Prepping for financial limitations is unfamiliar to most preppers despite the massive importance of the topic. While most of us are prepped enough to survive a lockdown of 1 year or a wildfire that rages for more than a week, only a few can claim to have planned for financial disasters.
There are damning stats about our preparedness for a financial accident. According to the Federal Reserve, at least 47% of Americans cannot cater to a sudden need of $400. What’s more, 33% of our countrymen have no savings while a whopping 57% maintain that they are unprepared for a financial emergency. Thought-provoking.
Ways Of Prepping For Financial Limitations
As preppers, we recognize the possibility of all kinds of emergencies, financial accidents inclusive. This year is a good example. The outbreak of Covid-19 hurt thousands of businesses home and abroad. It rendered millions of individuals broke and penniless due to the abruptness of its appearance. Imagine how it’d be if the government didn’t share palliatives.
However, what if the disaster is personal? Will the government grant you aid for a sack, business collapse, or losing your money to a fraudster? I don’t think so. Let’s prepare ourselves ahead by considering the various ways below through which you can prepare for financial disasters.
Stock An Emergency Fund
Before much, let’s consider the Federal Reserve stat that 47% of Americans cannot cater to a sudden need of $400.
If you will agree, $400 does not do much on this side of the world. It is typically the cost of our expenses for a few weeks or half of a month’s rent. It is, therefore, disturbing that 47% of us can’t get it when it matters the most.
Leveraging on this, the first step as a prepper is to set aside some funds which you can use when an emergency hits. Just like how you prepare for a natural disaster by first building an emergency kit, that’s how you have to stock an emergency fund regularly.
The popular opinion is to have an emergency fund that can cater to your expenses of 3–6 months. This figure will, of course, vary according to your lifestyle, but the key is to be buoyant enough to eat, get shelter, buy supplies, sort regular bills, and cater to other needs you can’t do without.
To set up your emergency fund quickly and easily, I’d suggest that you take a fixed portion of your income and add to your fund every month-end.
Have A Budget
A financial planning strategy without a budget is terrible, and for good reasons. Most find it difficult to track or regulate their spending, particularly if there are kids or dependents. Thus, having a budget that tells you how much to spend and have spent will help you avoid unnecessary or careless expenses.
A budget is typically planned on the 50:30:20 income rule. That means 50% for needs, 30% for wants & 10% for savings or debt repayments.
Unfortunately, but understandably, most of us cannot have followed this rule as we live on paychecks. In this scenario, the ideal step is to outline your monthly spending on feeding, housing, utilities, debts if applicable and, also, recurring expenses, and then consider where you can cut costs. For example, if you eat packaged foods mostly, you can switch to fresh produce as they are not only more affordable but healthier.
If you face trouble organizing your expenses, you can try out budget management and expenses tracking programs. Some of these programs are free and reliable. They work by connecting all your banking, credit, and debt accounts to get a clear picture of what your net worth is, which is total assets — debts.
Cut Down On Your Debts
Most of us are in debt. The average American family owes up to $8000 in credit card loans only, not to even mention mortgage and schooling loans. That’s not a good spot to be. While I agree that owing some debts is fine and perhaps unpreventable (by some of us), I am against allowing your debts to accumulate before they are cleared. The technique is to, therefore, repay loans as soon as possible.
Thankfully, with a detailed budget in place, you can start looking at ways through which you can cut down on your existing loans. When planning your budget, you have to work out an amount or percentage of your income; you can take out monthly to offset your loans. While at it, avoid taking new loans and slowly chip off your outstanding debt.
A loan repayment calculator or credit card is an excellent resource to work out your loans and how to clear them.
Keep Some Cash At Hand
Every prepper recognizes the importance of having cash at hand, particularly when SHTF and ATMs or credit machines are no longer working. Even if you aren’t planning towards a financial disaster, always hold some cash as it can be used to stockpile when natural disasters occur.
The recommendation is to keep cash that will cater to you and your family for a minimum of 3 days. This would be between 400 – 800 dollars, depending on the needs.
Keep in mind you’ll have to secure your cash if you’re holding at hand or home. There’s no essence of keeping cash if it’ll be stolen or misplaced.
Stockpile Necessary Supplies
All preppers understand the need to stockpile necessary supplies regularly. In case of a financial accident, a stockpile of important supplies will provide you some leverage until you can work something out. Experts advise that your stockpile should be able to cater to you for half a month, at least.
With a stockpile containing relevant supplies, such as food, drink, medications, and what have you, you can bear the shock of any disaster that takes your finances by storm.
Closing Thoughts On Prepping For Financial Limitations
Prepping for financial limitations is as important as prepping for natural disasters. Financial wreckage can be as devastating as large-scale warfare or natural disaster. Spare a moment to consider your situation: what would happen if you lost your job today, met an emergency or the economy collapsed? I doubt up to 50% of us can claim to be ready for a financial emergency, which is a sobering fact.
Fortunately, by following the simple steps above, you can be perfectly equipped to survive any unexpected financial accident.