SYSTEMIC RISKS

Diversify Excess Cash Into Safety

diversify-into-safety

If you are preparedness-minded and fortunate enough to have excess cash funds beyond your bills and obligations, AND if you are very concerned about our economic future or stability (an apparent ‘house of cards’), you might be wondering where to focus your ‘investments’.

Here’s one opinion:


 
Diversify into safety.

What do I mean by that?

‘Diversify’ – Simply don’t put all your eggs in one basket. How many baskets? Read on…

‘Safety’ – The broader consideration, and might encompass many different things.

 
Note that this is not financial advice, and the presumption in this opinion is that one’s overall debt burden has either already been eliminated or minimized well within manageable limits. I would use excess cash to pay down debt. Whether it be ‘some’ cash or all of it, that’s an individual choice depending on one’s additional needs or goals.

 
BANKS
Long ago, people used to deposit excess ‘money’ into the bank. The bank used to pay a competitive interest on one’s deposit. Today though, the economic policies are ‘incentivized’ to discourage savings while encouraging spending. Especially spending into debt. I won’t go into the detailed reasons for this, but basically it’s because the Fed cannot raise interest rates without the risk of collapsing a frail and indebted economy which mostly lives paycheck to paycheck – in addition to the fact that the government’s interest payments on its astronomical debt would become enormous. So as a result – the ‘fix is in’ and we will likely see ZIRP (zero interest rate policies) continue into the foreseeable future.

Additionally, ‘if’ the dominoes tip over, there are new policies in place to ‘bail-in’ the banks (as opposed to ‘bail-out’). This basically means that you might have an even lesser chance of ever seeing your money again – depending. I summarized it in this article:
New Banking Rules: Your Money Becomes Theirs In The Next Crisis

CREDIT UNION
Having said that, I personally would be discouraged from depositing too much excess cash into a bank (especially the BIG banks). Instead, I would consider depositing ‘some’ excess cash into a credit union (credit unions are owned by their own membership rather than beholden to ‘the system’). Again, interest on deposits will be miniscule – but at least it will be a safer place than many traditional banks in my opinion.

CASH AT HOME
I also keep a certain amount of cash at home, in a Safe. Personally, I believe that having at least several months worth of ‘bill money’ is prudent – in case of emergency. This cash will also be a general emergency fund which will always be at your fingertips.

CONVERT CASH TO ACHIEVE MORE SELF-RELIANCE
Very generally speaking, I would use some of the excess cash to convert into tangible assets which would help me become more self-reliant and independent from external systems (all of which cost money to access). While it is exceedingly difficult to become completely ‘off the grid’, there are some practical things one can do to lessen one’s dependence (on all sorts of things).

MONEY DOES NOT HAVE TO GO INTO A TRADITIONAL INVESTMENT ACCOUNT
People have been trained to ‘invest’ their money in various traditional investment vehicles – each with their own associated risks. I’m talking about investment funds, etc.. I personally believe that many of these (if not most) are very risky today – given the world we’re living in right now (despite what the propaganda on mainstream TV is telling us). It doesn’t take a genius to figure out the ‘real’ situation we’re in. All it takes is a little motivational ‘digging’ beneath the surface of the mainstream to discover the truths and un-truths.

Having said that though, ‘IF’ the so called ‘economic collapse’ does not come, and ‘IF’ the PTB can keep it hobbled together for many more years while they continue to ‘pump’ up the various bubbles and balloons, then perhaps having ‘some’ of one’s excess cash in a few investment vehicles is a way to stay diversified. In other words, perhaps you hedge your bets. I still would personally stay out of the stock market, but there are other choices out there too…

YOUR HOME
I would rather spend some excess cash on my own situation – my home. Tangible and practical improvements or enablers for self-reliance, efficiencies, security, etc.. If the SHTF, your home will be your castle (as it should already be). If you own it outright (paid off mortgage), any improvements will go directly to you and your life there. If the bank still owns the house, any improvements ‘might’ be lost if there is sufficient enforcement to take it from you after an economic collapse and default. Just saying.

