Every financial crisis is both terrible and unique. It’s extremely difficult to predict what exactly will go wrong because there are so many ways that things could go wrong. Although the next financial crisis may come as a surprise, you can be prepared for the worst.
You don’t have to live in a bunker surrounded by instant noodles and DVDs to be ready for the next disaster. Here are 5 things you can do now to make sure that you’re not caught unprepared.
Keep some cash – local and U.S.
Cash can get you what you need even if banks go down or ATMs stop working. If your credit or debit cards don’t work, you’ll want a way to access money. So keep enough cash at home (preferably in a safe) for you to get by for a few weeks or months. And since much of the world is moving towards negative interest rates, you might be better off holding on to your cash at home and getting zero percent interest rather than losing money keeping it in a bank savings account.
The U.S. dollar is the default global currency and is accepted almost everywhere in the world. In the developing world – and most of the rest of the world for that matter – a US$20 bill can get you out of tough place. And where that doesn’t work, a US$100 bill will. Having a stash of USD can be a real lifesaver if the local currency drops like a stone or becomes unavailable (such as in Venezuela).
Use different banks
It’s important for you to diversify your personal equity and your investment portfolio. But it’s just as important for you to diversify where you bank. Don’t assume that you’ll get your money when you need it just because your bank is covered by the local deposit insurance organisation. Keep some money in a bank that’s “too big to fail” (at least until it’s allowed to fail). And if possible, keep some money in an account in a different country.
Periodically download personal records
Personal data and records that are online now might not be available when you need them. Download your personal records from time to time and store them somewhere safe. Don’t forget things like bank or brokerage statements.
Set (and stick to) stop-loss levels
If you own shares, make sure each of them has a stop-loss level (the lowest price that you’re willing to sell to cut your losses if a stock falls). And if your stock hits the stop-loss level, sell. Don’t trick yourself into thinking you can still recover your losses. Consider this: if you own a stock that’s down 50 percent, it has to double before you break even. And how often do stocks double? Not often. It’s much better to set a stop-loss level of (for example) 25% below where you bought it. You can raise the stop-loss level as the share price rises. That way you will still have money to invest.
Own gold and/or silver
I’ve talked a lot about gold and silver. They’re both great insurance. They don’t go up and down with other assets, and right now they’re a good investment. And gold and silver go up as global market uncertainty increases.
By following these 5 easy tips, you can be ready for the next unpredictable (and unavoidable) crisis.
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