Jun32011

54 Comments

Survival Survey: The Debt Question

A few days ago I posted a few suggestions for preparing for the coming apocalypse, however you define ‘apocalypse’.  One of them was to become debt-free.  My reasoning is that having very little, or no, debt places your family in a more secure position for the future, whatever comes.  However, my suggestion was met with a bit of criticism.

image by alancleaver_2000

Mike said, “That said, a statement like this just doesn’t make 100% sense. If our economy experiences hyperinflation or a complete meltdown shouldn’t I feel a bit like a fool for working my butt off the next six months to pay some credit card companies $2,000 when two years from now I might be able to sell a banana for $2,000 or if the credit card companies no longer even exist?”

Then Sierra Dave chimed in, “I chose having the food, debt be damned. Any argument otherwise is to leave you unprepared.”

There were a handful of comments who supported my position.  Master Po said, “Don’t fall for the idea that debt will disappear if TSHTF in the economy!! Unless our nation literally falls apart into a Mad Max world, I assure you someone somewhere WILL eventually come looking for repayment of that debt. And don’t be surprised if the full weight of law and government is behind them!”

image by MENE TEKEL

And Mary kind of stradles the fence, “Mike makes a point that I have pondered myself. From a stand point of my principles, I couldn’t do it, because I believe in making good on what I owe. For me, it’s my “word and credibility” that would keep me from taking on debt for tangibles and hoping the credit card companies wouldn’t be around to collect.  On the other hand, having a small amount of debt that I would still pay off, even if the dollar wasn’t worth as much probably wouldn’t bother me, after all, it would be the boat we were all in.”

So, this Survival Survey asks, “Where do you stand on debt in the face of a coming economic collapse, be it hyperinflation, deflation, whatever?  Do you rack up debt buying food and other supplies and not worry about paying off the debt?  Do you pay off all debt, except for maybe the mortgage, as quickly as possible?  What should you do about debt in today’s very uncertain world?”

Mike and Sierra Dave have made some very compelling points, and I’m considering making the minimum payment on that last bit of Visa debt this month!  What say you?

 

 

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I'm the original Survival Mom, and have been helping moms worry less and enjoy their homes and families more for 5 years. Come join me on my journey to becoming more prepared to handle everyday emergencies and worst case scenarios.

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(54) Readers Comments

  1. I think everything in moderation. Of course you shouldn't rack up debt to buy supplies. And in light of the current situation, it's probably not wise to put every last penny on debt if you have only a couple days food in the pantry. Having food and supplies is a top priority.

    That said, we paid off our credit cards in March and are $1500 from paying off our car loan, leaving only mortgage and utilities. And I don't regret it for a minute. The peace of mind that comes from not owing the Bank Of Whatzit monthly payments is incredible! And allows extra money, free and clear, to buy supplies.

    I totally agree with Master Po…unless Armageddon happens, SOMEONE will be manning the phones at the collection agency.

  2. I can see both points of view, Lisa. I think it's a balancing act. Like you, I'm an advocate for beginning preparations by buying 1-2 extra of everything you use on a regular basis every time you go shopping. Once those basics are in place, it's helpful to set a budget each month and focus on one area at a time. Longer term food storage, first aid, toiletries, power outage cooking, etc. It's much less overwhelming from a planning standpoint that way and makes it easier to manage financially as well. A win-win. :-)

    I also think *not* rushing out to buy everything all at once on a credit card is often a better strategy to keep you really focused, especially when money is tight. Doing those massive stockups can make it easy to fall into the trap of buying a whole bunch of "Oh, and I'll throw this in there too – what's another $20 when I'm already spending this much?" stuff that isn't really necessary or a priority. Having a monthly plan of how much you can spend and what you're focusing on helps you look for specific bargains on the items you *know* you need most.

  3. The correct answer depends on when you expect a problem and what type of problem you expect.

    We don't know if the economy will collapse or not. Or even if it will just be a personal economic collapse.

    So you prepare for both. A life with a collapse and a life without a collapse.

    My answer is that you should not prepare for economic collapse until you are prepared for a no-collapse world.

    This means paying down your debt at a prudent rate. As usual, balance in all things.

    • I agree 100% – you have to plan for the possibility of NO collapse just as strongly as you plan for a collapse. The elimination of debt is the quickest path to experiencing true liberty and peace of mind. Besides, why pay MORE in interest than you have to? Don't leave yourself "cash poor", but I would advise targeting debt as aggressively as makes sense in a given situation. CC debt has to be eliminated ASAP, because paying 3-5 times more for an item over time, just doesn't make any sense at all. Once the debt is gone, it is almost unbelievable how many options and opportunities seem to arise in your life. Debt is financial cancer and modern economic slavery.

  4. I think that balance is important and I also have to remind myself that my current position with debt and with prepardness are different then everyone elses. If I was new to preparedness and did not have the supplies I do, I may think debt is the way to go, but with a year supply plus of food and many other items. I'm worried more about details, holes and education.

