10 Ways to Prepare for a Depression

Filed Under Emergency Preparedness, Expenses, Financial News, Personal Finance

Recently, a few economic naysayers have leaped ahead of those warning about a recession, and are now warning about a depression. They’re not talking about a situation akin to the Great Depression of the 1930s - current US banking and market regulations prevent that severe a disaster - but rather a depression similar to the one Japan suffered following the collapse of its real estate and credit speculation bubble of the 1980s. Their economy suffered deflation and falling wages throughout the 1990s and still hasn’t recovered.

I’m not sure things will get that bad - Congress and the Fed know what happened to Japan and they don’t want it to happen to us. However, they’re slow to act, so we can’t rely on them completely.

If you’re concerned about the possibility of a depression rather than a recession, here’s how to prepare for it:

Pay Off Debt
At the very least, pay off your high-interest debt. Personally, I wouldn’t focus on paying off a mortgage unless you’re meeting all of your other savings and retirement goals, but get those credit cards paid off now. As we’ve seen with the current credit crisis, when banks lose money one place, they try to make it up somewhere else, usually with variable interest credit products. Don’t let them milk you dry!

I wouldn’t worry too much about federally subsidized student loans, either. Those have very generous deferral terms if you lose your job or suffer an extreme financial hardship.

Shore Up Your Emergency Fund
If you don’t have an emergency fund, start one now. Aim to save at least three months’ living expenses if you work in an in-demand field like nursing, and up to six months’ living expenses if you work in a discretionary spending area, like retail or entertainment.

Build Your Network
Don’t just build a network of colleagues in your own field - in an extended depression, you may need to transfer your skills to a new area, so make friends with people in fields where you can use your skills. Especially concentrate on people-oriented businesses that can’t be outsourced.

You should also build your network of friends. During a depression, you’ll come to rely on each other for moral support and sharing goods and food. Make friends with your neighbors now so you’ll have access to their canned goods later (and vice versa.)

Learn to Prepare Food at Home
If you don’t like cooking or your idea of “dinner” is opening up a box of Hamburger Helper and adding some meat, it’s time to learn to cook. Once you start, you’ll discover that it’s really not that hard and usually it’s cheaper, too.

Learn to Shop Wisely
If you don’t already use coupons or look for bargains at the grocery store, learn to shop wisely. See my series on eating well for less for tips for doing just that. But in a depression, you may need to go further. Become friends with generics and store brands of comparable quality and safety. Visit your nearby 99-cent store. Although they’re also raising prices, you can still stock up on staples for much less.

Plant Some Food
If you have a garden, it’s time to make room for food. In addition to herbs that can add freshness to that 99-cent canned stew, plant hardy vegetables native to your region and native fruit trees. Although there are initial start-up costs, once your food is growing, you should see some savings.

Learn to Live Below Your Means
All of the above can be summed up as: learning to live on less. Even if you can spend more, that doesn’t mean you have to. Instead, send your raises directly to savings and learn to budget your money to have something left over every month. That will make it easier to cut back further if a depression occurs.

Keep Your Car in Good Condition
By this I mean a car you own, not a car you lease. A car you lease could quickly become a car you no longer have. But if you keep your paid-off car in good condition, it will serve you well during a serious downturn.

Buy Classic Clothing Styles and Keep Them in Good Condition
Don’t worry about buying the latest trendy thing and instead focus on high-quality classics, and then keep them in good condition. I have shirts and jeans that are more than five-years-old that are still in good condition and still in style. A classically-cut white shirt never goes out of style. A good men’s suit is always in fashion. When it comes to trends, stick to the affordable accessories to dress up your classics. Even high-quality clothing is affordable if you own it forever.

Avoid Super-Aggressive Portfolios
Unless you’re young and single, don’t put the bulk of your investments into a really aggressive portfolio or stock in the hope that you’ll hit it big. Instead, take a balanced approach with index funds, bond funds, and international funds. If you’re youngish and want to take more risk, you can also build a position in a growth fund.

Vote Wisely
Finally, vote for politicians who are more concerned with the needs of real people, not lobbyist groups and big corporations. If a depression comes, it’s the people who ultimately bear the brunt while hedge fund fat cats glide around the Mediterranean on yachts.

Now as you look at this list, you might be thinking: shouldn’t I be doing all of this anyway? Yes, yes you should. Being frugal is always a good idea, even when the economy is flush, because you never know when your personal economy might go down the tubes.

Do you have any other ideas for preparing for a depression? Tell me in the comments, or post it on your own blog and link back to it here.

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20 Responses to “10 Ways to Prepare for a Depression”

erik on August 19th, 2008 9:08 pm

Awesome post Aryn. This is something that I’ve been thinking about for a while…and preparing for. Who knows? Shall we hope for the best and prepare for the worst? I think so. I appreciate your insights. Keep it up.
Depression » Blog Archive » Depression And Money on August 20th, 2008 1:05 pm

[…] 10 Ways to Prepare for a Depression […]
Stacey on September 23rd, 2008 5:58 pm

Thank You for the post! I have started to store can goods and food. I think people really need to take this step. So what if you have 4 months of food stored in the basement? Better to have 4 months of food sitting there than to have 4 months of nothing to eat. I like to think be perpared then just say “it will all work out”. God bless everyone!
Aryn on September 24th, 2008 4:04 pm

That’s a great suggestion, Stacey. I have food for an earthquake (3-4 days), but I really wish I had room to get serious about canning (and also room for a garden.)
nic on September 25th, 2008 9:06 pm

So - I have always laughed at ‘food hoarders’ because I always assumed they were saving for the apocalypse or something crazy I actually went to the store today and got enough beans, rice, lentils, peas, etc. for us to get by a couple months for around $50.00. Better safe than sorry - its a small price to pay considering the alternative. I figure that if groceries become terribly expensive it would at least give us enough time to figure something out.
travis on September 29th, 2008 4:59 pm

Stockpile firearms and ammunition and become properly trained in the use of them
Aryn on September 29th, 2008 5:16 pm

I’m not big on guns, so I’ll be skipping that one, but having the ability to hunt your own food could come in handy if things get really bad. Let’s hope it doesn’t come to that.
Arian on October 7th, 2008 10:59 pm

This is relative but more less an example of a good idea.
During the Great Depression, Popcorn became extremely popular. I had read a story about a man who lost all his farm land, and managed to purchase a popcorn machine. Long story short, he ended up being able to buy back his lost land, and he made enough money to hire people under him to do the same.

