14 Nov 2016
People prepare for many reasons, be it a zombie apocalypse, EMP, nuclear war just to name a few. Personally I think the most common forms are disaster are weather related, such as floods, hurricanes and such and financially related, such as a full blown economic collapse to a personal financial crisis. This is why I think preparing for economic collapse should be first and foremost in prepping. Once your financial house is in order, prepping for anything else is much easier.
When you think about it, all other types of disasters will effect ones finances, so isn’t it best to prepare for an economic collapse or personal financial crisis? I think it is.
Prepare For Economic Collapse – Get Out Of Debt
First things first, you really need to get out of debt. Regardless of the type of economic collapse or financial crisis you encounter, being in debt will only compound the situation.
Debt causes stress, mental stress and relationship stress. Like Dave Ramsey recommends, start the debt elimination process with baby steps.
- Save at least $1000 for an emergency fund.
You are probably asking “how can I do that when I have all this debt?” well if for one month you and your spouse stop buying morning coffee, breakfast and lunch out, you could save $1000 right there. Please check out “How To Find Money To Buy Preps“, that post explains how you can save $1000 in one month in detail.
- Start to pay down your credit cards from the lowest balance to the largest.
- Pay minimum payments on all cards except the lowest balance card
- Put any extra money you can on the lowest balance card, this should be pretty easy now that you have learned how to save extra money from step one above.
- Once you pay off the lowest card, put all the money you were paying on that card, plus the minimum payment on the next lowest card.
- Continue to work this process until all your cards are paid off.
- Once the cards are paid off, build your savings up to three to six months of your expenses.
- All that money you had been paying on your credit cards can now be put into savings. You will be surprised on quickly that adds up.
Start Paying off Your Mortgage
Once you have paid down your credit card debt, and have your three to six months in savings, start putting extra payments on your mortgage. Make sure you designate these payments as principle payments, you don’t want the bank taking that extra money and putting it on interest.
Change Your Lifestyle
Now before you start bombarding me with negative comments about how you can’t afford paying off your debt, let me say you can’t afford not to.
Think about it, if you don’t have enough money now, during good times to pay off debt, what you are going to do if there is an economic collapse or personal finance crisis like losing your job.
- Start making cuts in your spending
- Cut out things like the newspaper
- Gym memberships
- Cut cable, there is no reason anymore to have cable. Instead Join Amazon Prime – Watch Thousands of Movies & TV Shows Anytime – Start Free Trial Now it is a fantastic alternative to cable and I think it is much better than Netflix since in addition to movies you get music and 2 day free shipping. Think about it, you are away from the house eight to nine hours a day, why pay for cable when you aren’t there most of the time to watch it?
- Repeat item one above and make it a new lifestyle
- Are you paying someone to mow the lawn and you have kids in the house that are old enough to mow? Put them to work. Or, start mowing the lawn yourself.
- Get a second job or start doing odd jobs.
- Sell things on EBay
- Do you have a hobby like knitting? Or woodworking? May be time to sell your creations for some extra cash.
The point I am making is it is time to reduce your living expenses permanently, make it a habit. Maybe you are living in a house that is bigger than you need and downsizing would be a good idea.
Get Rid Of Car Payments
What about those cars in the driveway? Are you paying lease payments on cars? I highly recommend getting out of those leases and buy a used car and pay it off as quickly as possible. I currently have two vehicles, both 2001 model years and both paid off. I keep them in good running order and when there is a maintenance issue, I can easily afford to repair it since I don’t have car payments.
Start Making Money
Now is a good time to start your own business. Make money on your terms rather than relying on an employer. When you are your own boss the sky is the limit on your income, vs an employer will pay you a flat hourly rate or salary with small annual increases. You are at their mercy and they can and most likely will lay you off at any time. When you are your own boss, making your own money, you are in control. If you don’t have a skill where you can sell your crafts….start a blog. It will take work, and it is not something that brings money in quickly, but after a few years there is no reason why you couldn’t replace your income if you work hard at it.
Don’t wait until there is an economic collapse or you have a personal financial crisis, the time to start is NOW! It is a lot easier and quicker to get into debt than it is to get out. Stop procrastinating and start the process listed above today.
Question Of The Day
What are you doing to get out of debt and staying out of debt?