FOOD STORAGE
While this rambling list is not in any particular order, FOOD should be at the top of the list. I would first spend excess cash to build up a food storage reserve. One year sounds pretty good to me… Not that difficult and really not that expensive compared to many other things out there (think about what you currently pay for insurances – health, auto, home, etc..).

GARDEN
I would definitely recommend to spend excess cash (and time) on building a self-sustaining garden on your property. The more you can feed yourself and the less you need to ‘buy’ at the grocery store, the safer you will be during a time of collapse. Tangibles include ‘how-to’ books, materials to build structures (raised beds? fences? green house? irrigation from roof run-off?, all the tools you will need for gardening, food preservation etc..)

ALTERNATIVE ENERGY

This is something that I am currently working on at my new location – putting together a photovoltaic solar panel system to provide adequate energy to charge a battery bank which will then power critical systems in the house. A solar power system can vary from small (less expensive) to very large (lots of ‘excess’ cash required). But in my opinion it is yet another practical tangible asset contributing towards self-reliance. Will the power grid stay up during a time of genuine SHTF collapse or turmoil? Or will it be sporadic? That’s why I sleep better at night knowing that I don’t need the grid.

YOUR SECURITY
Again, ‘tangible’ assets. Security could become a very high concern during a time of very high turmoil. There are lots of aspects to this broad category including the obvious (firearms, ammunition, practice). What about a ‘hardened’ safe room, etc..? Perhaps several 2-way radios for communications. Security cameras? Alarms?

PRECIOUS METALS
Silver and gold. No you can’t eat silver or gold. Instead they represent a mechanism for holding or transferring excess wealth into another system of exchange. Silver and Gold have been (is) ‘money’ throughout all of the world and throughout all of history. You cannot say that with regards to any fiat currency (EVERY fiat currency has and will eventually end up at ZERO). Precious metals tend to rise in value dramatically during times of crisis or when a fiat currency collapses upon itself. While most of us know that the price of these metals have been held relatively low since 2008/09 there may at some point be a trigger which sets this ‘to the moon’ so to speak. I personally am diversified into some silver and gold (physical and within a few investments). Physical possession is the ultimate, while any non-tangible investment (even in metals, e.g. ETF’s) does risk loss if the financial institution itself goes down. Be aware that the extreme conditions which may take the price of metals ‘to the moon’ might be the very conditions which bring down the institutions. Like I said – diversify. There’s risk in everything.

DON’T FORGET RETIREMENT
I bring this up because while many preparedness-minded folks believe that there seems to be no way that the current house-of-cards can stay together forever (and one might be tempted to completely withdraw from the system before it happens), the fact is though that no-one knows if and when it will actually disastrously collapse into a SHTF heap. ‘IF’ it doesn’t and if the decay continues slow and grinding, you might be sorry that you withdrew it all. Don’t blow it all up front and leave nothing as contingency. Diversify into safety, yes, but don’t spend it all at the expense of your future needs. Hedge your bets.

Having said that, a philosophy might be that the more one does (spends) NOW, on things that will reduce future needs for ‘money’, the better off one might be in the future. Reduce expenses and dependence upon the need for a large stream of income. First and foremost should be eliminating debt.

DIVERSIFY INTO SAFETY
Generally, and since we really don’t know what’s going to happen (or not), we must maintain a ‘cool head’ and plan (hedge) for various outcomes. You might choose to do some things in case of a terrible economic collapse (for example) and you might also do other things in case ‘things’ remain as they are. Fortunately, if you spend on yourself and your own preparedness in a practical and sensible manner – you really won’t lose anything. Just don’t spend it all at the expense of leaving nothing else. If you’ve invested some excess cash into traditional investment vehicles and one day it all tumbles down and it’s gone – so be it. Just don’t put EVERYTHING there. If things continue to grind out the way they are now, perhaps those investments in the future will be okay. We just don’t know.

Just focus on safety rather than risky things. This goes for investments as well as expenditures on one’s self-reliance situation. Don’t be frivolous and spend too much on non-practical assets. Think about your safety – both now and into the future.

Hope this helps.

There’s lots more to this… but what’s your opinion? Additional ideas?