  5. Let me add two comments:

    1) If you take the extra cash from making min cc payments and bank it so that later you can pull it out and pay down/off your cc debt (dont forget the massive interest that will build up on that debt!!) that *might* be a strategy. BUT, if you spend the cash too then you’re digging your own financial grave.

    2) Last year on another pepper site a guy made a comment that if he knew for sure when TSHTF would happen he’d max out his cc for press and the heck with the debt. He was roasted for that pov.

  6. I'm a big believer in no debt. There will always be someone coming to get your money, there won't be a total collapse. Some debt is OK, like property (modest level of debt compared to your earnings), possibly transportation if it helps you make money, like go to work that is too far to walk/bike or go to places, our family is a one car family.

    We have always been penny pinchers and I really didn't like my last job. I was able to quit and reschool (used to be engineer) myself in programming and am now enjoying life, that would have been impossible with a high level of debt. We should live life so we have a high quality of life if something happens or even if it doesn't (as the survival podcast Spirko says).

    • Excellent post and attitude. You are spot on – as is Jack Spirko at TSP. If all you do is live like there's no tomorrow, there probably won't be one there for to enjoy. Congrats on your programming gig. That is my profession as well : )
      But by living debt free, you were able to exercise true freedom over your life, and quit that job you hated. No way you can do that with debt. I'm inspired everytime I hear stories like this!!

  7. As preppers…many of us are returning to a more traditional way of life. Why should money be any different? It wasn't that long ago that frugality was a standard practice. If growing and canning your own food is more self-reliant…then being out of debt is too. My grandfathers and great grandfathers would never rack up tens of thousands of dollars in debt!

    It sounds like some people are willing to hedge a bet on what type of financial collapse we will face. This gamble, that the potential benefits of a collapse of the dollar will benefit those who owe creditors, is contrary to our Nation's origins. That's the type of thinking that got our Nation into this mess to begin with! Put it on the credit card…pay it of later.

    We will always owe taxes to someone…but freeing up money for purchases like: staples, bartering items, and even precious metals is an old-fashioned way of thinking. I'm more in favor of being "old-fashioned" these days!

    “Creditors have better memories than debtors.” and “Necessity never made a good bargain.”
    ~ Ben Franklin

    • I love your post – spot on all the way around!!

  8. My husband and I have pondered this for a long while – we haven't used lifestyle (consumer) credit for nearly ten years, and I can't say we're any better or worse for it, except that we don't owe anyone anything, or we owe very little. Using credit would have been easier, but I am confident that debt=exposure, which is counter to a "prepared" philosophy. Preps are assets – if a judgment is filed against you, say in the event of a credit card default, they can be seized and auctioned like any other property in order to satisfy the judgment. If you do not reveal the assets to the court, you are perjuring yourself – lying. It's naive and irresponsible – not to mention dishonorable – to approach the situation from anything other than a standpoint of absolute integrity.

    As is obvious, the Mississippi river or a tornado hitting your house is more likely that the SHTF, zombeez, terrer'ysn, etc, so your years worth of preps spread across the whole county won't do you any good, while a solid emergency fund held by a trustworthy credit union or even a family member will facilitate your family's return to normalcy. I am a Dave Ramsey fan, and agree with his non-credit use advocacy, but I would switch the "baby steps" a bit in the current economic climate. A solid six month emergency fund, and a years worth of food should and would be accumulated along with my getting out of debt. I do believe the two can, necessarily, happen simultaneously.

  9. Sometimes, I wonder if part of the prepper anxiety is fueled by feeling precarious in the everyday world. I'm not in debt. I haven't been in debt for years. Having a full pantry makes sense, but I don't have the same sense of urgency other preppers might feel, mostly because I don't have any impending sense of financial doom concerning my current life.

    My advice is pay off the debt. Make your preparations by one and two, not three and four, until you can afford to make those preps by three and four. The payment for those credit cards and car loans will come due. Somebody is going to pay. If you default on your obligations because of concern over an economic collapse, it won't be the banks that pay, but people who are careful with their funds and pay their obligations. That payment will be in the form of dropping home values, job loss, inability to get loans of any sort and skyrocketing interest rates.

    Yes, the banks fueled our current economic crisis, but so did a national, and I suppose an international attitude, that tomorrow is forever, money is cheap, and being over-extended is somehow patriotic.

    I realize this may be an unpopular and old-fashioned view, but neither do I think Armegeddon is around the corner. I think times may get harder, but I don't think we're heading into a Dark Age. Perhaps that feeling is fueled by the belief that I've done what preps I can and I hope they are sufficient. If the truly horrible times comes, I think HOW we live is going to be just as important as WHETHER we live.

    This mindset probably goes against every evolutionary and survival imperative. Then again, I'm not posting this comment using smoke signals from the cooking fire in front of my cave.

