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Thursday, August 12, 2010

Prepare: Go into debt to prep?

NEW YORK - MAY 20:  In this photo illustration...Image by Getty Images via @daylife

Did you see the episode of Wife Swap on ABC recently? It featured a "survivalist" family who was prepping for end times. Usual spin on that one, but not the point.

http://abc.go.com/shows/wife-swap/episode-guide/cathreastewart/424645

The survivalist family went into debt buying a bunch of furnishings and other stuff on credit believing that after 2012, they would no longer owe anything as the poop would have hit the fan by then and who cares about debt and credit card bills after that moment. So is it a good idea?

Also, on the other hand, many survival experts say paying off debt is part of survival planning. What is the basis for this?

First, going into debt to buy preps is dumb. D-U-M-B. Unless that credit card bill can be paid off at the end of the month, it needs to go back in the wallet (or left home). Preps should only be purchased when money is available and unless there is disposable income (money after bills have been paid and savings set aside) they should not be bought at all.

We all like to prep. The secret to successful prepping is to save money by living frugally and using the savings to buy extra food and supplies in bulk and at a discount. Another option I like is to have a second source of income and use that money only for preps.

Debt will only come back to haunt buyers. If the debt cannot be maintained (i,e paid off or paid down in a reasonable amount of time), then it can take over all finances and force the buyer to sell preps or worse, lose their car and home.

What is the reason so many experts advise would be preppers to get rid of all debts including house payments?

First, having a clean balane sheet allows the prepper freed up resources to make preparedness purchases without worry.

Second, being free of debt helps the prepper live even further below the the "radar". A person in debt is owned in some respects, by another. Debt is slavery.

Finally, the lessons from the Great Depression. He who did not own his farm or house could have lost it if the bank called the note home. This scenario could happen again if banks decide to purge their books of "toxic assets" like mortgages owned by persons without the ability to pay. An all too common result of our poor economy.

The bottom line is to avoid debt. Don't go into debt to make prep purchases and pay off debt as securely and quickly as possible.