Surviving a Financial Collapse

These days, a financial collapse could be personal, nation-wide, or global. The key to surviving any scenario is, of course, preparation and planning ahead. I'll cover some ways you can prepare and plan — I just hope it's not too late for any of us.

Around the globe major financial institutions are failing and some governments are in danger of of defaulting on their debt. Greece is in the news today.

The Greek Prime Minister is proposing big cuts in spending. Are the people happy that he is addressing their deficit? No. They're marching in the streets protesting cuts to their beloved services and government-paid salaries.

All over the United States the same thing is happening, including my state. Protesters were at the Capitol protesting the cuts our state government is proposing.

This is just my opinion, but a more self-reliant people would not need the government to provide all the services that it tries to give us. Governments that provide too much take away the power of the people and, unfortunately, people are allowing it. They are willingly giving the government their power.

The fallacy is expecting help from the government. If you are a small business person and your business is in trouble, do you think for one minute that the government is going to bail YOU out? Can you raise your prices 100%, 500% so that you can make a profit and keep your business going in these tough economic conditions? Only if you want to kill it completely!

Progressive (as opposed to conservative) governments THINK they need to help all the "little people" (us). So they print money, AND raise taxes. This is the sort of economic plan that leads to hyperinflation — a rapid increase in prices and decrease in the value of the monies used in society.

What will a financial collapse look like?

What will it look like if our government defaults? How will it effect you personally? How can we protect ourselves? I honestly can't imagine exactly what my city, state or country would look like if the government defaults and we have a financial collapse.

Will businesses not affiliated with government continue? Can we, "the little people", continue doing business with each other using either our current "fiat" money, gold or silver coins, bartering, or? Will there be looting like there has been during other types of crises (think Katrina) and has happened in other countries as well?

What's your opinion? Feel free to share it with us here.

How can we survive a financial collapse?

The key is planning. You can't save anyone but you and your family — so where do you start?

Let's see how much danger you're in personally:

If you are mostly in the "danger zone", it doesn't mean that you will be out on the street. It just means you have some work to do. Don't panic. Let fear motivate you.

If you are mostly in the "safe zone", congratulations. Take care to stay there and add to  your savings.

The Survival Plan

1. If you have debts, don't pay them off — pay only the minimums. Now I know that contradicts probably everything you've ever been told. But here's a question for you:

Would you rather have no debt and no cash to pay rent and buy food, or would you rather have debt and some cash to survive? Cash, right? Me too. That’s why you should not get over zealous and try to pay down your debt right now. Under “normal” circumstances, paying down your debt is a great strategy. But we’re not in normal mode anymore.

2. Do everything you can to keep your job. As long as you have income coming in, you'll be okay. In a growth economy, it's much easier to find a new job, but this isn't that kind of economy.
3. If you have an interest-only loan but have also been making principal payments, stop. Just pay the interest for now. When things improve and there is more stability, you can start paying down the principal again.
4. If you're paying a student loan, check the rules of your loan. Many government sponsored loans do not require you to pay on it if you are a student. Take a class (one that increases your skills or employability) for $50 and find out how to stop paying on the loan.
5. Renegotiate your credit card payments or interest.
6. Stop contributing to your kids' college savings plans. (You can start this up again when the economy improves.)
7. Set up a budget. Go through your expenses with a fine-tooth comb and postpone, eliminate or reduce any that you can.

The bottom line: hoard CASH by making minimum payments on all debts. CASH IS KING. You might also want to put a bunch of that cash in a safe in your home rather than a bank. You know — just in case there's no electricity and the ATMs don't work, or the bank fails, or the FDIC runs out of money to pay everyone should there be a run on the bank.

I'm just saying...

Information gleaned from Plan Z: How to survive a financial crisis by Robert Pagliarini

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