    Great post, Lisa. Very thought-provoking. Thank you.

    • It's nice to see you, MG! Hope all is well. I'll bet your garden is a huge success this year!

    • Very astute post!! Great points. It is amazing little money a person actually NEEDS once they practice just a little frugality, and avoid debt. And I'm not talking about living like paupers, a very nice quality of life can easily be enjoyed for what most people earn. Thanks for your insight.

  10. LOL! Yes! Climate change is proving a blessing to Phoenix! We haven't even had to turn on the air conditioning yet. All my eco-friendly energy saving efforts with my house are keeping it cool enough to tolerate. I'm sure the tomatoes will have to be shaded sometime in the next few weeks, but the sunflowers and melons are NUTS!

  11. the debt my family has is not from going crazy and buying things to keep up with the jones'. its all been emergencies that we weren't prepared for or incurred before really understanding debt and how we wanted to live as a married couple.

    Going forward, our goals right now are to get our pantry and house in order. We pay on our debt, but i know that i'll work harder and feel less worried if my pantry is stocked before paying money to the CC companies. when i'm set i'll put more money towards the cc's and car payments. with inflation the way it is. i'd rather buy what i need now and then pay off the debt when money is worth less.

  12. Debt is a prison period. When you owe money you are a slave to the creditor. Being debt free has been the most liberating experience of my life. When you no longer have to make monthly payments, you are amazed at how much money you actually have. It is true freedom.

  13. Essentially, I don't think it's a bad idea to use money to buy ahead on things you know you will be using, but I wouldn't go into debt for it. I would decrease savings quite a bit, if you have any, if you think an economic collapse is on its way in favor of material essential goods you know you will need.

    I have boys, so I have bought basic clothing several years ahead when I see it on sale. (I wouldn't try it with anything more substantial than tights for a girl, though.) My car is old, but low-mileage for its age and it's a Honda, so we're keeping it awhile longer. But if it was looking likely to die in the next year or so, we'd replace it sooner rather than later in a post-SHTF scenario. You can pre-pay college for your kids and that, like a mortgage, is a set payment for a set number of years, and then you're done. You would obviously want to choose carefully (no way would I prepay a CA state education now), but it can be a good long-term choice even though it's incurring an unnecessary expense right now.

  14. While we all can speculate a few scenarios, including financial Armageddon, none of us has a crystal ball to accurately predict exactly what will happen. We are debt free, including our mortgage and any money we did make from the sale of our old house went directly into our retirement home(cabin) to make it as self-sufficient as possible. Sure, we could have taken a few cruises or traveled alot, but why?

    A few years ago I had a substantial CC debt but paid that all off. The feeling of freedom from owing anyone is great and now I only use what I have in my account to make my purchases. And…I relentlessly search for better deals and bargains without having to sacrifice quality.

    The reason why this country is in such a mess is because of both the government and the people themselves thinking they could have everything without having to pay th piper later. It's irresponsible because the rest of us have to bail them both out. I hardly think that's fair, do you?

    • Debt free GREAT! but how long could your family get on without the ability to buy food or water? and how well could you defend your family if the police can't afford to (police departments spend money too and if the dollar inflates they will have less cars, gas, guns, and bullets to use to protect you (and remember legal the Sup Court has said they have no duty to protect you)?

  15. I am with you 100%, I believe in paying my debts, and indeed I intend to. In an ideal world people would be prepped not prepping, being self-sufficient would be a way of life that my parents and your parents would have handed down like so many photo-albums. But thats not the case for many of us who at some point in the past 20 years or so realized that people were living a fantasy on SO MANY levels:

    Going into debt individually so that we can have the latest gizmos or the most exotic vacations. Going into debt locally, and on the state and federal level, so that we didn't have to take responsibility for ourselves but could "depending" on the government to do what individual have done for themselves for most of human history. Acting like the Government can use the force of law to fix problems, it can't. Acting like things will always be like they were in the good old days (1950s thru 1990s). Acting like Mr. Murphy never came up with his law or that it doesn't apply to whole nations and governments.

    The fact is that our Government and our populace, are pushing the country toward an economic abyss and there are a whole lot of other doomsday scenarios that are a lot worse than economic collapse. An your credit card companies and banks which pushed so hard for bailouts, have contributed to the problem which one day might make us all a lot poorer. So why shouldn't you do the economically smart thing, that is both legal and moral, and bet on the failure of the dollar if thats what you think is going to happen.

    I am not talking about not paying your creditors back, although that might be a possibility if they go under due to the collapse of our currency, I am talking about paying them back EXACTLY what you owe them, in the dollars that their own strategies have helped to devalue.

    Personally I would prefer my family to be stuck with a 10k credit card bill and a full pantry than no debt on the day that the dollar becomes worthless because sadly you can't eat "no debt."

