Natural disasters. Large-scale warfare. Global pandemics. These are just some of the many things that can upend life as we know it, which is why we preppers know that we need to plan ahead for when things get real.
But, while many of us spend countless hours stockpiling food and supplies and preparing our homes for disaster, economic crises can wreak just as much havoc on our lives.
Why, you might ask? Well, although many of us know how to prepare to hunker down for days or weeks on end, relatively few of us are prepared to survive through times of personal economic hardship.
While most preppers might be able to wax poetic about the importance of different types of emergency rations, only a handful of us know how to prepare our personal finances to handle a large-scale economic collapse.
What an Economic Collapse Is
What is economic collapse? Basically, it’s any really bad economic state where we see massive amounts of unemployment, bankruptcy, and problems with the production of commercial goods. This can be caused by prolonged economic depression (like the Great Depression), hyperinflation (like in post-WWI Germany), a massive natural disaster, or large-scale warfare.
That’s where we come into the picture. We can help you learn the basics of financial planning for preppers so you can be ready to handle any financial emergency, such as:
- Losing your job
- An unforeseen medical expense
- A last-minute plane ticket to help family
- Home repair (broken hot water heater, new roof, etc.)
- Wrecking your car
- Helping friends and family get out of a tough spot
So, up next, we’ll walk you through the basics of financial planning for preppers so you never have to worry about your or your family if you’re out of work for weeks or months on end.
Financial planning is a skill that takes time to develop and we’re here to get you started on the right foot. Let’s get to it.
Long-Term Strategies for Coping with an Economic Collapse
Assuming you do not have a job that is collapse-proof, and honestly no job is if the collapse is total enough, you only have a couple of viable strategies for getting through economic collapse intact.
The first way you can accomplish this is by preparing a massive financial nest egg that you can rely on while your income stream has shrunk or completely disappeared.
Think of this as a sort of monetary lifeboat that you can use to pay for all the necessities of life while everyone else is scrambling, ripping open the couch cushions looking for change.
Obviously if you have already lost your job, don’t have any big-ticket assets and don’t have very much in the way of savings this will probably not mean much to you right now.
The other way to prep for an economic collapse is by developing a sort of financial anti-fragility to the loss of primary income.
This is a more complex strategy with more moving parts, but it is one that you can develop easily over time as well as pull off in a hurry if you have to and have the right skills.
This approach means cutting expenses ruthlessly, cultivating and developing secondary skillsets to ensure you can look to other sectors for employment, growing and diversifying your income streams, having side hustle or moonlighting gigs you can turn to and having the chops to live entirely off-grid if required.
You can use either one of these strategies to get yourself through a financial pandemic without getting totally ruined, but the wise prepper will employ both at the same time.
With a healthy financial escape pod and a backup revenue-generating system provided by diversifying your income you will be able to weather the economic avalanche that will flatten people on your left and right.
It may not necessarily be easy, but as the wise ancients knew an ounce of preparation is worth a pound of cure. We will examine the details of both of these approaches in tandem in the following sections.
What is Financial Planning?
Okay, first things first: What even is financial planning? Well, simply put, financial planning is the process of creating a comprehensive strategy for personal economic security.
That might sound like a whole lot of jargon, but basically it means that you’ve organized your money and other assets so that you can handle anything that comes your way.
It doesn’t necessarily mean that you’re out investing in the stock market or starting a retirement account, but these acts can be part of your overall plan.
Why You Need to Make a Financial Plan
We’re now all on the same page about what financial planning actually is, let’s talk about why you need to do it.
Although we often think of having a large stockpile of supplies and a good working knowledge of survival skills as critical to getting through any emergency, we are all more likely to find ourselves in economic difficulties than in a large-scale terrorist attack or natural disaster.
Sound unlikely? Here are some sobering facts about financial security in the United States:
- 12.9% of US women and 10.6% of US men live below the federal government’s poverty threshold (Poverty USA)
- Approximately 46% percent of Americans make more money than they spend
- 43% of American families experience income gains or losses of more than 25% over a two year period, showing instability in people’s incomes
- 57% of Americans don’t feel financially prepared for the unexpected
- 33% of Americans have no savings
- 47% of Americans would not be able to pay for an unexpected $400 expense
If any of those statistics should jump out at you, it should be the last one. The fact that almost half of Americans don’t have the ability to pay for an unexpected $400 expense is shocking, to say the least.
