“I went to the ATM this morning and it said “insufficient funds”…
I’m wondering is it them or me?…”
– from Mirror.co.uk
As we commented in a recent post, “The Double Standard and the Golden Rule,” fractional reserve banking practices can leave our banks with insufficient capital should too many depositors want their money back at once. And frankly, in addition to the risk of bankers over-diluting our dollars or gambling them away with derivatives, a dozen other things could bring down the economy as well.
And we’ve noticed something curious…
If you listen to the mainstream/ major media, such things are NEVER discussed. The status quo doesn’t want people to panic or peek behind the great and powerful wizard’s curtain. The stock market has hit new highs, the economy has recovered, and “there’s nothing to see here.”
If you listen to certain other sources, a complete economic collapse and a total breakdown of society is imminent. Banks will fail, the dollar will vanish overnight, and you’re doomed, unless you’ve got a bunker full of gold, food, weapons and ammunition.
We shouldn’t have blinders on, but do we need to be doomsday alarmists? Perhaps not.
The truth is probably somewhere in between. There are severe problems and stressors underneath the hood of our economy, but as Peter Diamandis points out, there is also innovation and progress on many fronts, and much evidence for abundance.
Yes, the deficit is higher. Our government is still trying to spend money it doesn’t have. Financial institutions take unreasonable risks, corruption abounds, and the policies of the Fed continue to discourage personal saving. And we are likely due (if not overdue) for a stock market correction, so we advise to prepare your portfolio for a bear market.
We can’t assume “all is well,”, but it doesn’t serve us to live in fear. If you are rightfully concerned about the economy, here are seven things you can do:
Focus on What you CAN Control… Your Thinking!
Positive focus and gratitude are essential in every economic climate, but especially in turbulent times! Every minute you read the fear-based news or listen to people spouting off about problems is a minute you cannot spend shoring up your mental capabilities, being thankful, or learning something new and useful.
Nearly a century ago, Napoleon Hill interviewed some of the wealthiest people in the world to determine the common habits and principles that led to their fortunes. His findings eventually became a best-selling book, Think and Grow Rich. As the title reveals, the book’s main theme is this: wealth begins in the mind. To earn and keep great prosperity, you must develop and control your thinking.
Grow Your Non-Monetary Assets
People often think about how to protect themselves financially, but often it’s the non-monetary factors that make or break someone’s ability to thrive under stress or keep their business afloat during challenging times.
You can create non-monetary “hedges” and increase your value in the marketplace in many ways. Some “assets” you’ll want to shore up in any economy include:
- Relationships: There is no asset more valuable than family and friends. These are the people who help us keep perspective and are there for us “come hell or high water.”
- Health: Managing your stress, staying in shape and at a healthy weight are all part of true wealth. Good health is also important to our ability to earn!
- Professional network: Remember the old saying, “It’s not what you know, it’s WHO you know!” People build success by increasing their connections and enlarging their sphere of influence.
- Mentors: Whether your mentor is someone whose books you read, a private mentor in your business or line of work, or a colleague in a mastermind group, we are wisest when we learn from others.
- Database: If you are a business owner, your list of customers is a valuable asset! Make sure you have a way of identifying and communicating with customers.
- Knowledge: Specialized knowledge is one of the principles of Think and Grow Rich because it can give you new and better paths to wealth.
- Skills: By expanding, practicing and deepening our skills, we can provide (and be compensated) for more value.
As authors and entrepreneurs Bryan Franklin and Michael Ellsberg assert in their recent excellent book of the same name, YOU are your “last safe investment.”
Keep Cash on Hand
If you could not access your checking account, could you purchase food and other essentials? We feel it is wise to keep 15 – 30 days of cash in your home in case banks have to close for a few days or even weeks. (But don’t keep it under your mattress or in a coffee can in your freezer – those are the first places thieves look! Check out “Twenty Places to Hide Money at Home Besides Under Your Mattress” for ideas.)
Why would banks close? A natural disaster could cause local branches or credit unions to close temporarily. Cyber attacks, as well as technical difficulties, can compromise ATMs. And there is also a possibility of a Dodd-Frank “bail-in,” which is what would happen if insolvent banks are forced to fix their own problems from within, without any taxpayer money. And while it’s a good thing that taxpayers will no longer be faced with bailing out banks, the downside is that depositors money could be utilized in some situations. This happened in Cypress a couple of years ago. (For more about bail-outs and bail-ins, read “From Bail-Outs to Bail-Ins: Understanding the Frank-Dodd Act,” an article by Carlos Lara.