    • Padre, because we have no outstanding debt we can prepare ourselves both physically and mentally. We can defend ourselves as best we can by investing in weapons and ammunition as we've done. No one can be fully prepared for that scenario because we don't live in a bunker.
      I don't buy into the mindset that the CC companies and lenders were to blame for those who find themselves bogged down by debt. Only in extreme circumstances: job loss, death or illness do I feel any empathy. Did they break anyone's arm to sign that mortgage agreement or run up purchases? It's called personal responsibility. There's always someone or something to conveniently blame and that shows just how far this society has declined. A once great country is now a country of whiners who've made it difficult for the rest of us.
      People can't handle Life 101. Oh, and let's not forget the "evil rich."

      • How could outstanding debt prohibit you from prepping "physically and mentally."

        I don't think you understand my point. I agree if you incur debt then you have a moral responsibility to repay it. I agree no one is twisting my arm to incur debt to fast forward my prepping. At the same time, and I will note I am not bogged down by debt, given the terms of my short term loan, I do not feel that I have an obligation to pay down my debt any faster than my contractual obligations require OR that their is any preparedness benefit to be had from doing so. In fact, my contention is that it would harm my prepping, as I would need to slow down my prepping to afford paying off my debt, which I could easily do over the course of 5 months if I didn't buy a gun, a case of ammo, or a couple pounds of food a month.

        The question is not should people default on debt in order to prep, the question is in prepping is there any benefit from being debt free? If you believe that hyper-inflation is likely, which is caused by government spending and money print, which is at least in part a result of the bailouts my credit cards companies received, then incurring debt is an economic strategy that can help you prep quickly and end up repaying those debts with junk, or at least less valuable, money.

        I am not blaming the bank for giving me a loan, for 12 months interest free in fact. Although I do blame them for taking a risk on people who clearly couldn't pay back their loans, and then going to the government to bail them out. All I am saying is that if they can't see the inflationary writing on the wall and I think I can, then its not immoral or dangerous to incur debt and bet on repaying it with less valuable money. Just as no one twisted my arm, no one twisted the Banks to give me a new credit card with a great balance transfer rate and incurring that debt, seems like a sound idea for someone who sees the inflationary patterns and is fearful of hyper-inflation. As I said initially, I am in favor of non-secured debt which would be difficult for credit card companies to foreclose on, not mortgages and car loans, since I need those things.

        Paid cash for my SUV credit for all the toys I fill it with.

  16. Keep in mind that in today”s financial world debt isn’t isolated with a single bank. Debt of akl types is commonly bundled and sold as investments to other banks and institutions. So even if your bank goes under in a SHTF event chances are someone else really now owns your debt and they may come after you for payment.

    Never ever underestimate the motivation when money is involved.

  17. I use my cards to help me prepare, but I am far from maxing out my credit lines to stock my pantry. I still buy when things are on sale and I keep my balance in check. I fully intend on paying everything off. I also believe that it is better to use credit to build your credit score up, we are looking to buy a house in a few months and we wouldnt be able to do that if it were not for credit. Don't get me wrong, I think it is a wonderful thing to be debt free, but that isn't the kind of world that I live in right now. I pay off as much of my bills as possible, still prepare and still manage to save a little for… well who knows what.

    I think that it is impossible to tell someone what is right or wrong for them until you have walked a mile in their shoes. We aim for sustainability, but until then I will use the resourses I have at hand. That is my two cents.

  18. MasterPro, which is why one must be selective in business dealings of any investment. Need one go to a bank or mortgage company for a mortgage? No. Try a credit union. It astonishes me that people who make the single biggest investment of their lives can screw it up so royally and not examine each line item, understand the terms and take a loan they know they can satisfy. Instead, we know have most people who are underwater on their houses simply walking away even though they can make the payments. Check out MSN today and you'll see some who actually have ethics and those who do not. Do the research. Above all, do the research BEFORE you borrow or charge.

    • You have no choice. Even if you get all your credit from one source they can (and often do) sell your receivable to someone else and you never know. Credit unions do it too.

  19. Any debt that has an adjustable rate – meaning credit cards and the like MUST be paid off ASAP – if we have any kind of hyperinflation, these payments will wipe you out as companies raise the interest rate! Any kind of debt that is fixed can be paid with cheap dollars if/when hyperinflation hits.

    On a moral standpoint – when you borrow money, you have an obligation to pay it back. Its your word – its an honor thing. Its the reason the Bible states to not be the borrower because then you become a slave. If this has been ignored, then the result is to suffer the consequences.

    I understand the feeling that using a credit card to prepare, but wouldnt you be better served to pay off the cards and then put all the funds towards your preparing in that way you will own everything free and clear? No one can sue you and take what you have….

    There is also a subtle undercurrent of stress when you are in a financial obligation to someone/company. This stress can easily grow to influence your sleep, your marriage, your relationships, even your health. It is hard to explain to someone who is not debt free. Debt free frees that person to be able to make different choices – so many more things are possible. There isnt the "have to" do something because you have to pay someone else – you are able to take more chances financially, locationally, vocationally….

