Personal Finance

How to Prepare for the Next Economic Meltdown.

economic collapse

None of us can predict when it is going to happen, how soon it will happen, or how long it will last.

All you can do is take the steps needed to prepare for an economic collapse by starting to think about your bank and wallet as survival tools, rather than spending tools.

When COVID 19 was announced in Wuhan China, most of us continued with our lives as normal, only to be shocked at the measures government took to reduce its impact once it hit our African shores.

For most of us, that economic collapse as a result of COVID 19 infection curve flattening measures was something we just weren’t prepared for, and it has turned out to be a very tough period.

An economic collapse like what we are experiencing is not something to wish to experience twice, however, the question everyone is asking now is ‘when is the next economic collapse? It could be this year, the next or in five or even 15 years, but its sure coming and the reasons might not be medical but purely economic.

What is an economic collapse?

An economic collapse, economic meltdown, depression are terms interchangeably used with the term financial collapse; meaning a series of very severe economic conditions that place risk on our basic needs such as food, shelter, water, power, security, and civility.

Some of the signs of a looming economic collapse include growing government debt, a looming medical pandemic, increasing unemployment rate, and instability government.

A good on the street sign of an economic downturn is when you see some of the world’s richest executives preparing for an economic disaster by taking considerable efforts to protect themselves and their families.

How can you prepare for an economic collapse?

An economic meltdown feels like a monthly mood swing, we can’t really run from nor fight it either. Even if it were to be isolated to one country such as Kenya, 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 it 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 to identify early warning signs

The list above on economic collapse red flags is not comprehensive, there are endless warning signs that you can identify early if you regularly view financial and economic news at the country and global level.

Basic understanding 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.

Additionally, observing the behavior of the political and financially rich will help you discern an economic collapse in advance.

 

  1. Prioritize cash and Build an Emergency cash fund

Cash is the most valuable economic power when faced with turbulent times. When you have cash, you can maneuver better than those who don’t have.

Cash refers to bank balances too. Savings and current 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.

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 save this in any savings account with your bank. This fund is essentially a do not touch fund. Make sure you have enough money to at least allow you to buy essentials for 3 months and if needed tickets to another country and support yourself and your family for a month.

  1. Be frugal with your monthly bills

During a meltdown, as we have seen in the past few months, it’s very likely that you will have no money coming in, therefore the worst thing to have is money coming out on expenses that you really don’t need.

During good times, start minimizing your bills by going through them each month with a toothcomb and seeing where most of your money is going. Is there a way to reduce those expenses? Perhaps the telephone bill is a little higher than it should be?

To manage your bills, download the FM Budget app here.

If you leave in a suburb where you can practice sustainable methods such as organic gardening, or generating your own power such as solar or biogas and utilizing your own space, by all means, adopt these to lessen monthly expenses and save more.

Upcountry people 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 or country homesteading skills and they are both very fun and rewarding tasks.

  1. Build an additional stream of income

The story of the Mercedes owner selling vegetables from the boot of his car is a classic example of how during difficult times man can devise ways to find alternative income when his country’s economy has collapsed. What if you find this alternative before a collapse?

While things are looking good, try starting a side hustle to generate you a bit of extra cash each month aside from your normal job. This hustle can turn out to be your fallback when times are tough and you face job loss.

When choosing a hustle, lean towards skills that would be required in a collapse, which could be things such as sewing, gardening, building, repairs, selling your own foods, accounting, and other things that households would regularly require.

  1. Clear debts

Debts during a meltdown add to your headache. 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.

 

  1. If you have to get out or bug out

If you feel your country 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.

Ensure that your passport has enough remaining time, with 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.

In another situation, a financial collapse may be accompanied by a high increase in crime rates, social disorder, looting, and likely clashes with law enforcement and military, especially in densely populated areas. Should you detect this to be the situation, then bugging out in a less densely populated area like upcountry should be a choice.

Should this occur chances are you will need food more than water as water will still run, but stores may close down and shelves may empty out quite quickly. Have a bug-out plan, location, a suitable bug out bag and bug out contents.

Over to you…

Many of us have teetered on the brink of survival during this COVID induced economic downturn. These downturns are reoccurring beasts that can not 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.

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