Financial preparation for a catastrophe: personal and business

Preparing for change

It’s wrong to say that people will only encounter hardship during catastrophes. A catastrophe will be extremely hard to people which aren’t willing or able to adapt to the changing conditions. What are the ways to adapt an important part of life, one’s finances to a catastrophe?

More support means more articles. Three tiers are available to Money Bear Club’s supporters on Patreon.

financial disaster catastrophe preparation individual business
Copyright: Money Bear Club.

Personal finance

Opposition to debt is a conventional idea in the personal finance community. Debt does limit the debtor. It also means paying more money for having a lump sum in the present.

During an environmental, political, or economic catastrophes, debt obligations aren’t going to be cancelled unless the whole system controlling them fails. Hence, debt has been, and will continue to be eternal.

A conclusion from these premises would be to never acquire any financial debt. For individuals who have the ability to live without it, debt should be avoided. Yet, there are those who can use debt to improve their long-term wealth prospects. Well-thought out investments into education or real estate aren’t always a bad thing.

The lendees just have to accept that debt will hold them back severely during a catastrophe. Also, the size of their debt can increase during unfortunate times.

Another thing that is bound to increase during unfortunate times? Spending on liabilities. Being rational about the liabilities the individual likes to buy the most, should help. After all, many consumers buy certain products just to derive enjoyment.

Budgeting, and doing it consistently, will help to cope with a catastrophe’s financial aftershocks. Also, being as self-sufficient as possible, without skimping on quality.

It’s important to build diversified income streams through assets and investments. The right investments will help to keep a similar level of wealth even during the worst times in the markets. Dealing with economic downturns and high volatility through options trading explains one way on how to potentially use them during challenging times.

Even minimal job losses are inevitable during catastrophes. There are two questions every worker must ask themselves to prepare for a catastrophe: are they working in an industry vulnerable to changing conditions AND are they being inadequately paid for the work they are doing? If the answer to both of the questions is “Yes”, then the worker should strive to change at least one of the conditions.

Family preparation

Preparation of personal finances, for many, will be incomplete without preparing family’s finances. Although it can take more effort, a unified plan for a family will bring better preparation than several individual plans.

Budgeting for a family is analysed in How to do extreme budgeting. Budgeting during a catastrophe should be even stricter than extreme budgeting. Every purchase should be viewed as non-essential. Purchases should be divided into “want” and “need” categories, and the former foregone.

Preparation of a family’s finances shouldn’t be about avoiding any and all purchases. Spending on liabilities to turn them into assets (figurative or literal) is analysed in Liabilities worth their money. During challenging times, when many will forego all purchases, the lack of certain tools or things will hold them back.

Bulk buying is important not only for preparing for challenging times, but also for survival during them. Bulk purchases not only help to save money. Bulk purchases also allow the buyers to save time, effort, and resources, which can be scarce and valuable during challenging times.

Pooling financial resources together can help with maintaining the family’s wealth at the same level. If individual family members are paying for individual brokerage accounts, using just one brokerage account could be a better decision. Not only that, but having one larger account rather than several smaller ones could improve the service and the deals given by the brokerage. Pooling financial resources together can also be achieved through the avoidance of individual purchases, living together, and negotiating for group offers.

In the event when family relocations are likely during a catastrophe, it can be more worthwhile to invest in connections and contacts rather than physical things. Leaving everything behind to relocate and not having any connections in the new place of living, is harder compared to already having connections.

Having a list of possible relocation locations, best suited for different disasters, and starting to build relationships in advance could be very valuable during a catastrophe.

Readers looking to change their budgets or their spending habits can use Money Bear Club’s personal finance Services.

Business during a catastrophe

The main thing that businesses have to prepare for during catastrophes and economic downturns?

Decreasing consumer demand.

It is true that certain businesses see increasing demand during downturns and pandemics/natural disaster periods. Yet, often the demand is often just a temporary increase.

Industries to watch for the coming downturn analyses the industries and the businesses that fare well during downturns. Many of them will fare well during every future downturn. Many could also go bankrupt. Moreover, if catastrophes that rely negatively on the demand from the consumers, change every time, then businesses that change their models to suit the catastrophes of the past, could become unequipped to deal with future ones.

There are several steps every business can take to challenge decreasing demand and lower discretionary spending from consumers. These steps are unconventional, but could be the right choice during unfortunate times.

