, in the current climate of job globalization and automation, almost every sort of job is at risk. During the financial crises, there is a huge rate of unemployment. A person should utilize his skills in another industry or field so they can stand out from all the other candidates who will also be searching for jobs.
Over to you…
Many of us have already been affected by past economic downturns. They are reoccurring beasts that can be escaped. The only thing we can do is to ensure we are prepared so that we can survive the many problems that come with an economic collapse.
In this post, we have identified what is an economic collapse, how to tell when a financial collapse is about to happen, and how to prepare for an economic collapse. I hope this information has helped you form a more clear picture of how to start your economic collapse preparations.