    Ultimately, if you owe – there is someone out there that can take – are you willing to bet your family's future on that they wont actually take everything you own or willing to bet your family's future on an absolute governmental meltdown?

    • It may be crazy, but under current US law, I don't believe they can raise your rates easily without cause, i.e. non-payment.

      And if there is hyper inflation, even if they did raise my rates I would just pay it off quickly and easily with the devalued dollars that will not buy me what I need in the future. This is the whole point of the discussion, why not spend those dollar if and when you can't buy anything you need with them (at least not for a reasonable price) on paying your debtors latter?

      And again no one is adovocating defaulting on loans, just paying them back slower and using the extra cash to prep.

      • Padre, I think that law, or maybe it was an Executive Order, went into place a year or more ago. However, at the same time, credit companies began severely limiting the amount of credit available to their customers. It was like a trade-off…"Okay, we can't raise your interest rate, but now you only have a $1000 credit limit!" The banks will ALWAYS take care of their interests first and foremost. They are NEVER altruistic in their dealings with consumers.

  20. Let me through another point out into the mix:

    If the financail SHTF and the American dollar is worthless (for all intents and purposes) how do you think you're going to repay that debt?

    You might be able to convert the USD into whatever other currency but the exchange rate will destroy any hope of repayment.

    Gold? Silver? How many people own that much physical metal to pay off a 5-6 figures worth of debt?!

    The creditor may seize part or all of your property in payment with the full support of the law.

    I wouldn't even rule out the return of indentured service as a way to pay back a debt post-SHTF!

    But one way or another I assure you payment will be extracted. And it will be totally "legal" (by whatever the standard of the time will be).

    • It's cool to have inspired a whole post – never done that on a blog before – especially cool that it’s survival mom. I have been just sitting by and reading, but I feel I have to reply here to MasterPo. Let me tell a very fake story of hyperinflation. Let me preface the story by saying I do not believe hyperinflation will happen in the US. People like to point out Weimar and Zimbabwe but this is two instances in about 100 years and 2 countries out of about 190 nations. My argument is NOT to suggest hyperinflation is likely, NEITHER is my argument to recommend taking on credit card debt. My argument IS “IF you believe hyperinflation is likely then taking on debt is a great financial strategy”. I feel strongly that people should give logical advice for they what believe is a likely occurrence. For preppers who believe hyperinflation is coming, paying off debt is not good advice.

      So if you cannot see how taking on debt in a hyperinflation scenario is a good Idea here’s a tall tale for you:

      I am a prepper. I believe hyperinflation is a true possibility. Based on my beliefs I get a fixed rate 25 year home equity loan for $20,000 at 7% apr – which assumes I have good credit and have equity in my home unusual nowadays but maybe not for this forum. IMPORTANT get fixed rate debt. If you do not have the credit score for fixed rate home equity loans don’t even get started. With this $20,000 I buy 6 1,000 gallon propane tanks and have them all filled for about $2/gallon. I now have to pay about $138/month for the next 25 years. I know I can afford this because I currently put more than this away in both an emergency savings bank account and in retirement accounts. But why keep saving up a bunch of dollars if I truly believe they are going to be worth less or worthless. Besides I’m going to be paying for my heat living here in North Dakota anyways. I’m now just sending a fixed payment to the bank not a variable payment to the fuel companies. If I wanted to pay the loan off immediately July 2011 it would cost $20,000 or about 500 gasoline “fillups” for my corolla of 5.5 years of groceries for my frugal family of four.

      Very high inflation (never seen in America’s history) hits. My salary does not keep pace I would be struggling to keep food on the plate with food and gasoline prices 5x what they are today. Lucky for me I am eating largely from my larder. However, I decide I have to sell off some of my security fuel to buy some more food as I am getting to the bottom of the pantry. I look up the price of propane. It is now 10$/gallon I sell 1,000 gallons of propane for $10,000, but keep the tank. I use the money to pay for another years supply of food and $1,656 is all I’ll need to cover all of this years loan payments – keep kicking that loan into the future where dollars shrink. I burned through 1,000 gallons of propane heat in the last year, but I have 6 tanks and 4,000 gallons left. This year I could pay off the loan for $19,654 or about 98 gasoline “fillups” for my corolla or 1 years groceries.

      Next year it is true hyperinflation. My salary is trying to keep pace I got out of 1 year contracts and my pay increases month to month. Food is 40x the cost it was in 2011. A bunch of bananas is $80. Propane can be sold for $80/gallon. I sell another 1,000 gallons which now gets me $80,000. I can choose to pay the loan off for $19,312 or about 12 gasoline fillups. I decide that with that $80,000 on hand I‘ll go ahead and pay the bank in full. That payment of $19,312 is only 12 corolla fillups or less than 2 months of groceries. Leaving me with $60,000 or so which will fill my corolla 38 times or pay for 5 months of groceries in July 2013 prices. I burn through another 1,000 gallons of my propane this year.

