I called my favorite banker today.

I wanted to hear his suggestions on what (if anything) people should be doing to prepare for an economic meltdown.  In the minds of people watching government debt, spending and financial policies in general, the consensus seems to be WHEN we have a meltdown, not IF.  My banker agrees with me that, absent a significant change in fiscal policy, it is only a matter of time.  So what is his/my best advice on how to prepare?  Most of these pointers are nothing new; just some very basic steps you can take to be ready… should the need arise.

• DO NOT carry any credit card balances.  Only charge what you can pay off at the end of each billing cycle.

• DO NOT borrow money for consumer spending… furniture, appliances, vacations… not even automobiles.

• Prudent business borrowing may not be problematic.  Just use your best judgement and don’t borrow more than you really need to accomplish your business objectives.

• Borrowing for a home loan is another kind of debt that may be necessary, but pay it off as soon as you can.  My banker has a great suggestion to help accomplish that goal.  Make a WRITTEN chart that separately itemizes your principle, interest and escrow payment.  When you see how little is actually going to principle, it will motivate you to pay some extra against the remaining principle balance every time you can.  SEEING your balance reduce keeps it at the front of your mind and helps you stay focused on paying it off completely.

• Keep a reasonable amount of cash in a secure place at home.  In the event of a government dictated “Bank Holiday” or an economic disaster, you will need enough cash to carry you through.  How much you need is a personal decision, but I think enough to manage for a couple of months isn’t overkill.

• Buy gold or silver?? Maybe some, if it makes you feel better.  My banker leans toward gold if you are determined to buy precious metal.

• Debt free, income producing real estate is a good bet.  Even some debt on this kind of investment isn’t a terrible thing.

This is actually sound advice for financial stability even if there ISN”T a meltdown.

My banker insists you should not worry about the money you have “in the bank”.  He believes it is secure.  Just remember, he is a banker (smile).  We agree that having possession of some kinds of hard commodities wouldn’t be a bad idea.  Generally speaking, the best preparation is to reduce or eliminate your debt and have some diversified kinds of resources in your physical possession.

Food supplies can be interrupted in times of emergency.  Have you seen grocery store shelves nearly empty just before a major storm?  Have you seen lines at a gas station?  If you live in a city, it might be important to have a reasonable supply of food and water… don’t fill your garage and basement, but have enough for a couple weeks to a couple of months.  If you are in a rural area, you may not find food and water to be as difficult to locate.  Sound extreme?  Do as much or as little as you are comfortable with.  I know some people who have done nothing.  Others have a complete retreat fully stocked with disaster provisions.  You might want to consider whether it makes sense for you to own a small generator and have some fuel on hand.

If you are inclined, you can also buy books or hire a financial planner.  Personally, I think a better choice would be to follow the advice in this article…

…and send us a few dollars to keep the lights on in the meantime.

***Gordon Howie is an author and CEO of Life and Liberty Media***

     “It’s not about right or left, it’s about Right or Wrong.”

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