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25 Comments

  1. Thoughtful article Ken. I wonder about storing bulk rice. If you did it as a business and sold some of it yearly to show it was a legitimate venture if food confiscation happened you would be doing good for the community. I would guess that if the government were seizing food from businesses you could probably expect a receipt for your assets. Might be possible to be re-paid at a later time if the situation causing the seizure was temporary in nature. I kind of doubt that if the government were going house to house that you would be getting any receipts. Just my thoughts.

  2. If the 2008 experience taught me anything, it is HARD assets only. No counter-party risk, EVER.

    At this point in time I have no exposure at all to the Big Casino (sometimes referred to as the stock/bond market). The house is the last item that can be burdensome as it is liable for any number of taxes/fees “they” may wish to impose. Not quite ready to pull the live-in-a-RV handle yet. Getting close.

  3. Very well written and thought out article.

    We’ve been “investing” in self-reliance for decades and have always believed that whatever we add to our skill base or our home base will reward us many times over. So far, we have not regretted our decisions.
    We focused on paying off a 30-year mortgage that didn’t have a bad interest rate but it was debt. We did it in 15 years and that gave us the ability to have more ready-capital for our other “investments”.

    Back in the early 2000s, we decided to begin a business for each of us as a means to earn some bread-and-butter money during our retirement years. My hubby opted for riflesmithing and obtained his FFL. Everything went well and the part-time business was more successful than we anticipated. He was working his regular job plus the smithing part time. Then 3 months after Obama was elected, we had our first “visit” from the Feds. That led to the second “visit” from the Feds. There was nothing wrong, no issues w/ records or non-compliance. It just, well, it just happened. Coincidence, right?
    Then we learned a fellow smith was getting monthly visits. We could see how things were transpiring and we decided that we had too much to lose to be under the Obama-Commie scrutiny. He gave up the FFL and folded up his business. I folded up my business, too, because we decided we weren’t using our retirement days by giving tax dollars to a corrupt regime in DC. So our investment in part time jobs for retirement was nothing more than a paper-loss and waste of time, in the end. Lesson learned.

    In 2007, we ended the stock market investments. The returns were still there. But our principals were stronger than the money earned.

    We are diversified and fairly well prepared for the downward spiral. We thought we were rock-solid prepared until my youngest son suddenly passed away in the fall of 2013. There’s no way to prep for something like that. And there’s no way to try and shake off the deep shock that the mind and body take. All we knew to do was make lists and follow them. Who has made burial arrangements for themselves, much less their seemingly healthy children? I used to work w/ disaster victims and suffering parents at FEMA but nothing can prepare you for that late-night-call.

    Seems like we have fought the slayers too many times in the past 10 years. We always wind up at home, though, readying up for the next day, a step at a time. Again, lessons learned.

    Now we focus only on our home place and our family. All of our resources are plowed into our own ground here. All we can hope for is some rich Earth returns for our efforts…

  4. Something to consider: Prepaying property taxes. You can learn more on eHow (“Can I Prepay Property Taxes for the Year?). Of course, you can keep enough cash at home to cover the year’s worth of property taxes, but if hyperinflation hits, that cash may go to other things. Having property taxes paid up in advance is a good investment, imo.

    If doing this, definitely keep the receipt! ;)

  5. Very good article Ken keep up the good work. I also feel that we have some bad days ahead and I hope more people prepare for it.

  6. Another way to diversify is to stock up on clothing items like underwear and jeans. Buy an extra pair of shoes to store for each member of your household and buy sizes ahead for the growing children if you don’t already have stores of hand-me-downs.

    An example: We have good quality winter jackets in sizes up to adult stored for our young son, for instance. Shopping for non-underwear items used on ebay has allowed us to stock ahead without breaking the bank.

    1. There are probably about a gazillion people in the snow zones this horrible winter that wish they had taken your advice [extra winter jackets]!

  7. The Fed did say on TV they are not raising rates at least for the next two sessions of meetings they planned.

    People have to be aware of the warnings you posted. I have tried to tell relatives but it went nowhere.

    1. What I hear many people say (regarding our present ‘real’ economic situation) is something like this, “it’s too complicated” “whatever”.

      They will simply go down with the ship, which is all the more reason I prepare – because SO MANY PEOPLE will be completely screwed and caught unaware.

