How to Be Prepared for the Next Economic Crisis?

My Practical Advice on How to Be Prepare For the Next Economic Crisis!

How to Be Prepared for the Next Economic Crisis?
Photo by Karolina Grabowska from Pexels

I started preparing for the financial crisis a year ago. I didn’t know that there will be something similar to nowadays crisis, however, I was sure that I needed to be ready financially to face the majority of problems people experiencing right now. So, here I will tell you several guidelines on how to be ready for any crisis!

Financial planning

Financial planning is necessary in any case and any situation so does it. Plan your expenses carefully because, ironically as it sounds, income levels rarely matter. Usually, people spend as much as they earn. And if they start earning two to three times more, at the end of the month there is still nothing left. Therefore, plan your home budget and do not deviate from it a single step. Of course, in the world, there are a lot of temptations and interesting products, but be smarter. Rich is not the one who has an iPhone, but the one who manages to get out of the financial crisis in the most worthy way.

Create your cash reserve stock

If you work for a fixed fee or make money on the Internet (that is, for yourself), in any case, you need to take care of your emergency fund. In times of crisis, you can be shortened, and if you work on the Internet, the income level can significantly decrease. Therefore, you need to save money in an emergency fund now. You have to set aside several funds that will help you to exist without income for about six months.

This period is enough not to panic and not to make stupid mistakes. Also, this will give you time to think and not cling to the first job that comes across. Remember that this money does not need to be invested anywhere, it should be at your fingertips. In times of crisis, it is extremely difficult to withdraw money from deposits. Besides, they are greatly depreciated.

Risk diversification

Now let’s focus on the implementation of the golden rule:

“Do not put all your eggs in one basket.”

Reasonable investors and businessmen do this, so any financially competent person should do so.

Where can I invest my money?

  • Bank deposits
  • Valuable metals
  • Stocks
  • The property
  • Currency

The above methods are not ideal, have their advantages and disadvantages. For example, investing in real estate is a good start, but during times of crisis, it is a very illiquid product. That is, it will be extremely difficult for you to sell your house or apartment if you urgently need money.

Bank deposits may also not help, so how lucky. And perhaps a premonition of a crisis will help you. Until all the people massively ran to the banks to withdraw money, you have a chance to be one of the first and save your money.

Stocks are a great way to both lose everything and make a big profit. It is difficult to say what will happen to the company during the crisis, the shares of which you acquired. But if she survived, and you still have the shares, then there is a high probability that it will be very profitable to sell them in a couple of years. However, as already mentioned, and burn out is also very simple.

Valuable metals are also quite illiquid, but at the same time during crises, money notes are much less valuable than their equivalent, expressed in metal.

Buying currency is a good way to lose as little as possible. Nevertheless, it must be bought in times of economic recovery, and not a crisis.

Getting rid of debt

If possible, get rid of all debts. It will be difficult to repay the mortgage, of course, if you wish, but it’s better to repay other debts now. And in general, do not take anything on credit if it does not concern vital issues. In times of crisis, lenders tend to be much tougher and more persistent.

I have never been to debt in my life and never will be. I have a principle never to take money from others, never use a mortgage, or take credit from a bank or any other organization. So, my advice is to build the same habit and never use credits and debts as a solution for your financial situation.

Food stocks (reserves)

Now it’s hard to imagine that toilet paper or food may disappear from stores. But it is quite possible. It is absolutely not necessary to litter the balcony or the utility room. Buy the essentials — flour, cereals, sugar, salt, drinking water, sunflower oil, canned food. It is also necessary to buy an electric generator or a solar battery because problems with electricity can also arise. If expensive, then buy matches and candles. Create your own first-aid kit, and it should be more than standard and designed for your body and the characteristics of the organisms of your relatives. Remember that during crises, medicines are becoming more expensive, so it’s better to buy them now. And of course, do not forget about the growth of crime in difficult times. You must protect yourself and your family.

An important role is played by psychological preparation. This also seems rather strange and unnecessary advice, but you all read stories in which during the times of world crises people did terrible things to themselves. But the fact is that they didn’t even think that everything could collapse. If you are mentally prepared for everything, then you will be able to at least not make heaps of mistakes in the first wave of the crisis. You are ready to become flexible, make difficult decisions, and not sit idly by.

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How to Be Prepared for the Next Economic Crisis? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

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