The steps all centre around more effort and knowledge. They are: more marketing, more user research, more sales.

For many businesses, marketing employees or even whole marketing departments are the first departments that get fired or cut during downturns. For some, it is irrational to consider reducing a company’s visibility during difficult periods. Nonetheless, many businesses choose to do so.

Money Bear Club suggests an unconventional perspective. If the catastrophe isn’t as severe as to limit marketing spaces (it doesn’t destroy them), then using them can be a win-win deal. Not only will the business spending more on marketing will be able to gain higher visibility because of decreased prices; it will also be able to stand out against competitors which have pulled back. If the marketing space is bought in businesses in industries that struggle during catastrophes, then the action could also be thought as a goodwill action by the public, and should bring even more visibility and good PR.

User research during good times is like learning to accommodate every desire of the customer or client. User research during difficult times is like finally uncovering the true needs of the customer or client. Individuals working with user research know that clients will often suggest improvements that don’t reflect their true desires, and that can even be harmful to sales.

Challenging times, when thoughts about finite time enter the minds of the populace, can be excellent for user research. When the potential consumers are more true to themselves, they also can be more true to the researchers.

A push to increase sales numbers for businesses which have salespersons, isn’t always unconventional. However, it could be met by negative attitudes and even disbelief.

If the product has an use for the consumers experiencing challenging times, working to achieve higher sales numbers will pay off. It won’t, if the product can’t be sold on their usefulness for meeting new challenges. For all other cases, a larger sales department is a must.

In the ideal situation the three steps will contribute to more interest in the company and/or their products. What’s next?

Concentrating on repeat customers, feel good tactics, and subscriptions (if possible), should help.

When everyone’s pulling back, the competition is decreasing. With the right actions, the negative consequences of challenging times can be minimized or even entirely avoided.

Feel good tactics and concentration on generating repeat sales are methods often used during times of increased consumption. Subscription sales generation during challenging times is a more of an unconventional step.

It could seem contradictory that consumers would want to tie their budgets to a new subscription when their financial state could be in peril. Yet again, if the product has a value for a changed situation and the discretionary incomes are more or less the same, then this step could be right for some businesses.

Money Bear Club’s services for business are there for their clients both during economic expansions and contractions. More industry- and business-specific advice and strategies can be generated according to the demands of the clients.

Business preparation

Preparation of a business for a catastrophe, and its negative effects, starts from the business model. The model of a business must be defensive or able to turn into one without significant challenges.

How to change a business model without losing money in the process? Hiring the right people helps. Analysts; those who see several sides, encourage creativity and non-stereotypical thinking, will be valuable employees during a downturn.

Even with the right business model, unexpected challenges can happen. Having a contingency plan, and diligently following it should help to minimize the impact of predicted or new challenges.

Instilling a culture of rational cost-cutting will be valuable not only during a catastrophe, but also during an expansion. Saving money on unneeded purchases will contribute to larger reserves. And those will be valuable during difficult times.

Preparing for a crisis can be done by keeping profit margins slightly lower, and with them, prices. This way, if prices due to lower demand have to be increased, customers will be less likely to defect to the competitors (because they already will have higher prices).

Quality is also important. During crisis, people will be seeking it even more than during normal times. Offering better refund and return policies than your competitors can help to compete on perceived product quality.

Repeats and new issues

Two challenges, repeating and new issues, will be common problems both for businesses and for individuals during disastrous times. Focusing on managing actions that repeat, as they will bring the most financial problems, should help to cope with disastrous times.

Always trying to predict the future will also help Even if the predictions turn out wrong, it is better than not planning for the future at all.

Unconventional idea generation and perspectives are important during catastrophic times. When every area of life changes, it would be irrational to solely rely on conventional ideas about finances and human behaviour.

New issues will emerge during every new catastrophe. No catastrophe is the same, even if they will have many similarities. Being open to new ideas about the catastrophe will help.

Listening to the financial pessimists is important. Pessimism will help to be more conservative with finances. Also, relatively happier even if all goes wrong.

Those who change

The financial side of disaster preparedness will help to cope with common problems.

Dealing with new and unexpected problems will be too hard for many individuals and businesses during disastrous times. Individuals and businesses prepared to change and to adapt to the changing world, should find it easier to increase their probability of survival. Even if not, who would want to go down without a fight?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.