      While I hope it never happens in a severe way (a SHTF economic collapse), my gut tells me that we’re walking the cliff edge and most of the people walking it are ‘near-sighted’ and have no clue their walking the edge.

    2. Two points:

      NEVER believe anything you hear on TV (6 corporations own all tv news)

      The Fed works for the Fed. They are not really accountable to anyone. They are a banking corporation. They will always do what is best for the corporation, not you.

  8. Good article. Another investment opportunity is skills. Knowledge & Skills are things that are less dependent on outside forces. For example, small engine repair, welding, gardening, food preservation, leather working, sewing, etc. could all be invaluable. Even if a catastrophic collapse doesn’t occur, these might get you through a job loss, recovering from an injury, or help add extra income.

  9. BUY AMMO…. It is only going to get harder to find and more expensive.

    Also, buy Mountain House or Wise Freeze dried foods. They last longer and are more portable than can food and are cheaper than MRE’s.

    Get a Berkey water filter…. One can’t count on potable water always being available….

  10. We do not have a house payment. We looked into how far in advance we can “pre-pay” our property taxes, (3 years max. in our county) so we just are always making a monthly pre-payment to the county. Of course, we also file an appeal to the “drive-by” increase in assessment the county does each year, and get that reduced as well. Most people don’t know you can indeed “appeal” the assessment the counties file on your property, just follow their procedures to the letter, and it does get reduced, our usually about 45% ON THE AVERAGE.Not perfect, but sort-of acceptable.This article was excellent, in pointing out the pitfalls to relying solely on “your money in the bank”, with the threats of “Cypriot-style haircuts” (bailing in in the Fed-Speak). This advice, counsel, suggestion should definitely be followed, otherwise, we lose everything.

    1. I am shocked how many people ignore the teeth factor. Dentistry is no joke in a collapsed world. Many people also don’t realized that untreated cavities lead to abscess, and tooth abscess can lead to sepsis, brain infection, and death. We just don’t hear about this much in the US today‚Ķ. but it is a major problem in other countries.

  11. Kudos on the getting your health in order. I recently had cataract surgery on both eyes and never, but never has anything made such a regenerated positive outlook on life for me. I didn’t realize how much my sight had went downhill over the last decade. Also if you have hip or knee issues, please get them replaced now, because limping along after teotwawki will not be conducive to survival. Same goes for the chompers, do it now, pulling teeth without the pain killer stuff would be very traumatic while trying to survive after shft. I must confess that I am convinced beyond doubt that diversification in anything other than your own health and survival resources is a waste of time. In fact it is suicidal. Put every dime, every ounce of strength, all of your kinetic energy, and creative ability into the only thing that really matters: your spiritual and physical survival for the time when survival will be all that matters. If there is any other advice: Young people, enjoy your cartilage while you have it! thanks

  12. Over the last many months I have read many articles that stress how much debt our country is in, debt to Gross domestic output(GDP). And I just thought so what, we will manage somehow. Well, yesterday I put the pencil to paper using a GDP = 2.86, the advertised number. When I finished the calculation, it really hit me. Our country(us) can never really get out of debt unless we are hit with new taxes. And what do I now read about. New taxes on savings accounts, pension plans, education savings plans, by the driven mile taxes, and a few other tax methods. So, I must say Ken is correct, take any excess money you have and put in tangible assets.

    1. We cannot TAX our way out of debt. Taxes and The Debt have NOTHING to do with each other. Spending is not restricted to the amount of taxes collected, and always exceeds the amount collected. Taxes are now a form of redistribution of wealth and not meant to run a legitimate government. Taxes now are more a form of LOOTING and oppression, than a way to fund needed civil functions. We must face the fact we now live in a growing tyranny, supported by a deliberately indoctrinated, ignorant, populace. I never thought I would live to see a Marxist as President of the United States….

      The only remaining hope for freedom is Article 5 of the Constitution..that’s it.

  13. A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the “placed in service” date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit may be carried forward until 2016, but it is unclear whether the unused tax credit can be carried forward after then.

    http://energy.gov/savings/residential-renewable-energy-tax-credit

  14. Thanks Ken. Great article. Many may not have “excess cash” but I suspect that many who do are very quiet about it. I find this very helpful.

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