When building a strong Trunk for your financial tree, you establish a 5 Tier System:
- Tier 1 – Your Cash on Hand. We’ve discussed potential reasons that the banking system which has been strong your whole life could experience a momentary collapse. This happens throughout the world when a system experiences extreme conditions. The question you should ask yourself is if you cannot access the money in your bank, or in other accounts, and your debit and credit cards won’t work, do you have a way to buy the basic necessities? If you feel that this could potentially be a real need that you want to prepare for, then you should plan to keep money at home that is as safe as possible from fire, thieves, and any other danger. Suggested Amount = enough for 1 month
- Tier 2 — Your Expense Account(s). The checking accounts that you conduct your day to day business with should be held at a stable and insured bank or credit union. Suggested Amount = 1 month
- Tier 3 – Your Rainy Day Fund. The savings or other account or accounts where you keep money in a bank or credit union which you don’t access on a monthly basis, but which is available when minor emergencies do pop up. Suggested Amount = 1 to 2 months
- Tier 4 – Your Wealth Gate (WG). This is the account which you use to systematically save money each month (or as you earn it if less frequently). The higher this number the better, but you should really work to make sure this number is at least 15%. However, once here, money does not need to stay here but can then flow to other accounts such as your Storehouse where it will earn more. Suggested Amount = 0.
- Tier 5 – Your Storehouse. Most of your “Cash” held in Dollars should be stored in a correctly set up whole life insurance policy because this is the best Storehouse you can have. As long as you are able to cash a check and have a week or two to use the money after requesting it, this is the best place to keep Dollars. However, it is Tier 5 because it is not good for any short term need for Dollars. It also becomes an excellent place to pull money out of Dollars to move into other places whether those be Non-Dollar Savings or Investments. Suggested Amount = 3 months or more
What is accomplished by having this multi-tiered approach?
In a world where the Dollar can be relied upon, these are all you need to do to maintain savings. In a world where the Dollar is losing value all the time, you might want to consider other options. If you believe, as we do, that the Dollar is going to fall anywhere from severely to catastrophically, then you absolutely must look at other places to keep safe money in addition to what we’ve discussed above.
Unless you’re moving to another country where Dollars are not used, you still need to maintain this structure above for two primary reasons:
- You must use Dollars in this country to transact any financial business.
- This system will grow your Dollar savings in the most efficient way possible with incredible long term benefits as we discussed in The Trunk.
But after this is established, you should look to diversify away from the Dollar if you want your savings to be maintained in real terms (by being able to buy the same things that they bought before) in a world where the Dollar is losing value. We’ll begin to look at how to do that next.
This post is Part 6 in the series A Few Ways to Prepare. To continue with this series, click on Pt 7. To use this as a growth tool to better understand your own calling, you might start by reading Pt 1, Pt 2, Pt 3, Pt 4 and Pt 5.
Photo credit: Just Jackie