Economic 9/11 Series: How I’m Financially Preparing

by Stephanie on April 17, 2012

in Financial Freedom

Unless you have your head in the sand or you’re busy watching Jersey Shore you know the instability the world is in right now.

I’m expecting an economic 9/11 to happen here in America. Could I be wrong? Sure, but I don’t think I am. Look around. Read between the lines. Something’s going on.

Of course, I don’t know when it’s gonna happen but for a lot of families it already has.

In these next couple of posts I’m gonna discuss how I’m financially, practically, physically, and spiritually preparing for economic hard times that seem to be just around the corner.

This post is how I am financially preparing for an economic 9/11 and will mainly discuss my opinion on the importance of being debt-free. But first a lousy lesson in economics:

Hyperinflation or Deflation?

From what I hear we’re either headed for hyperinflation or a deflationary depression.

World-renowned economists like Marc Faber and Nicole Foss can’t agree on which one will happen because in the end, both of these situations are dependent on human behavior and as we all know human behavior is totally unpredictable. Yay humans!

Still though, I’ve been trying my hardest to learn about both of these monetary phenomena because while both are horrible realities, they are different.

Hyperinflation is the more destructive of the two and is especially scary because it seems it can happen almost instantaneously. Before you know it, a loaf of bread is $12 and then continues to rise to $20, $30 and up and up never stopping.  This will happen because the value of the dollar will be rendered worthless. But strangely in a hyperinflationary scenario, debts are essentially wiped out. So, if hyperinflation hit our country, having alternative food sources would still be wise but paying your debts would be the last thing on your mind (considering a loaf of bread could very well cost thousands of dollars).

If you have time, you can research hyperinflation in Germany’s Weimar Republic and Zimbabwe to learn more.

A deflationary depression, however is different; the price of goods and services drops. So, while inflation reduces the value of money over time, deflation increases the value of money over time. If you’re debt-free, you’ll essentially have a lot more purchasing power (if you can actually keep a job and if you can actually get your hands on cash, that is).  But if you are indebted, you’re gonna be in a world of hurt. The payments you’ll have to make on your loans are going to “represent a larger amount of purchasing power than they did when the debt was first incurred” (Wikipedia).  Deflation benefits savers with liquid assets but negatively impacts borrowers.

For some reason, I find myself agreeing with Nicole Foss and think we soon experience an economic deflationary depression.

Foss believes that hyperinflation will become a reality but only after we are so deep into a depression, that the effects of hyperinflation won’t really matter at that point. Add even more insult to injury, Foss believes the coming Depression will be worse than the Great Depression of the 30′s. Wayyy worse:

We have a very long way to fall, and the deleveraging process is likely to play out over several years. During this time we can expect to be mired in a worse depression than the 1930s, as the excesses that led to our current situation are far worse by every measure than were those of the Roaring Twenties. Unfortunately, we are much less prepared to face such an occurrence than were our grandparents. Our expectations are far higher, our knowledge and skill base is much less appropriate, we are far less self-sufficient and we have a structural dependency on cheap energy. This will be a very painful time.

How I’m Personally Preparing

While a hyperinflation scenario benefits debtors like myself, I am not taking the chance and ‘hoping’ that that scenario becomes reality.

Me and my husband are attacking our debt as fast as we can because if we experience a depression, which I think we will, ‘ your debt will be like a millstone around your neck.’  Its gonna bring you down during the worst possible time…

It’s been hell getting rid of our debt (especially on one income) but we have made great progress:

Since 2008, we’ve paid off $43k in consumer debt. In the beginning we weren’t very serious and I was ‘doing the budget.’ Since then my husband has taken over the finances and we have made great headway.

The $43k included car loans, credit cards, personal loans, my husband’s student loans and some of my student loans.  We still have $18k left to pay on the rest of my student loans. We expect to have it all paid off in December 2012.

We’ve been on the Dave Ramsey Debt Snowball Plan and Envelope System. It’s worked wonders.

We also decided to get out from under our mortgage. We are trying to short-sell our house now and in the meantime we are renting it out.

Basically, we are living as frugally as possible, selling or donating things we don’t want or need.

We’ve attempted to create another stream of income in case the hubs loses his job but nothing has come to fruition yet.

After we are debt-free and have an emergency fund, we hope to save for a small homestead (that will be paid in full) where most of our needs are met in a self-sufficient manner.

Not sure how far we will get with this but the ultimate goal is to produce most our necessities ourselves (food, water, electricity, shelter, etc) so we can have cash for the things we cannot produce ourselves (shoes, tools, fabric, transportation, electronics, firearms etc.)

Once we’re debt-free we’d also like to invest in a typical diversified portfolio including gold and silver. I’m not too knowledgeable in this area but the hubs is so he’ll be spearheading this one.

Well, those are my plans for now. Do you have any?

And for some blurry lightheartedness (this is what we do every time we get a credit card offer):

YouTube Preview Image

 

Stay tuned for the next Economic 9/11 post: How I’m Physically Preparing

Photo Credit: Don Hankins

____________________________________________

Connect with us on Facebook and Twitter!

