4 Ideas on How to Increase Your Financial Security
The world is crumbling, or at least that’s how it looks in the finance world. If you are not involved in financial assets and think, why should you care? The truth is, as long as you have a bank account and use money, you are in the financial system and exposed as everyone is.
But don’t worry, I got your back. I will give you some ideas to reduce that risk, especially if you are a person that is not into investing but only into traditional saving.
Something is going on
Before jumping to the list of ideas, I want to leave you a few events that happened in recent weeks for you to have a bit of context.
- The gas pipeline Nord Stream was attacked: This will add more inflation to Europe due to higher energy prices. And also will bring misery to emerging countries that couldn’t buy the gas they needed because Europe did it at a price others couldn’t pay. ( Check my previous post, Why energy Equals life)
- UK pension funds almost bankrupt: A couple of days ago, half of the pensioners from the UK almost lost their pension contributions because of the price of the UK bond. On top of that, the UK government is a real mess, going for its third prime minister in 2 months.
- Switzerland has problems with its banks. Check what is going on with Credit Suisse. Also, it seems that some banks are having liquidity issues so the swiss national bank is “secretly” helping them.
And this is just Europe. China, Japan, and the emerging markets are in trouble too.
These are just a few things that have come up lately and would deserve a whole post for themselves. But for the sake of this post, let’s just say it’s a mess out there. And this can affect you via inflation, the currency you hold, or the banking system if another great financial crisis comes our way again.
So the question is: What can we do to protect ourselves from events we cannot understand?
4 Ideas on how to increase your financial security
- Cash: There are two general things that you need to know. First, in most countries, the money in your bank account is not yours; it is the bank’s. So in case, they go bust, they can take it to cover their losses. This happened recently in 2013 in Cyprus, for example. The second thing to know is that your money is insured for up to 100.000 euros. But even if you are insured, having a bit of cash on hand is better than waiting for insurance to cover you.
So take some out of the bank and keep it somewhere safe. There is no need to take it all, and you can still enjoy the comfort of digital life. But remember that if it is in your hands, it will be always available to you.
Also, if you have more than 100.000, you better split it between different accounts in different banks to add an extra layer of safety. Since an amount above that is not insured. - Currencies: Another way to mitigate risk is by splitting your money into different currencies. Nowadays, online banks like Revolut make it as easy as installing an app on your phone. So with a few clicks, you have most of the currencies within your reach.
The US dollar (USD) is the world reserve currency, so traditionally, this is the place to look for safety. However if at some point the federal reserve cuts rates to zero or starts buying debt, as the Bank of England or European Central Bank is doing now, that will be your signal to move out of it.
Another currency to look at is the Swiss Franc (CHF), which will probably be one of the places where European money will fly when inflation starts to rise.
A no-go is the Euro, the British pound, or the Japanese yen. Those guys are in big trouble. - Countries: We mentioned above that splitting your money into different banks increases your safety level. If you would like to take it a step further, you can create an account in a bank from a different country.
Now, it might be a bit of a hassle to take a flight somewhere and try to get a bank account without an address there. Or even more problematic, to travel further enough where having an address is not a requirement.
However, the online bank Revolut, is registered in Lithuania and your money is insured by their authorities, so if you leave anywhere else that is an additional layer to take into consideration.
For those thinking about the Wise app, watch out, they are not a bank, and the money you have there is not insured. - Gold: We have previously discussed in this blog, the gold investment thesis. Now instead of looking at it as an investment, we can look at it as insurance, as a way of storing wealth across time.
Consider that an ounce of gold will still be an ounce of gold in 20 years or 200. But a hundred euros note might be devaluated potentially to zero over time. That’s why gold is the ultimate protection against government mess-ups.
There are 2 ways of owning gold.
The safest is that you buy it from a gold dealer and keep it somewhere only you know. If you live in Prague, you have this as an example. If you live somewhere else just google for gold dealers, and you might be surprised how many of those there are, and you had no idea about it.
Also, if you value privacy, you can buy it in cash for up to 250.000 CZK in Czechia, and 2.000 euros in Spain. In the rest of Europe, I believe it oscillates between 8.000 &10.000 euros.
Now, if you are someone concerned about being robbed at home, having too much gold to transport, or having to fly rapidly to another country where you don’t want to be questioned at security control.
The solution is to buy gold and have it stored in a vault in a different country. This might sound a bit like a spy movie and out of reach for you, but in reality, nowadays, it is very easy. There are companies that act like banks without being one, where they buy and store the gold for you and charge you a storage fee.
As a reference, you can check the BullionVault services. They have vaults in Switzerland, Singapore, and London, and you can have your gold stored in any of them for a minimum fee of 4 dollars a month. Less than Netflix 🙂
Wrapping up
As you can see, there are many things you can do to increase your financial security. Some might think that this is a bit extreme and conspiranoic. I would tell those, what is the worst thing that can happen for having some cash at hand or having different bank accounts? The answer is nothing; you might have to put the cash back into the bank. That’s it.
On the other hand, getting a different currency or gold may give you a loss from a local currency perspective. Their price changes over time. Just remember, we are not looking at these ideas to have a profit. We are not investing here.
We are buying insurance to protect our savings, and that costs money.
Think of your car or your medical insurance. You pay for them (that is a loss), and the best scenario you can imagine is that you don’t have to cash that insurance. That would mean that you or your car are ok.
I would be happy with that loss, knowing that I am covered. The same philosophy applies here. There is no reason not to take responsibility and make sure you are protected. Things are weird out there and don’t hurt to be mindful of it.
I hope this post brought you some value. If it did, share it within your community so they can benefit as well, and I get to increase my audience :p
I leave you two educational links to the UK crisis and the Swiss one mentioned above.
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