For many of us, $400 is the cost of a few weeks of food, or perhaps half of our monthly rent or mortgage.
If we don’t have the funds on hand to be able to pay for these expenses, we’ll be in a hard place should we lose our job or be unable to work.
While there are unemployment and social security protections in the United States and many other countries, it’s important to keep in mind that these systems don’t provide immediate financial relief.
There’s often a delay of a few weeks or months before you ever see money from unemployment insurance. Plus, in the event of a global financial crisis, these systems can be overwhelmed by applicants, like what’s happening as a result of the coronavirus pandemic.
With an almost 80% increase in applicants for unemployment from April 2018 to March 2020, these social aid systems are not what you want to rely on when you need to feed your family.
As preppers, we need to do everything we can to ensure that we don’t find ourselves in a difficult financial situation. That’s where financial planning fits in with survival preparedness and why you should start prepping for economic security.
The Basics of Financial Planning
Now that you know what financial planning is, it’s time to get into the nitty-gritty of it all. But, instead of trying to overload you with information about economics and personal finance, we’re going to introduce you to some of the pillars of prepper financial planning.
Then, we’ll finish up with some top tips for getting your finances in order before we send you off to get started on your personal financial plan.
Build an Emergency Fund
Before we get too far ahead of ourselves here, let’s take a moment to think about this statistic one more time:
47% of Americans would not be able to pay for an unexpected $400 expenseFederal Reserve
As we’ve mentioned, $400 really doesn’t go a long way in this world, especially if you’ve got rent or a mortgage and a family to feed. So, the fact that nearly half of Americans can’t come up with the cash to cover a modest unexpected expense is something to really consider.
Thus, as preppers, we should always have an emergency fund that’s ready to go if and when the time comes.
According to most financial experts, people should work to create an emergency fund that can cover between 3-6 months of your personal expenses.
Of course, this will vary widely from family to family, but you should aim to have enough money to pay for food, housing, regular bills, insurance, and other expenses that you just can’t live without.
This money should go into a savings account of some sort (preferably an FDIC insured account that accrues interest) or you can keep it in cash. What’s important is that this money should be kept to the side for only the most serious of situations.
My advice? Come up with a plan to automatically deposit a fixed amount of money each month into your emergency fund so you can establish it quickly and easily before you need it most.
Create Your Budget
No good financial planning strategy is without a budget, and for good reason. For most of us, keeping track of our spending is quite difficult, especially if we have kids and a family.
Therefore, having a detailed budget can stop us from unnecessary spending and can help us start to save and create emergency funds for use in a real disaster.
While everyone has a different financial situation, in an ideal world, we would all follow the 50/30/20 rule: 50% of your income is for needs, 30% is for wants, and 20% is for savings and repaying debts.
But, with so many Americans living paycheck to paycheck, it’s understandable if that’s just not possible for you at the moment.
In these instances, the best thing to do is to sit down and take a look at your last few months of expenses.
Look at how much you’re spending on housing, food, utilities, debts, and other recurring expenses, and see where you can trim the fat.
hink about what you truly need and what you could do without or find for less money. Ideally, no more than 30% of your income will be spent on housing and no more than 20% on food and other necessities.
If you’re having trouble getting organized as you flip through your expenses, it can be helpful to use an expense tracking and budget management program.
One of the best options out there is Mint (from the makers of TurboTax and QuickBooks), which is a totally, 100% free way to manage all of your expenses.
With Mint, you can connect all of your banking, credit card, and loan accounts to get a clear picture of your current net worth (your total assets, minus your debts).
Plus, Mint will automatically categorize your spending by category, so you can quickly look for places to save money. They have both desktop and smartphone apps so you can stay on budget, wherever you go.
Once you’ve found ways to reduce your spending on necessities to what you really need, think about how you can keep your spending on non-essentials to a minimum.
However, don’t think that you can’t spend any of your money on non-essentials.
In fact, you should strive to have some money available for entertainment and fun with each paycheck, but you need to be conservative here.
Then, come up with a real plan for how much you plan to put in your emergency fund and general savings each month.
Finally, think about how much money you can realistically devote to prepping and building up your personal supplies each month as you build a prepping-specific budget. Voila! You now have a monthly budget to work with.
Reduce Your Debt
Once you have a budget in place, you can start to figure out ways to repay any outstanding debts that you might have.
In fact, the average American household with a credit card has over $8,000 in credit card debt, not to mention mortgage and student loan debt on top of it all.
