How to be Financially Self-Sufficient in Today's Uncertain Times

We have gone through some of the worst financial conditions that have been seen in the last 70 years. Everything from stocks, home values, savings rates, consumer spending, and all types of businesses have suffered greatly from the recent events. There seems to be absolutely nothing that is considered a good investment these days.

In the past, if one investment sector had a downturn, there was always another that would pick up the slack. For example, when stocks plunged from a combination of the tech bubble and the 9/11 terrorist attacks, the real estate boom picked up the slack and money funneled into that sector. Initially, as real estate quickly cool in 2007, the thought was that stocks could start to pick up some of the slack. That line of thinking did not work this go around, as the severity of the real estate crash has affected everyone and everything. The biggest impact has been the tremendous loss of jobs, since this is the driver for consumer spending and the GDP heavily depends on the consumer. This is not just a domestic problem, as the new global economy has intertwined the fate of many international economies.

The thought of being self-sufficient is relevant now more than ever. The ideology of depending on your employer, pension, and 401k plan is becoming more and more archaic as layoffs have put many out of work and individuals near retirement have seen there coveted 401k plan cut in half in less than one year.

Below are few ways that one can become self-sufficient:

1. Live off of interest
Certificates of Deposit (CD) and Bonds are ways of accruing interest with little to no risk on the part of the investor. If you have a relatively large sum of money saved, either from a 401k or investments, this money can yield good, safe returns from a CD yielding 6% - 7%. For example, $500,000 invested in a 7% APY CD for 7 years will yield about $2,916.66 per month. If allowed to compound over the 7 year period, the initial $500,000 investment will become $814,997.03. This is a risk-free investment. The best CD rates are not found at the major banks, as sites like Bankrate.com would have you believe. In actuality, the best rates are found at small local banks and credit unions. The website bankdeals.blogspot.com is a site that I often use to find the best CD rates across the country.


2. Live in a property that has a rental component
Many of the people that purchased the McMansions during the real estate boom years are either now in foreclosure or struggling to meet their ballooned monthly payments. Living above ones means has been the American way of life because everyone assumed that the economy would continue to grow, houses would continue to appreciate, jobs would continue to give great raises, and net worths would continue to rise.

Since this is obviously not the case now, a great way to supplement your income is to live in a property that also has a rental component. This could be a small apartment building with 3 – 4 units. You could live in the largest unit and rent out the others. This could also be a single family home that has a legal rental unit in the basement. Depending on the type of property that you live in, the rent that you charge your tenants could cover all of your housing expenses. This is a great way to create monthly income that is more resistant to external economic conditions.


3. Utilize solar/wind power
The cost of installing solar panels on your roof or a small windmill in your backyard is becoming more and more inexpensive. Once the initial investment is made, it can take 5 – 7 years to break even, but after that, you will be able to generate free electrical power for your home from the abundant energy of the sun and/or wind. In these times when the cost and source of our future energy is so unknown, this kind of investment can prove to be a way to liberate yourself from the total mercy of the utility companies.

If you have other ideas of ways to live self-sufficiently, please provide us with your comments.