      Continued…

  21. Part of being prepared is to prepare for any possible situation, yes there is economic stress occurring in the economy today, as there has been in the past. If you rack up debt to buy supplies then you are not being prepared for all situation, such as the one where the economy does pull out and fuel and food prices stabilize. so in this situation you would rack up debt to buy supplies that then are cheaper in the future and you now have debt load to repay. So yes food and supplies are important, but you need to build your supplies and banacle the need for supplies with adding debt. This is a balancing act.

  22. Two years have gone by. I have 6 1,000 gallon tanks in my ugly backyard. Two still have fuel One to use in the next year. And one that can be sold for food or transportation. If true hyperinflation is happening maybe prices have again increased 40 fold – that last 1000 gallons of propane can get $3,200,000. Which can easily pay off my first home mortgage in full and still keep the family fed for 6 more months? I have already kept my family fed and warm for 2 years and have paid that measly $20,000 loan in full with highly devalued dollars and also took care of my home mortgage.

    So MasterPo and others, how does a fixed rate long term loan that I can afford hurt me in hyperinflation? Should I have rushed to get that $20,000 paid off and felt more secure sleeping at night not having a $168 bill that I can afford which really only amounts to paying my heat for the next 6 or 7 years in installments?

    Before anybody decides this sounds like a great investment – realize it only works out to be a positive with inflation rates substantially higher than 7% (like 5000%). But if hyperinflation is coming (again I personally don’t believe that it is) you should take out a loan not pay one off. If deflation hits and the dollar becomes worth so much more than it is in 2011 and prices drop you (I have trouble imagining this under current political directions) you might go bankrupt and loose your home.

    • Mike – A couple of points.

      First, I wasn't refering (necessarily) to not being able to pay off debt due to hyperinflation. It has no baring if the economy tanks due to a currency collapse. Fixed or variable debt is irrelevant for the most part. Un-repayable debt is still un-repayable.

      Second, your example is flawed. Even if you can sell your propane for a lot of money, that money is inflated. So you aren't going to be able to buy a year's worht of food with your inflated or hyperinflated dollars. Maybe only 6 months of food. Maybe less. And that presumes you can find people with the money to buy your propane.

      Third, you're "investing" in commodities which isn't much different than buying gold or silver. It's a strategy but risky.

      There probably are more arguments but can't think of them at the moment (been up since 3:30am today).

  23. One other point: An currency collapse my result in replacing the current American dollar (USD) with some new currency. It's happened many many times before in other countries in similar situation. Usually a "bank holiday" is declared over a weekend. When banks reopen your dollar has been replaced with something new, maybe the North American Dollar, or the World Dollar, etc. Your current USD in the bank is converted, say on a factor of 10-to-1.

    So if you went to bed Friday night with $10,000 in the bank come Monday (or whenever the "bank holiday" is declared over) you have $1,000 'new' dollars.

    And your house, valued at say $200,000 USD is now valued at $20,000 'new' dollars'.
    Your salary at say $60,000 USD is not $6,000 'new' dollars.
    etc.

  24. ps- Mike – *Why* do you think hyperinflation is very unlikely? (other than the historical reference you gave)

  25. Because we're in a balance sheet recession. The money pumped out by the gov't has, for the most part, gone no where. No one wants it. Prices have increased for some things primarily due to a speculative frenzy, but we appear to be near the ledge at this point where lack of ability to pay is going to constrain prices. It really boils down to supply and demand (currency and goods). We're really much more like Japan than Zimbabwe.

  26. I guess I just believe rare things are unlikely. In that same hundred years there have been lots of genocides two world wars, countless stock market crashes, even a worldwide great depression, and yet the US dollar's value has never experienced hyperinflation. I don't think it is impossible, but my personal estimate would be less than a 1:100 shot. So it is just not part of my life plan. But, for example, Padre put it at a 50/50 shot and he is acting pretty logically based on his estimate. Padre if you are reading try to consolidate your debt with a fixed rate home equity loan or those credit card companies will do a number on you.

    MasterPo I have no personal argument with you or anyone else here, but my direct question was how does taking on fixed rate debt pose any risk in a hyperinflation scenario? Please be intellectually honest when considering this issue.

    You raised three points:

    1. How do you pay debt with worthless currency? In hyperinflation or currency collapse (can you define any difference?) the DEBT IS FOR WORTHLESS CURRENCY. I signed a contract to pay back 20,000 US dollars it doesn't matter how much they will buy. I just have to round up 20,000 and turn them in. I could find them blowing on the street.

    2. Your example is flawed… I actually stated explicitly how much the prices for food had changed and payed in the inflated prices. $8,400 bought 1 years food in 2012, but $60,000 only purchased 5 months of groceries in 2013.

