This is a very good question and there is no right or wrong answer here. It will all depend on your needs. There is an old saying that goes, “The rich don’t need to save. The poor don’t have enough to save and the people in-between struggle to save.”
This saying is very true. During an economic collapse, the amount of cash that you have with you is very important. It will determine your course of action and give you the flexibility to do things that others can’t.
The brutal truth is that the more money you have, the easier it will be to survive most crises. If you’re struggling to make ends meet, things will be even more difficult during an economic collapse.
In this article, we’ll look at a few tips to improve your finances so that you can be better prepared to cope with an economic crisis. Should you lose your job or things get desperate, with a small nest egg you’ll be able to get by and be able to breathe without getting stressed out.
Savings will buy you time to find your feet when the ground beneath everyone else is falling away. It’s an unfortunate fact that more than half the people in the US barely even have $1000 in savings.
It’s time to remedy that problem and make sure you’re not one of them. Let’s get started.
Your plan of action
If you plan to migrate to another country and retire should there be a financial collapse in the place you’re currently in, you’ll need a sizeable nest egg. There are many people who have migrated to places like the Caribbean or Bali or Chiang Mai because of the low cost of living.
They love it there and are able to stretch their dollar and live a very comfortable lifestyle. If this is the way you wish to go, you need to do the math and come up with a number that will allow you to achieve this goal.
All you need to do is hit this number and you can drop everything and leave without suffering the effects of financial mismanagement by a group of entitled bankers.
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If you don’t wish to migrate, you’ll need enough money to last you for about six months or so. Save up 6 to 9-months’ worth of your monthly wage. It will take you a while to get there… but you will have a buffer if you lose your job and the going gets tough during a financial collapse. This is the most important step.
Plan your budget
It may seem restrictive to plan your expenses, but in reality, a budget will give you freedom over time. Start off by writing down all your expenses in a month.
You’ll notice several areas where you’re spending money on frivolous things. Stop smoking, reduce your consumption of alcohol, cancel your cable subscriptions, stop buying magazines and newspapers, etc.
Do whatever it takes to free up some money. Save whatever you can. The more you practice, the better you’ll get at it. It’ll be difficult initially, but once you see that you’re putting aside money, you’ll be more motivated.
This may seem like a Herculean goal to many people. Saving $5000 when you can barely save $100 may seem impossible… but it’s not. All it takes is a time and discipline. Slowly save until you hit the 5k mark.
Once you can do this, do not immediately splurge on a plasma TV or something extravagant. This is your nest egg that will tide you over a crisis.
Now, calculate how much 6 to 9 months of your monthly salary is worth. Start adding on to your 5k and aim for that amount. If your take home wage is 1.7k, you should be aiming for about 10.2k to 15.3k. Once you have hit this amount, you’re quite safe and have enough to survive an economic collapse for a few months at least.
What are your expenses like?
The higher your expenses, the more money you’ll need. If you live in a mansion with your own personal chef, etc. you’ll probably have enough cash to survive the crisis. For someone who has been putting on a show and trying to live with the Joneses, during an economic crisis, they will be hard hit.
There will be a slump. Profits will dip, and everyone will be cautious with their spending. Incomes will drop and the expenses which remain the same will become a huge burden.
It’s best to cut your coat according to your cloth. This will ensure that your life does not become a living hell should an economic crisis strike.
The fastest way to increase your savings will be to eliminate debt as quickly as you can. Pay up all your credit card bills. The interest rates really add up and you’ll be shocked at how much money you’re wasting on interest alone.
Start with the card that has the highest rate of interest. Pay that one off first while making minimum payments on the rest. Once you pay the first one off, start paying off the next one with the money you usually used for the first card.
This is the fastest way to eliminate your debt. NEVER allow your balances to ‘roll over’. Paying the minimum sum on your credit card bills will make you a slave to the banks… and that’s exactly what they want.
Never spend money that you don’t have. Carry only one or two credit cards. You don’t need more than that. These two cards are for emergencies and if you do use them to buy items at the mall or online, always pay your bill in full.
Increase your income
There’s no better way to increase your wealth than by increasing your income. Improve yourself and develop skills that are in demand in the marketplace. Charge for your services and aim to keep improving till you’re making a decent income.
The more you earn, the better off you’ll be. You can’t become rich saving off a monthly wage of 4k. You need to increase your income
Do you have skills?
Having skills will be very useful during an economic crisis. Even if you’re retrenched, if you have a trade skill such as plumbing, carpentry, etc. you’ll be able to find work because others will still need their choked sinks to be cleared.
Wilderness survival skills are fantastic to have. If you love camping, you could live off the land for months. You just need to camp out at a good spot and survive. Your expenses will be very low, and you’ll be able to stretch your dollar.
Spread your investments
Lastly, diversify your portfolio. Don’t invest all your money in one stock or with one firm. Do not put all your money in one bank. Spread out your risk. During an economic crisis, many institutions can go belly up.
So, be wary and invest wisely. Having cash stashed away for an emergency will give you flexibility and more options should you face a crisis. Start planning and saving today and you’ll be better off tomorrow.
Have you invested in gold?
Investing in gold is a very wise move to make. Of course, you’ll need some money to purchase gold chips, coins, etc. It’s best to buy smaller pieces of gold such as jewelry which are easier to sell for cash. It’ll also be safer since a gold bar can be easily stolen but several pieces of gold packed into different bags will be harder to steal.
Gold will always retain its value. The price of gold goes up when the value of the US dollar drops. This inverse relationship makes it a fantastic investment.
At the end of the day, your goal should be to determine just how much money you need to survive a crisis and you should save up for it. Always strive to increase your income while living modestly. This will be the fastest way to save your nest egg and achieve financial independence too.