Having that much debt is preferably not a place you want to be in with your financial life.
While having some debt is okay, and perhaps unavoidable for many of us, our goal should be to repay our debts as quickly as we can. However, without a real plan for doing so, many of us find our debts spiral out of control right before our eyes.
When building your budget, think about how much money you can set aside each month to pay off your debts.
Aim not to take on any new debt and then see if you can slowly chip away at your existing debt. You can use a credit card or loan repayment calculator to help you plan.
Build Your Savings
As we’ve already mentioned, about one-third of Americans have no savings.
Without savings, we get stuck in a vicious cycle of living paycheck to paycheck and often have large amounts of insecurity about how we’re going to pay for a large expense.
Plus, if we have no savings, it’s unlikely that we’ll ever be able to retire, take a vacation, or simply enjoy life outside of work.
Therefore, we should all try to find ways to put aside money into some sort of savings plan each month.
Ideally, we should try and save 15-20% of our income, at a minimum. But, if this isn’t possible, come up with a plan to put aside a fixed amount of money each month to start building your nest egg.
Have Cash on Hand
Most preppers know that having some cash on hand is important, especially in natural disasters or any other situation where credit card and ATM machines just aren’t working.
Indeed, cash is an important part of any emergency kit as it can be used to buy food or other essential supplies during a disaster.
How much should you have? Well, you want to have enough cash at home to be able to survive for about three days.
For many families, this equates to a few hundred dollars, especially if you need to buy a hotel room and food, but more certainly won’t hurt.
Do keep in mind that if you plan to keep cash or other valuables (more on that later) at home, you should certainly consider investing in some sort of safe or perhaps even think about digging caches.
Having cash money at home isn’t going to do you any good if it gets stolen, so it’s important to find a way to protect your assets.
Stockpile Important Supplies
If you’ve been prepping for a while, you understand the importance of having a stockpile of important supplies.
Food, water, first aid kits, shelters, and other such pieces of gear are all critical should you need to hunker down for days, weeks, or months on end.
As you start to build up your stores, though, you should aim to have at least a month’s worth of supplies so you can be self-sufficient at home.
Eventually, you’ll want to start building up to having a year’s worth of supplies for you and your family.
This might not sound like a financial plan, but having a stockpile of supplies eases the financial burden on you to provide for your family, should you lose your job or be in an emergency situation.
However, don’t overlook the value of stockpiling some other “non-essentials” like toilet paper, alcohol, and other items that can be used to barter for more important goods should the supply chains get disrupted.
Consider Gold and Other Precious Metals
While the US dollar hasn’t been backed by gold since the 1970s, gold and other precious metals are still valuable commodities in today’s world. In fact, since the US dollar isn’t backed by the gold standard anymore, it can easily lose value and become essentially worthless in a global stock market collapse.
Therefore, investing in some small quantities of gold and other precious metals can help you in a tough situation should the US dollar get devalued or become hugely overinflated.
Investing in gold or buying physical gold are potentially good options for protecting your financial security in a true global emergency.
Think About Cryptocurrency
Cryptocurrency sometimes gets bad reputation, but it’s important to remember that it does have its uses. Currencies like Bitcoin and Ethereum are digital financial assets that aren’t backed by any government – a.k.a. cryptocurrency.
This means that they can have huge fluctuations in value over time, but that might be a good investment strategy for some who want to diversify where they keep their money.
Are we recommending that you invest in cryptocurrency? Not necessarily. But, investing in cryptocurrency might be a good thing to consider for some preppers.
If you have a high tolerance for financial risk and want to have a lot of little nest eggs to rely on if the going gets rough, you might consider cryptocurrency.
Homesteading & Self-sufficiency
While we can talk all day about ways to better spend and save your money, there’s really not much that beats being self-sufficient.
If you’re self-sufficient, it doesn’t really matter what the economy and the outside world are doing, especially if you live on a remote homestead.
However, we understand that not everyone is in a position to move to a remote place and set up their own self-sufficient homestead. But, we do know that there are steps we can all take toward being more self-sufficient should the situation call for it.
Learning how to grow food, make your own clothing, purify water, care for basic medical needs, build a home or a shelter, and do other trades can be incredibly valuable, especially if we don’t have the funds to pay for someone else to do these things for us.
Should learning to be self-sufficient take the place of other financial planning? Not at all.
