Lief Simon's Personal Failure Plan
Preparing for the unknown…
That’s the principle behind diversification.
You can’t be sure that any stock pick you make will turn out to be the next Apple or Facebook… so you buy stock in different companies. You can’t be sure stocks will always go up (in fact, you can be sure they will not always go up) so you invest a portion of your money in bonds, as well.
However, real diversification means going beyond these kinds of paper investments. Real estate, currencies, and metals all have a place in a truly diversified portfolio.
Further, if you want to be prepared for a broader range of crises, you need to diversify beyond the borders of the country where you live…
And you need to diversify not only your investments… but your life.
My globally diversified lifestyle plan has evolved over decades, and I believe it now amounts to protection against just about any potential regional and many potential global catastrophes. It includes passive income in multiple currencies; properties in multiple countries, many of which are places where I’d be able to grow food if I needed to; bank accounts in different jurisdictions; some precious metals, coins, collectibles, and other portable items that could be sold or traded; and a network of friends around the world.
Kathleen and I did not conceive this plan all at once. We didn’t set out to build the global infrastructure we enjoy today. Our initial idea was far simpler. We just wanted to find ways to enjoy different parts of the world… and, for both of us, our priority investment interest has always been real estate.
So we began buying property in places where we wanted to spend time. One purchase led to a second, which led to a third… and, before we knew it, we had a starter investment portfolio that doubled as a great excuse to travel to places we wanted to be able to go anyway.
Today, 25 years later, I see that the steps we’ve taken all these years have not simply been about building an investment portfolio and rationalizing regular trips to places like Paris, Lisbon, and Medellín.
What we’ve been doing has been creating layers of contingencies… a personalized “Bug-Out Plan.”
I’m talking about a series of measures taken and pieces put in place to allow you to bob and weave. To insulate you from trouble and risk. To make sure you never find yourself at the mercy of any one economy, government, currency, or investment cycle. To give you the control over your life you need to be able to pivot out of harm’s way with no negative consequences for your lifestyle or your standard of living. To be able to sail through downturns, even crises, virtually unscathed.
I’m talking about a program of personal infrastructure that incorporates backups and redundancies so that you always have somewhere safe to be, alternative source(s) of income in the currencies of the country(ies) where you need cash to spend, independent means for feeding yourself and your family, and access to liquid wealth.
In Ireland recently, Kathleen and I spent a long weekend at Ashford Castle. Dating to the early 1200s, the castle property was purchased by a family called Browne in 1715. The Brownes proceeded to expand the castle structure and then settled in to live quite a life.
The Browne family did not work or engage in any business activity. They spent their days hunting deer in their forests, fishing for salmon in their lake, and doing the other things that landed folk in Ireland did at the time. To earn the income needed to maintain and operate the enormous Ashford Castle estate, they rented out land and various structures on it to tenant farmers.
When the rents were flowing, all was grand. Then, in the mid-1840s, something happened in this country that nobody expected—the potato crops failed.
Overnight the Irish world was turned upside down. Relevant to our story, Ashford Castle’s tenant farmers could no longer afford to pay their rents. Without that income, the Brownes could no longer afford their castle… or their lifestyle.
In 1852, Benjamin Lee Guinness was able to buy all 10,000 acres of the Ashford estate for tuppence on the pound.
One day the Brownes had enormous wealth and an enviable life. The next they were penniless and homeless.
The Guinneses, by comparison, had spread their wealth around, across different businesses, different properties, and even across the Irish border to England. When crisis struck in the form of the Famine, while other families were ruined, they were able to buy up prize properties across the Emerald Isle… further expanding and diversifying their holdings.
No one expected Ireland’s potato crops to fail… and no one today could predict specifically what crisis might await any country, region, or indeed the world. You need to prepare as broadly as possible.
A regional crisis in the Americas could make that second home in Central or
South America less of a safe haven than you’re counting on it to be. Another property in Europe or Asia would give you more options.
My personal approach is founded on four strategies…
Step 1: Home Sweet Home
I believe the place to start is residency redundancy… an alternative place where you could show up in case of emergency, secure in the knowledge that you couldn’t be turned away.
Step 2: Establish Passive Income In The Currencies You Need
Not ideal to relocate to Portugal in time of trouble if all of your income is in dollars. This means you’re living at the mercy of the euro-dollar exchange rate. Better if you have passive income in euros, for example.
Step 3: Keep Liquid Assets Where You Need Them
I write often about your best options for where and how to open an offshore bank account. In the context of creating your personal Bug-Out Plan, I want to suggest that you think through how much money you’ll need to support yourself and your family in each of your backup residency locations in case of crisis.
Step 4: Consider Self-Sufficiency
While I’m not generally a doom-and-gloom kind of guy, I do think about worst-case scenarios, both to do with my investments and my lifestyle.
When making any investment, I consider what would happen to my portfolio overall and to my lifestyle if that investment were to disappear completely. If the investment didn’t pay out a thing, would my net worth and/or comfort level deteriorate significantly? If I can live with the answer to that question, then I invest.
The worst-case scenarios most people think about in the United States have to do with civil unrest, financial system breakdowns, and oil and food shortages. People prepare for these disasters by building bunkers and storing food and ammunition. But what happens when the food and ammunition run out? Most don’t think beyond that. They are preppers but not really planners.
I’m not a prepper, I’m a planner.
My plan is to be able to grow my own food if I ever need to. I’ve invested in arable land in places off the world’s radar.
I’m not about the doom and gloom. I don’t think a worldwide crisis will hit in such a way that I’ll have to learn how to sheer a sheep and knit my own sweater. My diversification plan started out as a lifestyle plan. It evolved into a financial plan. That, in turn, has evolved into a strategy for surviving a crisis.
Now I’m realizing that this plan is evolving into a next stage… into a legacy plan for my kids and grandkids. They will inherit a diversified portfolio of properties and investments along with multiple citizenships, multiple residencies, savings in multiple currencies, and friends across the globe.