Note that those most likely to say the sky is falling advise you to buy gold, and profit from doing so. There is certainly nothing wrong with having a small portion of your assets in gold. Though as we’ve covered in podcasts and articles, investing in gold is a speculative move that may actually hurt your cash flow and liquidity when you need it most.
Gold can be a good traditional hedge to a falling dollar, but you won’t be able to take your Krugerrands down to the local store to purchase food or medicine, nor can you quickly and easily use gold (that could be locked in a failed bank’s safety deposit account or that must be sold in a turbulent market) to pay your mortgage. That’s why we recommend choosing investments based on The 7 Principles of Prosperity, which you can learn about through our complimentary Prosperity Accelerator Pack.
Plant a Garden and/or Store Food and Water
The most important necessity is food and water. You’ll want to have a good supply of drinking water for all in your household to last for up to 30-60 days in case of a pandemic, natural disaster, or economic disruption.
Consider starting a garden so that you can provide a portion of your own food, either a traditional one or an aeroponic garden, which is ideal for apartment dwellers (or anyone who doesn’t want to play in the dirt!) Gardens are a great way to help your budget as well as provide food in emergencies.
You’ll also want to store such items as:
- nut butters
- vacuum packed crackers
- canned tuna, chicken, or salmon
- protein bars and granola bars
- dried fruit
- nuts and trail mix
- chili and soup
You can find some great tips to building or buying an emergency food supply in a MoneyTalksNews.com article, “14 Easy Ways to Create an Emergency Food Stockpile.”
Stock Essential Emergency Supplies
Whether a disruption is economic troubles, extreme weather, or something else, it is always wise to be prepared for an emergency. Supplies to put on your checklist:
- Candles, lanterns, flashlights, and extra batteries
- Cell phone with chargers, inverter or solar charger
- Manual can opener and coffee grinder
- First aid supplies, back-ups of any essential medication and supplements
- Portable power packs and/or a generator
- Fuel for heat (depending on where you live) or an alternate way to heat your home, such as a generator or an indoor propane heater. See suggestions of emergency heating sources here.
- A hand-crank radio, a NOAA Weather Radio with tone alert, and/or a battery operated TV to check the news.
For a longer list, see this Basic Disaster Supplies Kit list.
Increase Your Cash Flow
One of the BEST ways to prepare for any economic reality is to develop multiple streams of income and increase your cash flow. If you have a job, consider a business on the side. If you have a house, consider a rental property. If you have a hobby, consider monetizing it. If you have assets, put them to work earning cash flow! Having just one source of income makes you financially vulnerable while having many sources can make you wealthy.
And if you aren’t earning at least 7% from your assets, you’ll want to learn more about our favorite cash flow vehicle. Then contact us to discuss how you can start receiving monthly checks from a secured investment. We have multiple options to help you put “lazy assets” to work!
Save More Money… but Not in a Bank!
There are MANY excellent reasons to save money outside of the typical banking environment, such as privacy, safety, tax treatment, asset protection, and better returns! And it’s important not simply to save money, but to save money you can access or borrow against when needed.
Banks are highly leveraged and a “bail in” is a possibility. And if you “save” in a 401(k), you’ll pay taxes plus fees (unless you are over age 59-1/2) to access “your” money. And what if the stock market crashes? That’s the worst time to have to liquidate your assets!
That’s why we use a banking alternative for long-term saving. This alternative never loses value like the stock market, nor is it allowed to leverage as banks do. For generations, people have used life insurance cash value accounts to increase their liquidity and their privacy while building generational wealth and earning higher returns over the long haul… in a tax-advantaged environment.
You can borrow against your cash value at any time for any reason… to replace a car, purchase a cash-flowing asset, or carry you through a period of unemployment (which makes borrowing money VERY difficult!) Learn more about using life insurance through this episode of The Prosperity Podcast or in my book, Live Your Life Insurance.
Put these seven strategies into practice, invest the Prosperity Economics way, and you’ll be ready for just about anything!