____________________________________________

 

Did you enjoy this article?
Share
the
Love
Get Free Updates

{ 13 comments… read them below or add one }

1 Jennifer April 18, 2012 at 6:23 am

I agree…whether hyperinflationary or deflationary, we’re all in for an uncomfortable ride.  I don’t know how much longer “the system” can be propped up (days?months?years?), but the mathmatics clearly indicate that it will HAVE to undergo drastic changes at some point down the line.  You simply can’t maintain the kind of massive debts and the crazy financial system we have over the long term.  And history shows that such changs are never good for the “little guy”.  My husband and I are paying down debt, have built up a basic level of preparedness (2-3 months food/supplies, a garden, and a few chickens to start with), and are diversifying our options as far as making money (its always good to have a part-time job or income stream to fall back on in case of unexected job loss).   We also own some gold and silver (in the form of jewlery) that we purchased years ago.  We’re not in the position to buy more metals at present, but we’ll hang onto what we have as a kind of insurance policy (my grandmother always invested in jewlery…now I understand why).   Hopefully people out there will choose to be proactive andtake action to  “shore up” their position in life as much as possible…it brings you some peace of mind, and it will benefit your life even if NOTHING bad ends up happening!

Reply

2 Stephanie April 18, 2012 at 7:34 pm

Hey Jennifer! You’re right- something is coming and it’s not gonna be pretty. I’m so glad to hear you are getting rid of your debt too. Congrats on the garden and chickens- I’m not there yet but hope to be soon. We’re also thinking of breeding rabbits for meat as well (hubby’s gonna do this). People may think I’m odd for prepping and living a more self-sufficient lifestyle but I love it and if America was still a prosperous nation and affluence was common, I would probably still desire a homestead lifestyle. 

Reply

3 Brian Larsen April 19, 2012 at 10:25 am

I personally think what Jennifer described below (2-3 Month food supply, chickens, garden etc) should just be a normal way of life for all Americans, not only for the prepping aspect…but also for a higher quality of food.

Reply

4 Shawn Payne April 19, 2012 at 3:04 pm

 Great article, we were debt free a few years back but bought a new house and with that had to put some back on for furnishing and such but we plan on being debt free again soon with the exception of the house.

Also you take longer to tear those new card offers up than we do, they normally get opened and shredded as soon as we make sure it’s an offer lol

Reply

5 Stephanie April 19, 2012 at 3:21 pm

Good for you! Yeah, we usually don’t take that long to toss them but sometimes we have fun with ‘em. lol

Reply

6 hecms1991 April 20, 2012 at 7:56 am

I keep hearing that people are cashing in on the government reverse mortgage to bolster their ready cash without having to sell or move.  Maybe not such a bad idea. Leave the government holding the bag!
They say you don’t have to draw it all out at once and you can wait till the time comes and then draw it out, no questions asked and they can’t cancel it once it’s in place.
I’m looking into it.

Reply

7 Joyce April 30, 2014 at 11:53 pm

I do not like the reverse mortgages. The home does not belong to you once you sign on the dotted line. All profits will go to the government and once we have an economic meltdown or an Obama meltdown, then you are at risk of losing what you have worked so hard for. There are so many cons that they outweigh the Pros.

Reply

8 Surviving Economic Collapse July 17, 2012 at 9:16 pm

Awesome post Stephanie!  My wife and I are taking essentially the same steps.  One side income that has worked out very well for my wife is the production of EBooks.  Within a popular niche, even fairly basic ebooks can sell like hotcakes sometimes.

Reply

9 Stephanie July 18, 2012 at 7:41 am

Thanks! What niche does your wife write ebooks for? What’s the name of it?

Reply

10 kruger August 13, 2013 at 11:48 pm

Think about a boat as a home…. don’t need to do the marina thing….. but if you do it is usually cheaper than traditional housing if you select correctly. Another good thing about boaters…. it is a closer community than most shore based neighborhoods.
Another idea that I am doing since I have a boat …. the island of Montserrat …. the real estate is affordable…. the weather is good… no heating nor cooling bills…. all year growing season… small population and its a friendly population.
I am willing to share my knowledge if someone thinks they would like to do something similar. hydrorescue@yahoo.com

Reply

11 Stephanie August 16, 2013 at 5:24 pm

Hi Kruger,

Yes, I have heard of people living on boats as a preparedness advantage. If the S does hit the F, you can just get on your boat and take off! Sounds good for single and married couples but I’m not sure how families with children would manage. Where there’s a will, there’s a way though! I’m not exactly sure where Montserrat is but it does sound nice. I think your plan sounds great. Thank you for sharing with us!

Reply

12 Joyce May 1, 2014 at 12:00 am

My husband and i have been debt free for 11 years now. We saw all this coming and worked hard to get to this point. We are concentrating on getting the small animals and their habitats built now. Barn is in the process of being built. We are about 85% there. The chicken coop and rabbit habitat will be in the barn, with an outside, fenced yard for the chickens. All should be in place this summer. An idea for some of you folks is to look into repo’s. There are a lot of them that are really dirt cheap. In the $20,000. range. Some will need a little work, some will need extensive work. Forget the extensive ones-money pits. But the ones that need a little work are great finds. We purchased one on almost 9 acres and it is working out great.

Reply

13 Joyce May 1, 2014 at 12:05 am

We have put in a fruit orchard, small fruits, a garden area, tree lot with fast growing trees for wood(it takes about one acre of trees for one year) and when you cut them for fire wood, if you leave a small stump they will grow back and in 4 years will be ready to harvest again. That is why we put in 5 acres of them. We will also raise the corn and grains for the chickens and greens for the rabbits

Reply

Leave a Comment

CommentLuv badge

{ 15 trackbacks }

Previous post:

Next post: