Preparing For Multiple Economic & Political Scenarios

The mainstream financial advice in America these days is to be smart with your money, don't overspend, and invest regularly over time. These are great pieces of wisdom, and are all true, although investing regularly over time makes a huge assumption. That assumption is that America's trajectory or the American economy's trajectory is going to continue higher. Even during a painful recession, the common view is that this is temporary and that we'll bounce back... eventually.

Even financial all-stars like Dave Ramsey (whom I love and think is great) believe that America will be fine and stocks, real estate, whatever will all be higher down the road.

My questions are:

• What if things are not better down the road?
  
• What if the trajectory is lower?
  
• What if things are really bad down the road?
  
• Even if these possibilities are remote, even if the chances of bad things happening on a large scale are very small, should we prepare for such a possibility?
• Should we only plan for a growing economy with happy days in America?
  

While the mainstream financial advice quoted above is a sound strategy, I'm skeptical that it is all encompassing.  You should take actions of investing, but is that it?  I believe you should do more than that.

I believe you should invest over time in sound companies in the stock market.  I believe you should invest in real estate.  However, I believe you should also invest in your own security should things get ugly economically or politically.

Harsh Realities

Politically, our country is divided as ever. With recent passing of at best, controversial and at worst, unconstitutional legislation such as the health care reform bill, you have bitter divisions that will not be smoothed over for some time.

Economically, it's been well documented by many experts and bloggers like myself that things are not improving underneath the surface.  We have major economic hurdles ahead and they make be with us for years.

Add the two together and you can see the possibility of some ugly scenarios.  Will people be willing to help others struggling when we're so bitterly divided?  We're sowing the seeds of some ugly scenarios in the future I'm afraid.

Even if the chances for these ugly scenarios are remote, the question remains: what if they occur and what will happen if you're unprepared?

Risk

Financially, we're well versed in minimizing risk through techniques such as diversification, but when it comes to political or lifestyle risk, we're unable or unwilling to prepare.  Think about preparing for economically or politically painful scenarios in the future as another form of diversification.  This might help you see the reasons that you should take such precautions.

You're probably ahead of the game when it comes to preparing for prosperity.  You're investing in your 401(k), you're planning for your kid's college, etc.  We won't get into that too much.  So what about planning for the opposite of prosperity?

Increase In Crime

In the event of an economic depression or meltdown, crime is likely to increase dramatically.  Couple this with under-funded police forces and you can see the need to be able to defend yourself.  I'd recommend considering the purchase of a firearm and enrolling in significant training on such a firearm.  It's important to note that owning a firearm but not being trained with it is probably worse than not owning a firearm at all.

Supply Chain Disruptions

Another possibility in an ugly scenario is a disruption to the global and national supply chains that provide us with the goods we need, especially food & water.  The best way to prepare for this possibility is to stockpile some goods yourself.  For additional resources on stockpiling, check out the following:

• Start a food supply
• Start a water supply
• The Alpha Strategy - the ultimate defensive financial strategy