Establish a Budget
Establish a “real-live”, working budget. What? Seriously? A budget? YEP. This is prep #2 for a reason, and is CRITICAL. Having a solid budget in place from month to month is a giant hinge that the rest of your “escape plan” swings on. So many of the world’s people are trapped in bad life situations, simply because of their finances. Obviously some of this stems from things that people have no control over, but the reality is that most of us DO have a lot of control over our financial situations. Developing a monthly budget and a beginning a savings component assists you with buying preps, paying unforeseen medical expenses, job-loss scenarios, and a ton more. It dramatically lessens the number of nights you lay awake stressing about keeping the bills paid and lights on. And above and beyond helping you make sure the necessities are covered, a budget helps you spend money on the things that you most want to spend money on (i.e. going out to lunch every day for a couple months vs. a cool weekend trip).
Fire Up An Emergency Savings Account
This is one you’ve already heard everybody else preach about since you were a little kid, so I won’t pound the pulpit too hard on it, but essentially, your emergency savings should be 2-3 months’ worth of living expenses. In a world that teaches us to spend more than we make, this can be really tough to build up. By far, THE SINGLE BIGGEST help in getting there, is creating a usable, working budget (as also covered in Phase 1). Once you have a sturdy budget in place, you can make compromises and sacrifices until you get to the point where you are putting away at least some amount of money each month. Maybe you can only afford $100 right now. Maybe only $20. Even if it is meager however, you should do it. Getting in the habit of socking away at least some money that you don’t touch is the habit that modern American life has trained most people out of. You never know when your circumstances could materially change. You can receive inheritance money, you can change jobs or get a raise, or maybe an unexpected tax return puts you in a better financial situation. If you already have a working budget and have made the decision to be disciplined and put money away, it will be much easier to maintain what you’ve been doing and simply plug in bigger numbers. Another thing to decide with your savings account, is when you’re allowed to withdraw. Maybe it’s medical emergencies. Maybe car emergencies. Maybe it’s both of those and emergency home repairs. Maybe it’s none of those, but whatever you decide, you should write down and stick to it. This helps to take the emotion out of the moment when you have something arise later—ESPECIALLY if you are doing this with a partner, and you guys are divided.
Protect Your Savings From Risky Banks
Here’s the reality: the financial institutions, markets, and currencies of the Western world are incredibly risky. They just are. They are backed by insurances, central banks, and governments, which are inflated, devalued, over-leveraged, and insolvent. So, if you are holding assets in them, you are exposed to an enormous amount of risk. Especially if this is the ONLY place that you are holding your assets. Without warning, your portfolio could lose tremendous value, you could have your accounts frozen (a la Greece, Cyprus, Argentina, etc.), or become subjected to other similarly ill-fated ends. It’s time to give yourself a layer of protection from all this. There are better alternatives. There are more highly capitalized banks within more sound financial jurisdictions where you can keep your hard earned savings. You can invest in vehicles and markets that aren’t controlled by a handful of central bankers and favor-trading politicians. There are retirement accounts that exist outside of the financial mega corps that most people have retirement accounts through. You can hold a portion of your savings in another currency, that doesn’t face the same devaluation that the Dollar and Euro do. The time to do this is now.
Start with getting a savings outside your country of residence, at a highly-capitalized, highly-liquid bank. With as little as a $5,000 deposit and a couple forms, you can open an account in one of several sound banking jurisdictions. More information here.
Cover Your Bases With Insurance
Get and maintain at least some insurance on your car, house, health, and life. Yes, insurance as we know it today is a complete racket, but until you have greater resources and are further detached from the modern American life, HAVING insurance is better than the alternative. Not having insurance (or enough of it) can land you in a world of hurt. Just ask the victims of Katrina, Sandy, Mt. St. Helens, the Southern California fires, or 100 other disasters if their insurance was worth it. Ask any hospital patient if health insurance was a good investment. Feel me? I recommend that your priorities be:
- Health Insurance
- Home Insurance
- Life Insurance
- Car Insurance
Obviously if you operate a business, there are business insurances that could be applicable to what you do. If this is the case, you are likely already leaps and bounds ahead of the pack in understanding the “lesser of two evils” that having insurance is.
Create Your Own Income Stream
This is an “800 Pound gorilla” topic, but the bottom line is that being completely dependent on your 9-5 job is being widely exposed to an incredibly fragile aspect of the modern American life. It means that you could be downsized, fired, or replaced. It means that you are at the mercy of somebody else’s ideas and whims. Many people have already attempted to create their own income streams, so if this is you, you could have a great head start. If not, these are the best resources I’ve found for helping to get the wheels turning:
- Noah Kagan – How To Make a $1000 a Month Business
- Tim Ferriss – The 4 Hour Workweek
- Gary Vaynerchuk – Crush It
- Chris Guillebeau – The Empire Building Kit
The common thread between the messages that these guys preach is that they teach “low barrier to entry” income generation. No elaborate business plans, funding, approvals, large teams, or anything else. Just lean action plans that give you the quickest route to income generation from your present situation (particularly Noah Kagan’s $1000 a month course). This is how you and I need to be thinking about generating income. What are the shortest routes to being able to create revenue for ourselves?
Making The Jump To Full Time Employment
Once you are able to begin producing at least a portion of your income, then making the jump to full time self-employment could be as simple as scaling what’s working. If you are collecting retirement, this may be enough money to escape the 9-5. The other thing to consider in making the jump to full time self-employment is your monthly cost of living. Are there some expenses that you can temporarily cut out while you are making the transition? Or if you can’t cut them out altogether, are there less expensive alternatives that you can use to substitute for a time (i.e. Netflix instead of cable). Nobody says this step has to happen in a certain time frame, and it could take a while. If it were easy, more people would already have done it. Nevertheless, finding a way to escape the 9-5 is an enormous pillar in the larger goal of escaping modern American life.
Transfer Your Retirement Account From a Traditional Brokerage to One That Is “Self-Directed.”
In Phase 2 we talked about some of the many vulnerabilities posed by Western markets and financial systems. Having a retirement account in a large brokerage puts you square in the middle of that risk. These brokerages are heavily invested in government bonds (a really bad investment class in this day and age), and are in bed with politicians and central bankers. If a new piece of legislation gets enacted that restricts the kind of investing you are able to do, or possibly even makes bonds investing mandatory, you can believe that the large brokerages won’t hesitate to conform, and require the same of you. Even if something that drastic never were to happen, having a “traditional” brokerage account still restricts the types of investments that you can make. For instance, you could never buy a 20 acre ranch with your Charles Schwab IRA account, even if it’s the best investment under the sun. Similarly, you can’t go out and buy 100 ounces of physical silver. In many cases, there are foreign markets that you don’t have access to with your brokerage account. Converting your brokerage account to one that is self-directed allows you to have the ultimate flexibility. You can invest in REAL assets (like physical real estate, and physical precious metals). You can invest in virtually any market you want. And as an added layer of protection, you can hold the assets in your retirement in other jurisdictions, where it would be next to impossible for your home government to seize, freeze, or otherwise control your hard-earned savings. As you can imagine, this kind of investment vehicle takes some careful structuring. It’s not something that you want to “wing it” on. Fixing sprinklers is a great DIY project, playing around with your life’s savings is not. There are some very specific requirements that need to be followed in order to receive the maximum benefits (and avoid possible penalties!). Do yourself a favor, and get expert legal help converting your retirement account to one that is self-directed.
My Videos About Financial Self Sufficiency:
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