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How to survive a financial crisis


In prepping we often prepare for major catastrophes like regional storms or earthquakes. But are you really prepared to lose your job or survive a financial crisis? In March of 2017, a claim was made that nearly ½ of Americans couldn’t write a check for $500. With the financial collapse and ensuing food shortages happening right now in Venezuela, it should make us in the prepper community think long and hard about our own finances. In this article, I’ll discuss the 7 laws you should follow to weather events like an economic collapse or an even more likely scenario of losing your job.

Budget prepping and just plain old budgeting go hand-in-hand. So let’s jump right in and discuss what I would consider 7 financial laws you’ll want to observe as a prepper.

Prepping has costs associated with it, gear and skills to acquire requiring you to budget and be a good steward of your finances. I’ve known preppers that have allowed fear to drive them to credit card debt only to regret it later when nothing happened. By having a level-headed approach and a control over your finances, you can much more intelligently navigate yourself financially in prepping. By setting yourself up for financial freedom in the future, you give yourself the ability to be in a better position financially if a catastrophe does strike. As we asked at the beginning of the article, how many preppers are prepared financially for common things like losing their job?

In this article, I’ll share my personal experience with finances and how it has impacted how I prep. I learned a lot by following the steps outlined in Dave Ramsey’s book, Financial Peace. I implemented the steps he outlined and it has put myself and my family on a path to financial security. Should there be an economical downturn in the economy, had a major unexpected expense or I lost my business, we would make it.

So here are the 7 immutable prepper financial laws that I personally live by and I hope to be of value to you.

1. Create a budget

A budget allows you to take control of your finances and gives you a full understanding of where every dollar is going. In prepping there are expenses in acquiring gear and other resources and for those that have a tight budget, making sure you can squeeze out every dollar from your paycheck is important. Without a budget, you won’t be able to effectively do this. The first step to creating a budget is very straight forward. The goal is to create a simple, zero-based budgeting approach.

Start by determining your household’s total take home pay after taxes. Then you simply document in a spreadsheet the regular monthly expenses you have like your mortgage, utilities, grocery bills, insurance, etc. I find it easy to look over my bank account and see all the expenses. Once you have all the numbers added up in a spreadsheet, you’ll want to define where every dollar goes. As a prepper, you’ll need to find a way to create a line item for prepping. How much you want to spend on a monthly basis on prepping is up to you and what you can afford. I spend around 2 to 4% of my monthly pay on prepping. At first sitting down and doing a budget might be a real eye opener when you see what you’re actually spending money on each month. Without a budget, it’s amazing how much money will slip through your fingers if you don’t actually stick to it.

By creating a budget, you’ll have a very clear picture of your finances. This would be a good time to make decisions about what you want to cut or reduce in pricing. Does spending $150 a month on cable really make sense if you’re having to cover expenses with a credit card? As you review your budget, find ways to cut spending. The goal is to increase the amount of money you can save so you can invest in the supplies you need to pick up.

And what do you do if you don’t have enough in your budget to prep? Get creative. Pick up a 2nd job or find another way to develop a revenue stream.

2. Get a $1000 emergency fund in place

As mentioned at the beginning of the article, The CEO of Assurant, Alan Colberg, made the remark that “Half of all Americans cannot afford to write a $500 check in an emergency,” on Bloomberg TV a few months ago.

When I first got serious about getting my finances in line about 10 years ago, this was the first step I took. It was difficult at first as I wasn’t used to saving money, but that first step was a huge psychological milestone on a path that has ultimately led me to a much more secure place financially. I would encourage you to do whatever it takes to get to this place. Whether that means having a garage sale or picking up side work, make this as a priority as once you have this amount in place, it gives you a small buffer to handle the unexpected things that come up in life.

Also, should there be a catastrophe in your area and the grid is down, you won’t be able to run to the ATM to withdraw cash and your credit cards will be no good if the store isn’t accepting card payments. Keep this money in a secure, safe place in your home. This isn’t investment money you keep at your bank, but rather it should be available at a moment’s notice.

