Sunday, May 7, 2017

Government Insolvency and You (Or How to Prep for a Financial SHTF Situation)

In case the 2008 financial crisis wasn't enough of a wake-up call, there have been several fiscal disasters (or near disasters) impacting governments at all levels.  The problem is that many of these seem "far away" like Venezuela or more recently Puerto Rico, and while many state governments are in a dire sort or financial limbo (I'm looking at you Connecticut, New Jersey, and Illinois), unless you have been directly impacted (like Detroit pensioners), you may think that government insolvency will have no bearing on you.  Ah but it will.  When one part of the financial market crumbles (as we saw with the housing crisis in 2008) it has a domino effect on everyone (example here).
So it would behoove everyone--whether you are a Connecticut teacher relying on your state pension or a small business person in a fiscally solvent state with a nice set of investments--to prepare ASAP for whatever coming fiscal apocalypse that may occur.  Here's how:

  • Be debt free.  No debt including credit cards, student loans, the car, the just think of what you can spend your weekly paycheck on if you have zero debts to pay besides utilities each month.
  • Take care of your health (it's looking less and less likely that the government will do this for you).
  • Have multiple streams of income.  Whether you are a well-paid tech guy or a federal retiree, never rely on just one source of income.  Have side gigs, have multiple diversified investments...make sure that if one income stream dries up (yep, even your state or federal pension) that you will still have other sources of income coming in each month.
  • Be as self sufficient as possible (if you live on land you own with a huge, productive garden with a good well, good septic system, a stockpile of food/supplies/weapons, and wind/solar power you will be miles ahead of the general population when it comes to basic debt-free living AND preparedness).
  • Diversify your investments.  You should never have all of your eggs in one sort of investment basket.  Having a government pension, money in a ROTH IRA, mutual funds, land, some gold, a small business, foreign currency, etc. is a good way to spread your wealth around and not end up losing all to one bad investment.
  • Have barterable skills and barterable items.  When the economy is blasted back to the stone age, this is one of the only ways you will be able to survive.
  • Have a wide-ranging, diverse set of skills.  You should be able to do nearly everything short of surgery for yourself.  The more things you can do for yourself, the less reliant you are on others for survival (ie; if you rely solely on the government for everything--feed your kids, make repairs in your apartment, pay for your bus pass, etc--you are screwed).
  • On the other hand it is a good idea to cultivate friends and relatives who you can rely on during dire times (and vice versa).  No man is an island and all that so know ahead of time who can help you out (and who you can help out) when disaster strikes.
  • Be prepared to bail.  As a last resort you may have to move on to greener pastures.  Always have a passport, cash, a go bag, etc. at the ready.  
For further reading on the topic check here, here, and here.

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