Prepping for a Financial Collapse

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Financial Preparedness
There are lots of reasons to start prepping…earthquakes, pandemics, terrorist threats, world wars. One specific reason has started getting a little more press recently: economic turmoil. This is actually the main reason I decided to start prepping. Despite the fact that every episode of “Doomsday Preppers” ends with economists believing the chance for an economic meltdown is highly unlikely, a person needs only to observe the daily headlines to see the economies of the world are not as rosy as we might be led to believe. Considering the rate the government is running budgetary deficits, slowing global economy, and increasing dependence on a digital world, it is enough to make a person start thinking “what if…?” What if the banks went into another 2008 crisis…or worse!? They have already been bailed out once, and now because of all the cheap money the government has provided, the banks that were “too big to fail” before 2008 have purchased smaller banks and have become bigger as a result!!! In any circumstance, it is foolish to leave all your eggs in one basket. There are some strategies a diligent prepper can use to help ensure his economic security.

Precious Metals
To start, I need to “foot-stomp” the purchase of precious metals. I believe this is one of the absolute best ways to ensure your buying power through the next several decades. There are many ways to buy precious metals…coin shops, online retailers such as eBay and Amazon, private collectors at coin shows, etc. But for a newbie into the precious metals market, there are a few things you should think about before buying large quantities of metals. Do you want bullion coins or bars? Bullion coins are easily recognizable and at the very least, have a face value printed on them, so you know you will always have a little purchasing power, even if spot prices were to plummet. The bullion coins are generally of .999 purity, so you know an ounce of silver is an ounce.

If you are considering coins, I would stick to the most common ones such as American Eagles, Canadian Maple Leafs, and Austrian Philharmonics. You can also consider the South African Kruggerrand if you are going to buy gold. I’m not such a big fan of bars because there has been an increase in the cases of tungsten and other metals being found in the cores of these bars. It is harder to verify the actual purity of the bars, which leads to buyers having to drill a hole in the bar, else they run the risk they may contain foreign metal in the core. If you choose to buy bars, I would limit your purchases to the 5oz varieties (less likely to be counterfeit based on smaller bar size), and only from reputable mints like PAMP Suisse, APMEX, or Johnson Matthey.

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Next, consider purchasing quantities of “junk silver”. Junk silver is the name typically given to currency that was minted prior to 1965, when halves, quarters and dimes were made of 90% silver. These coins do offer a good value as well because they are rarely counterfeit and they are generally pretty easily recognizable. Each $1 in face value of junk silver contains .715 ounces of silver, making it easy to be able to verify that 10 dimes has the same silver content as two halves or four quarters. Plus, the 10% of other metals in the alloy make the coins a little more resistant to wear, although many may show a lot of wear (also known as “slick”) due to being in circulation for 50+ years. I would definitely recommend storing a least a portion of your investment in junk silver.

I’ve spent a lot of time describing what I think would be a good investment to buy, but I want to make sure I highlight what I feel isn’t such a smart thing to buy. I generally steer clear of buying generic rounds or bars. Anybody can have their own dies or molds created and mint their own silver rounds or bars. Currently, I would say a majority of those privately minted rounds and bars are probably good to go as far as being pure .999 silver, but in a real economic collapse, I would hate to think that I invested a lot of money into some generic rounds just to find out they aren’t exactly what they claim to be. That peace of mind, to me, is worth an extra premium the officially minted coins command. Don’t waste your time trying to collect “Franklin Mint” items. These items are not minted by the government and are not worth the cost you pay for them. And you NEVER get your money back because professional buyers won’t pay what you paid for the items originally, if they purchase them at all.

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As an example, in my early days of buying silver, I found three “1000 grain” bars of sterling silver for sale on eBay for what I thought was a decent price, so I bought them. A few years later, although the silver spot price had dropped (and I had become much wiser as far as PMs go), I thought I could sell them to a coin shop and get a quote of near spot price so I could buy some junk silver. Junk silver is .715 silver, while sterling is .925, so I thought I could easily trade equal weight for equal weight in junk silver. I thought “sterling is much higher silver content than junk coins, so I am doing this shop a favor”. When I got there I was told they couldn’t sell those bars because nobody buys them and I could sell it as scrap silver, which would be about 40% less than I paid for them because they have to pay refining fees. Needless to say, I didn’t sell and I still have those bars to this day, hoping I can sell them at some point in the future. Along those lines, don’t waste your money chasing good deals in junk silver jewelry or old silver spoons, etc…you’re basically gambling that you might get your money back when you scrap the items.

TSP (Thrift Savings Plan) & Retirement Brokerage Accounts
I’m a big advocate of taking a portion of your pay each month and allotting it into an investment account. If you don’t plan on taking an active role in your investment and just letting it ride, the TSP is an ok option. I only say “ok” because I personally regret opening a TSP account due to the lack of liquidity of the account. A TSP account is not easily rolled over into a 401(k) or other investment vehicle until you separate from active duty. You can take money out of the account only as a “loan” which you have to pay back into the account. Also, you can’t even close the account prior to separation without taking a 30-40% penalty for taxes and early withdrawal fees. Now, recently I spoke to a member of the Military Compensation and Retirement Modernization Commission about this liquidity issue, but this is likely to take a while to change regulations, if at all. So if you have a choice, I would opt out of the TSP and open a brokerage account with a reputable online broker. Also try to max out your Roth IRA contributions each year. The main idea here is to maximize your return by leveraging investment dollars while having the ability to protect your capital in the event the market turns bearish.

Cash
Now that you have secured your long term buying power with PMs and are putting your money to work for you in a brokerage account for it to grow, you need to look at collecting some cash to keep stored in a safe location in the event of an economic collapse. Some people think this is impossible to happen in the modern system, but they are quick to forget this already recently happened in Greece during the most recent crisis in March 2013. ATMs withdrawals were capped at about 300 Euros per day. Soon after, many accounts were charged “fees” or taxed in order for the government to stabilize the financial system and pay debts. This, in my opinion, was tantamount to theft as accounts were raided to raise enough money to save the banks and keep from default. Luckily, those with the smallest accounts were largely spared, which is even more incentive to keep your account balances low. Having cash saved at home will at least guarantee you have liquid funds in the event you need to leave town quickly or if the U.S. Government takes the same approach to solve this country’s economic woes.

Cryptos
This is the new kid on the block. While I do think this realm holds great potential, I would emphasize education and diversification. We don't have a crystal ball, we don't know how the new global economic landscape is going to shake out. But if you aren't too worried about a mass power grid failure with no possible way to retrieve your cryptos, then I think it makes some sense to invest some discretionary money into a well-researched crypto currency.

Prepping in general includes getting your financial house in order just as much as gathering supplies you think you will need when things turn bad. When times get tough, there will be freedom in knowing your finances are under control and not necessarily under the influence of those who care not about your economic well-being.

Be Prepared!
Greg

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I know how much effort goes into writing such an in-depth post. Thanks in advance for taking the time. You make some great points about precious metals. I like to use https://www.providentmetals.com for purchases. They allow me to use an electronic check which gives the cash discount price. They also accept bitcoin. I frequent a local coin dealer for 90% silver. Diversification is key and now I am learning about cryptocurrency. I read somewhere that Japan is now accepting bitcoin at 260,000+ retail stores.

I would also like to bring up that bartering will be important if a major event occurs such as SHTF, WROL, or TEOTWAWKI. Having extra stuff in your preps like cigarettes, alcohol, ammo, and canned food that you put back specifically for this purpose can prove to be useful. I do this because I may need a service or chore that I am not capable of or know how to do and these items can be traded to get the mission accomplished.