3. Get out of debt

There’s a proverb that says this: “The wealthy rule over the poor, and anyone who borrows is a slave to the lender.” This saying is so true. When you owe someone money, you are essentially their slave. Ever been behind on a payment and have the debt collector call you and harass you? How fun is that? It will stress you out over time.

Some may argue why pay off debt if we’re heading to higher inflation if the economy may collapse? Well, you need to consider the reality that should there be an economic event, you could lose your job. Should this happen, you’re a much likely candidate to lose your home and belongings. Remember when the real estate bubble burst back in ‘07 and ‘08 here in the U.S.? I remember watching the local news every night and watching stories about people being forced out of their homes as they were foreclosed and being forced into tents and living in the back of their cars. Times were tough then and having debt hanging over your head will compound the problem. While you have a job and have the money, get rid of your debt so that should you lose your job later, you don’t end up on the streets. Also if you hold any debt that is an adjustable rate debt, be especially attentive to this and dump it ASAP as the banks will likely jack the rates high if the economy crashes.

When my wife and I got serious about paying off our debt years ago, we used a trick that worked extremely well for us. It’s called the debt snowball. It’s an approach that is outlined in the book Financial Peace mentioned earlier. It works like this. Line up your debts smallest to greatest and start on the smallest debt first. Now I know some may argue the best approach is to go after the debt with the highest interest rates, but there’s a motivation in paying off debt and then moving to the next debt. So you first pay off the smallest debt. Once that’s that is paid off, take the money from your budget you had to use to pay that small debt off and then roll that into your next debt. Once that next debt is paid off, then roll that combined money in your budget into the next debt and so on. The advantage of using this approach is that when you start knocking off the easier debts, you’ll see results and stay motivated to go after the larger debts. I call this approach a “trick” as there’s a psychological component to keep you motivated to attack the other debts.

Don’t try and leverage debt to gain gear or supplies. I’ve known preppers that have done this and when nothing ended up happening, the debt was very difficult to deal with.

4. Ditch credit and debit cards for cash

Getting off relying upon credit cards and debit cards was a huge first step for me years ago to not only get out of debt but to learn to control my spending. One of the stories told in the book Financial Peace is about how McDonald’s found that people spent 47% more when using credit instead of cash. When you pay cash, there’s a real connection that you can actually “feel” when you spend money. Not so much when using your credit or debit card. And they found that by installing the machines, their sales went up.

Again, in the context of prepping, we’re trying to lessen our financial expenditures and by getting off using plastic, we better our chances of having money left at the end of the month to spend on important preps. One system I have found very useful to keep our expenses in check on a monthly basis is the use the cash envelope system. What we do is create a line item for each expense each month in our budget and then on payday, we simply go to the bank, withdraw the money we need and then put the money in each envelope for that line item. So for example, if we have $400 in the budget for groceries, we put $400 in the envelope marked “Groceries”. By using this approach, we’re able to keep a very close eye on what we’re spending money on each month.

5. Get 3 to 6 months worth of savings in place

This is one of those things that you may think is really hard to do, but you’d be surprised how much momentum you’ll gain after you move through steps 1 through 3. Having 3 to 6 months worth of income in savings allows you to handle most catastrophes that may come up. Let’s say you lose your job. This is a scenario which is very possible and impacts people all the time. Again, in prepping, the goal is to not only prep for disasters like earthquakes or hurricanes but just things that can happen in everyday life. The loss of a job can be very catastrophic and having a 3 to 6-month cushion in savings will give you time to find a new job. Or you may have a large expense if your car’s transmission goes out. By having these savings in place, it keeps us from falling back into debt and having to rely on credit cards to get us through tough times. The feeling of security of having a cushion to fall on should a problem comes up is also a great feeling and helps remove a lot of stress.

Just a side note: this money is not to be used for investment purposes tied up in some type of investment account that you can not immediately access, but rather you should keep this in a well-established credit union or small bank.