    3. "you're "investing" in commodities which isn't much different than buying gold or silver. It's a strategy but risky" – oh I think its risky. What's even more risky is that you actually aren't using your own money. You took out a loan and have only paid about $1,656 in the whole first year. But you are holding 6,000 gallons of propane. If the dollar becomes super strong and prices go back to 1950s levels 25 cent steaks and 12 cent gasoline you will be left paying a ton of value to the banks for the next 25 years. But I'm pretty sure not a single person in this forum believes that that is where the dollar is headed.

    Your last point is about an exchange with perfect parity. I'm pretty sure that means absolutely nothing for either of our arguments. My loan would drop a zero at the end and the value of my propane would drop a zero and… ?

    • Mike – no insult taken. :)

      We could go at this all day and resolve nothing. Time will tell.

      But I do want to respond to two points:

      1) your argument about USD debt after the dollar collapses is a phantom. Someone loaned you something of value and they WILL expect something of value to repay it. If the USD is no more they will want commodities or property or service or maybe even literally your first born! But I assure you no one is going to forgive debt just because the currency it was originally denominated in is worthless. Through debt on your house or car doesn’t go away if it is destroyed.

      2) Parity doesn’t override psychology. Markets aren’t pure efficient. Emotions are often more in control. You go to bed with a net worth on $500,000 and wake up with a worth of $50,000 no one is going to care about parity.

      • Point 1 is ABSOLUTELY WRONG. I have a contract to pay $20,000 and when I have paid it I have met my obligations in full. I think this is where you keep getting confused. This is EXACTLY why taking on debt before hyperinflation hits is a great strategy!!!! If you cannot accept this then our conversation is over.

        • I suppose that depends on if you believe contract law / the rule of law will hold. Most survivalists don't. If it is a direct, personal loan then I suppose the owner of the contract could just rip it up and come after all the propane with a shotgun and band of brigands. If it is an institution, there is likely nothing they can or will do (even if rule of law disintegrates) except accept the settlement as declared in the original contract. Which is 20,000 US dollar bills — no matter how worthless.

          I agree with you (and choosing by probability).

        • Well, I guess I have been told.

          May we never find out for real who is right.

          Peace.

  27. My husband and I talked about all this already.
    The conundrum is- do you use your "extra money" to pay off debt OR do you use it for preps? We decided both.

    We do not go into debt to buy preps. – We pay off the debt little by little AND buy preps with a small amount of cash we scraped out of our budget every month

    We have a plan to pay off our debt and it is in progress. Slowly but surely- wish it was faster. I am not planning to win the lottery or get some inheritance to answer my money shortages!

    We also have about $150 a month we use to prep with.

    Best of both worlds? I hope so.

  28. Oh yeah, I should also mention that we have a checking account but we don't keep our money there in case of a "bank holiday". With a large family, every dollar is precious. We use the envelope/cash system and don't use our credit cards.

  29. I would like to clarify my perspective.

    First, I'm in no way advocating NOT paying your debts. If you're debt free, great!!! Prep up like there is no tomorrow. (Their might not be a store with any goods left)

    Second, I am not advocating maximizing out your cards and hoping for a collapse. Contributing to the problem that is facing the whole world. Fiat currency and debt.

    I'm advocating a moderate approach of getting a store of food for a year ASAP. Between Rice and Beans and canned goods, $1000 or so should cover a few people for a year. $2000 would flesh out the storage and still be a manageable monthly payment. Some financial experts think financial chaos could happen by the end of the year.

    IMHO, Hyperinflation is unlikely as we do not have 20,000 printers spread around the country like in the Wiemar Republic, passing out new notes on a daily basis. Continuing my HO, the federal Reserve has printed up Trillions and passed it around the world. A collapse in the faith of the Dollar is more likely. Followed by a bank holiday followed by desperate people who need money for food.

    And as stated before, other things could happen. http://en.wikipedia.org/wiki/Year_Without_a_Summe
    The Sun is acting strangely and their seems to be more Volcanoes going off. The global society is walking on a financial razors edge. A bad harvest is bad enough. No harvest for a Summer would end polite society.

    I'm a humanist and want to see as many people live. Having a years supply of food and being prepared for whatever calamity happens, trumps being debt free. AND, I sleep well knowing I have a closet full of food.

    I'd rather you were giving thanks, instead of cursing yourself and some purist who scared you off a little prepping debt, as you and your family slowly starve.

  30. Excellent post!

    I think becoming debt-free is important, but I don't think there is an either/or at play here. Many of the things we do to prep will also save us money, which can then be applied to debt. As you know, I garden and preserve extensively, which creates a stock of food for my family and is a hedge against higher food bills. That gives me extra money that I can use in any way I see fit; we've used it to become totally debt-free, and we still save even if we suspect one potential scenario is a hyperinflation or a bank collapse. We also use some of the savings for tangible assets that help us be more self-sufficient. I think prepping is about preparing as well as we can for a host of potential outcomes, and one of those is certainly an economic climate in which struggling financial institutions crack down on collecting on debt.

