In the economic downturn, some markets, such as Cambodia, have shown remarkable resilience and outperformed many others.
Creating a proactive financial crisis plan depends on individual considerations, including monthly expenses, existing debt and future living conditions.
Recommendations for entrepreneurs and investors:
1. Diversification with foreign currencies
Recently, several foreign currencies have faced challenges compared to the US dollar. However, history tells otherwise. Over the past decade, the US dollar has shown vulnerability against multiple currencies.
This currently provides an opportunity to acquire undervalued foreign currencies. Among them, the Singapore dollar stands out as a safe haven, offering higher yields and serving as a hedge against potential dollar depreciation.
Holding foreign currencies in an offshore depository account is an effective strategy to increase the yield on cash holdings, counteracting the impact of negative interest rates often applied by governments and central banks during financial crises.
2. Accept alternative currencies
In addition to fiat currencies, consider holding alternative assets such as gold, silver and cryptocurrencies. Central banks in emerging economies have been accumulating gold reserves, recognizing its value as a safe haven during economic turmoil. This approach can also be adopted by individuals.
Holding gold and silver provides protection against market panics and offers additional protection against potential government intervention. Offshore safekeeping of precious metals, independent of the banking system, provides privacy and legal non-enforceability for certain nationalities, contributing to an overall financial crisis preparedness strategy.
3. Establishing an offshore banking presence
Protecting some of your liquid assets abroad provides an additional layer of security and redundancy. Historical events in Cyprus, Greece, Argentina and other countries show the potential vulnerability of local banks in troubled times.
Opening an offshore bank account not only facilitates currency diversification and access to new investment opportunities, but also protects some of your funds from bureaucratic restrictions or arbitrary restrictions imposed by financial institutions.
Maintaining multiple debit cards from global banks improves access to cash reserves. Jurisdictions such as Panama, which are exempt from regional financial panics, offer an additional level of security. It is important to emphasize that offshore banking involves prudent asset management, and consultation with an international tax advisor is advisable to comply with reporting requirements.
4. Strengthening income stability
Regardless of business location, ensuring a portable income stream is paramount to fortifying against financial volatility. Diversifying sources of income in different locations and investments, such as real estate in different countries, can reduce the risks associated with local economic downturns.
Adapting the asset allocation strategy with overseas diversification contributes to a stable financial foundation. Additionally, ensuring that your primary source of income is not tied to a fixed location is critical to weathering the impact of a financial crisis.
5. Prioritize liquidity
Maintaining a reserve of readily available cash is the cornerstone of financial sustainability. While liquidity can take many forms, immediate access to cash allows business operations to continue, staff compensation and family support during difficult times.
While offshore gold storage and term deposits offer attractive opportunities, the importance of readily available cash cannot be overstated. Liquidity diversification across multiple domestic and international banks enhances protection against unforeseen events.