1. Invest money in precious metals.
Even the gold pessimist Jon Nadler recommends that it is wise to store about 10% of your net assets in the form of physical, allocated gold. This means gold you hold in direct physical possession, or in vaults overseas.
FOFOA also has excellent economic and monetary commentary which lends a strong case for keeping some assets in the form of gold, as monetary systems collapse and reset around the world.
2. Never sell at the bottom of a crash.
Man, you would be hurting if you had sold all of your equity in 2009. It was a great time to pick up on additional stocks, or precious metals for that matter. If you want a good long-term return out of your stocks, it’s imperative that you buy when prices are low, and ride out the tough times.
3. Never withdraw more than 3.5% of your portfolio.
The historical recommendation is 4%, but 4% can destroy you during tough times. 3%, on the other hand, provided at least 50 years of withdrawals, even through the great depression. I suggest 3.5% as a good middle ground, and lowering that as the markets rise so you withdraw 3% or less.
4. Save 50% of your net income.
Why 50%? If one partner stops working, you can survive. If you experience an unexpected expense, you can cover it out of income. If you lose your job, you’re not totally screwed. Saving 50% of your net income is also a rapid route to financial independence. Down payment of debt principal counts toward this 50%.
5. Don’t spend more than 33% of your net income on total housing expenses.
Banks love to lend you more money than you can afford. I recommend that after adding up all of your housing expenses, the total should be 33% or less than your net income. Why? This gives you ample buffer should taxes or interest rates go up, you get an unexpected assessment, a partner loses their job, etc…. it is a good way of staying within your financial means and protecting yourself from getting financially destroyed.
What are your own tips to help protect against getting financially destroyed?