In fact, having both the skills to be self-sufficient, as well as the financial resources to get out of economic difficulty is exactly where you want to be as a prepper.
Plus, if you learn to be self-sufficient and run your own homestead, you can be in a great place to sell your excess crops and other handicrafts in a large economic emergency. Or you can teach survival skills and homesteading to others and use your profits to re-invest into prepping. What could be better?
Tips for Starting Your Financial Preparedness Strategy
At this point, you should feel pretty comfortable with the concepts of financial planning. But, before you get carried away, here are some of our top tips for getting started…
Perhaps the most important thing we can tell you about financial planning is to get started now.
If you truly want to build your savings and become more financially secure, waiting a few months isn’t going to help. Start saving and planning now, even if you’re only putting aside a few dollars at a time. These things add up in the long run.
Learn how to clip coupons and search for deals. Don’t just buy the first thing you see in the store.
Instead, consider if a particular object is truly worth what you’re going to spend on it or if you can find a cheaper, similar option elsewhere. Buy used and check out thrift stores.
Be meticulous in your research if you need to make a big purchase. Use OneNote or another spreadsheet system to keep track of different prices for things and links to where you can buy them to be sure you’re always getting the best deal. You never know where you can save money.
Consider What You Really Need
Do you really need that new car? Or can you make do with what you have and put your money into savings and pay off your debts?
Prioritize your spending so that you always have what you need – then start thinking about what you want.
Remember that paying off debts is incredibly important, but don’t sacrifice your savings plan to do so.
Understand Unemployment and Other Financial Safety Nets
While many of us know that unemployment, social security, and other financial safety nets exist, few of us actually know how to use them.
Take some time to research these different options so you know what’s available to you should you need them.
Plus, research different kinds of loans and debt forgiveness options in your spare time so you know how these things work if the situation calls for it.
It’s also worth knowing where you can get prepping supplies on the cheap near your home so you can dash out and get last minute supplies quickly before SHTF. Good options include:
- Dollar stores
- Flea markets
- Big warehouse stores (Costco, Sam’s Club, BJs, etc.)
- Garage sales
- Discount sections of supermarkets
Passive Income Streams for Peace of Mind
Passive income streams are an excellent way to diversify your earnings, and have the major advantage of working and making you money even when you aren’t working making money, if you catch my drift.
A passive income stream is anything that makes money for you even while you aren’t touching it or working directly on it. This could be something like a blog or website with affiliate links that lead prospective buyers to make purchases that you get a percentage on.
You might have a web store of your own that sells an information-based product behind a paywall. The sky is the limit.
More tangible ways to passively earn income includes things like rental properties, which have many advantages and can in fact make you very wealthy if you know what you are doing, and stick with it.
The only problem with assets like this is if you don’t have the property managed by another company, you will be the one having to take care of the tenants’ complaints about repairs.
Additionally, in times of great economic downturn most renters will stop paying you rent and then you have to go through a lengthy and oftentimes expensive eviction processes.
The chances that your property will get torn up or mistreated go up correspondingly in times like this.
Be Financially Ready, Always
Financial planning might sound like something that rich people on Wall Street do, but it’s really something that we should all think about as preppers.
Being financially secure is just as important as having a stockpile of emergency supplies because we never know what the world will give us.
Plan ahead, be prepared, and find ways to build your savings so you don’t have to worry about providing for your family in an economic crisis.
Gabrielle is a wilderness survival expert, mountaineering guide, and professional outdoor educator, with specialties that include firearms handling and wilderness medicine. She is also a freelance writer for a variety of outdoor and survival publications.
2 thoughts on “A Prepper’s Guide to Financial Planning”
Interesting article with good advice. Since I’m on social security and have cut nearly every corner that could be cut or trimed I can’t say I learned anything new.
We’re frugal. I grow a garden and can and dry from it. I have a few chickens and rabbits. Do have to buy milk and ingredients for bread making. There are a few fruit trees on the property. Not as many as I’d like. I have berries to get planted soon. We should have berries by next year. I hope to plant enough grain to feed the chickens without buying so much next year. Also bought 2 more grapevine to fill in where old ones died out. We enjoy fresh grapes and dry enough Thompson seedless grapes to enjoy rasinsi in oatmeal or cinnamon rolls now and then.
Being frugal or poor doesn’t mean doing without. It just means doing differently.
Keep in mind Intuit, the makers of Mint, are anti-gun.and have refused to process gun-related credit transactions for 2 years.