So worst comes to worst, I might be selling yins popcorn haha.
Carolyn on October 9th, 2008 3:02 pm

Learn to make a solar oven from a cardboard box or even a pizza box, and if you do not know how to make simple biscuits and cornbread, learn how. Store up flour and cornmeal by using permaguard or diatamateous earth, which keeps the weevils and bugs out of it. You can live a long time on bread and gravy. Gravy is good if you make if from a roux and it will even taste like it is made with meat. Soud extreme? Things may get extreme.
Aryn on October 9th, 2008 4:21 pm

For those of you interested in homemade solar ovens, I found instructions here: http://www.solarnow.org/pizzabx.htm
Aryn on October 9th, 2008 4:23 pm

Nic, I also recently stocked up on beans. They truly are a wonder food. For those of you interested in beans, buy them dry rather than canned. You can cook a whole bag at once and then freeze the result into smaller bags with some cooking water. Follow the instructions on the bag and you’ll have cheap, delicious beans with less sodium than canned.
Ted Seay on October 10th, 2008 1:37 pm

My grandmother stockpiled toilet paper. Seemed like such a strange thing for my brother and I growing up. Now, I am racking my brain trying to figure out what else she kept in that pantry. I could have learned so much from her about this, she had to live through the big one.
Marie Martin on October 10th, 2008 4:40 pm

Oatmeal is also a great staple. Takes very little energy to cook and super good for you - storing dried fruit is valuable if you live where winter suspends the growing season.

As far as the gun issue - we do have them - not for hunting but they can be useful on our farm when dealing with possibly rabid animals like raccoons (yes we had one).
Bob on October 14th, 2008 6:12 pm

We increased our garden 3 fold this year.
Freezing over 40 quarts of corn, lot’s of tomoato’s, string beans, squash and potato’s.
We raise our own beef as well.
Now we are concentrating on dry goods.
We have bought several bags of dried beans and starting now on canned fruits which has a shelf life of 2 years. Also, some instant coffee and powdered drink mixes such as tang and powdered tea. Wife uses tons of coupons and this helps out greatly. Will also be stocking up on toilet paper and soaps.
Don’t forget the bleach as well
I have plenty of ammo to defend my food.
God Bless
Denise on October 14th, 2008 10:14 pm

I have dreaded for this day to possibly come. For those of you who has had those great aunts, grand mothers, etc, start thinking back on all the things they used to do. My great aunt used to prepare meals on a wood cook stove and if that had problems the old stone fire place. Never did I know that I would had to reflect back, we didn’t have electricity and thank God I got a house with a fireplace, boy did it come in handy for warmth and to prepare meals. I cooked beans breads and fried chicken on my fireplace. Never say you can’t because survival says you can, especially with having a family and little hungry faces are depending on you. And, about guns, I don’t favor them at all, but, predictions may show, for lifes sake, yours and your family for what ever reason you may need it. Just be so very careful yourselves, nothing worse then un-careful mistakes. God Bless You All, and stay safe.
cammie on October 23rd, 2008 10:14 am

I worry about being able to provide for my 1 year old. My grandpraent lived through the last depression. They brushed their teeth with baking soda, drank powered milk, and didn’t have a trash can because thwy produced so little waste. They were well off, put continued to wash tin foil and reuse it. Papa also had a safe and quite a few guns. Considering the state of our economy I understand them much better. I just wish they were still alive to give me advice.
Sharon Finley on October 24th, 2008 12:35 pm

We need to turn our hearts and prayers toward God. We must ask God for forgiveness because we have sinned against Him - greed, not loving our neighbor as we were commanded, and not practicing the Ten Commandments. God has blessed us with so much, and we have forgotten Him. This worldwide crisis can be overcome if we sincerely put God in our lives.
Aryn on October 24th, 2008 4:50 pm

Cammie, it might be time to try making your own toddler food. You can steam carrots and other veggies, then cut them into small bites and freeze them. Buy them fresh from a local farmer’s market or produce stand to get them at the peak of nutrition and the best price. They’ll keep for several months, then you can supplement them with affordable cereals.
Kathy on November 6th, 2008 2:34 pm

I just had our house wired up with Brinks-motion detectors etc. Have a gun license so stocked up on shells and am thinking of buying gold boullion. If you live near an urban area, expect crime to escalate. And thanks so so much to the Obama supporters out there.
Greg on November 11th, 2008 4:00 pm

I also, want to thank Obama supporters as well as the liberals who voted for the bailout. Why can’t the fat cats live on their savings, instead of putting us further in debt. God Bless the military for
tolerating the idoits (our government) who would rather give the money to the banks and car companies, then to the soldiers who deserve it.
If the depression comes in 2009, you can bet the blame will come on someone else….
not our outstanding government.
Yes I am preparing for a huge turndown, and am getting alot of firewood also. Thanks for the other tips. Guns good—-taking away the 2nd amendment bad.