  31. Deuteronomy 28:12:

    “The Lord will open for you His good storehouse, the heavens, to give rain to your land in its season and to bless all the work of your hand; and you shall lend to many nations, but you shall not borrow.”

  32. Those who rack up debt to buy supplies are idiots and fools. Why pay interest when you could have interest paid to you. Are you a smuck or what? People who do not pay their debts when they can are dishonest and a thief and sooner or later if the debt is not paid will account to a higher power. Bankruptcy should never be an option if there is any way possible to pay a debt. If someone owed you $ how would you feel if they went bankrupt even though they could have paid you off? Those who wait to let hyperinflation pay their debts are fools too. I have been on the receiving end of of bankruptcy from those who could have paid me off and it is not a fun place to be.

    The only true way is when one is debt free, and also has storage. Not just food but food, fuel, power, clothing, goods etc. For example what will you pay for soap if you had none and there was no soap in any store. Or what will you pay for feminine products or toilet paper or tooth paste or socks or a stick of wood to put in your fire box or a little propane to cook your food etc etc?

    If you have none of these things and you are in debt, going out to eat, going on vacation and etc. You are a grasshopper enjoying the good life for now……..

    I suggest to follow our church and many smart business leaders:

    1. Get out of debt. Start now and work at it every day. Start right now and cut up your credit cards. Yes YOU. CUT UP YOUR CREDIT CARDS.
    2. Get prepared in every way for EVERYTHING (not just food) you need.
    and when and if 1 and 2 happen (together).
    3. Buy some silver 1 ounce or smaller coin or bullion as the dollar will sooner or later crash. This is not an if but only a when. One needs only look at other currencies that have crashed and see what people fall back to. And yes, they do use the old time hard currencies of gold and silver every time. History always repeats and it is going to hit us no question.

    ARE YOU READY ? IF NOT WHAT ARE YOU DOING ABOUT IT?

  33. According to Biblical standards, one should not have debt. If you put things on a credit card thinking/hoping/wondering that it won't matter in the future and you don't pay that off, you have essentially stole the things that are in your possession that you did not pay for.

  34. in a situation where the dollar collapes and the whole system comes falling down your debt will simply be converted to a new currency. However, forclousers and collecting debt will be impossible for there will be very few people to buy the property.

    what will probably happen in such an event is there would be a huge number of bankruiptcies and the creditors will end up eating the losses. then if the numbers of people filing get high enough the government would take unusual steps to wipe the court slate clean by issuing mass forgiveness and wiping out debts at an alarming rate.

    they will probably have a special program for people to sign up for that would be like a mass filing of BK so the procedure would be rubber stamped.

    in the mean time get to know your states debt collection and exemption laws. each are different.

  35. Personally, I'm trying to pay off as much of my debt as possible. Part of the reason for this falls under, what happens when TSHTF doesn't happen… if nothing happens, and I'm straddled with loads of debt then I place myself and my family in a place of severe economic stress, possibly having my home, car or possessions taken away from us, and then where has all my hard work prepping for a disaster gone.

    Secondly, what happens if the economy does go belly up… like others have said before, just because the economy has tanked, doesn't mean that someone won't come calling trying to collect on your debts. I once read a book (Parable of the Sower, by Octavia Butler… and ok, it's a favorite of mine and has been read many more times than once) where the author posed a picture of the future where the economy collapsed. Public services like the Police and Fire Department begin charging for their services leaving many unable to afford their help. The government enacts a law allowing companies to indenture debtors creating a slave class again. And though all this may be far fetched to some, I find it more believable than massive pandemics or even complete collapse of the country where we go all 19th century living again.

    Anyhow, I'm working hard to remove the debt from my shoulders so that I may be in a better position to not only help myself and family, but to help others. The last thing I need in an emergency or long term disaster is more vultures flying around my head.

  36. In 1967 i started to see whats going on in this world and after seeing how people live in other countries I started to pack things away just in case i came on hard times and as the years went by i had a good supply for the people i love,i used the outdoor gear often and become able to set up a great camp for family and friends to enjoy and as newer things came out i would save money till i could upgrade,well as years went by this become a way of life. I remember a co worker said dont you wished you had all the money you blew on all that stuff you keep in your grauge.I repplied dont you wish you had the $135.000 you blew on that condo in lake tahoe your ex wife owns?.well l still prep and never felt l wasted any money and i still have my gear..

  37. Debt is expensive. At 5% API you are paying slightly over a dollar per month on each 250 in debt. at a consumer debt rate of 25%you are paying over a dollar per month on every 50 dollars in debt. So if you have 10 grand in cc debt and 50 grand in mortgage you are paying 400 dollars per month for the privelege of using someone else’s money. I for one cannot afford that. Besides even if you can that 400 bucks a month will buy a lot of preps real quick.

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