6. Diversify what you spend money on

When I first got into prepping, I found myself wanting to get all the cool gear, gadgets, bug out bag items, firearms and other items I felt were so important (or at least the items that were being marketed to me so heavily in the prepping community). If I could go back and start all over, I would have focused on more important things for survival instead of the tacti-cool products. For example, if you have $100 in your monthly budget, I’d start by picking up a $20 mini-sawyer water filter, some water containers, basic flashlight, cans of food to stock in my pantry and a simple medical kit. Does that sound exciting? No, not really, but if there were an emergency that hit my area, having these on hand would be far more valuable than a cool EDC bag. Don’t get heavy into one area when spending money on your preps but rather spread the money out over the basics. My budget priority is broken down in this order:

  • Water.  If you’re new to prepping, focus on getting a 2 week supply built up. I cover this more in a video titled “7 steps for emergency water preparation”.
  • Food.  Start by getting a 2 week supply built. You can watch my video, “How to easily build a 2-week emergency food supply” to get more information.
  • Medical.  Get some basic medical kits or build your own. A great resource is the Doom and Bloom Youtube channel where Dr. Bones and Nurse Amy discuss medical preparation and survival. Highly recommend you check out their channel to learn more.
  • Mobility.  Being able to move on a moment’s notice and survive while being mobile is important. I’ve done an article on building bug out bags for yourself and the family. Just a fair warning, don’t get caught up in thinking you need to buy a lot of expensive gear.
  • Security and Firearms.  For some, this is on the top of their list of things to budget for, but I’ll leave that up to you to decide. If you’re looking for affordable options for firearms to get you started, you might want to take a look at the Maverick 88 12 gauge shotgun. Again, no need to run out and buy a tricked out a battle rifle that can cost you thousands of dollars.
  • Precious metals.  I put this last on my list as this is a long game approach and in my opinion should be last on your list. Again, you might have a different opinion and would love your feedback in the comment section. In the event of a catastrophe, people aren’t going to be excited to get a piece of silver from you if they’re trying to feed their family and need food or some other important barter item.

7. Invest in education to gain skills and knowledge

Skills and knowledge are invaluable. Whenever you can the opportunity to gain an education from an expert, invest in it. Whether that means picking up books on learning how to operate a HAM radio, gardening or medical skills or taking a firearms safety course, I recommend investing in good books or classes. Gear is great to have, but knowledge is far more valuable. Investing in some good books serve a number of purposes in the event of a catastrophe. Having a physical book containing information when the internet is down will be so important. I’m in the process of building my own prepper library and having books on gardening and first aid are a great start in my opinion. Obviously, there’s tons of free information on Youtube, but again, having that physical hard copy should the grid go down will be invaluable. Learn now how to suture a laceration or how to grow a garden. I invested in learning material for gardening and while I’m having some success at the moment, there’s still a lot more I need to learn and I’m glad I’ve invested in this knowledge and am taking the time to apply these skills now before a catastrophe when it will be too late to learn.

Any opportunity you can find to educate yourself even if it requires spending money, do it.

But what about long-term financial prepping like Roth IRA’s and 401K’s?

While I personally invest in Roth IRA’s, I do realize that there are no “safe” investments and will leave that up to the viewer to decide what approach they’ll want to take for long-term investments. I’ve watched the stock market rise and fall over the last 16 years and am pretty sure we’re in another bubble. Land is taxed and you can get hit with eminent domain. I had a close friend who heavily invested in precious metals only to have someone break into his home and steal it all. There are no guarantees. I try to do the best with the money I have and am not looking for anyone to take care of my life for me. This is the life of a prepper. Move toward self-sufficiency. Look down the road a little further than most people are comfortable doing even if it means realizing you may have to make sacrifices now to ensure you and your family have a much greater chance of weathering a storm financially.

Thanks again for taking the time to read this article. As always, I enjoy feedback from the prepper community as you guys teach me a lot. If you have any insight into anything I didn’t cover or you have a different view on any of the items we discussed, please comment below. Also, if you enjoyed this article, please feel free to like or share on social media.

As always, be safe out there!

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City Prepping's goal is to help people understand the basics of prepping in urban environments.