Researchers have concluded that human civilization will crumble by 2050 thanks to climate change. From the looks of it, we’re doomed so all financial preparation is for naught.
However, before mankind actually comes to its end, money will be a temporary buffer against the loss of everything we take for granted now. For that reason, it’s more important than ever that you plan your saving, investing, and spending around climate change.
How to prepare your finances for the climate crisis
We are already in the midst of a climate crisis, so this isn’t as future-looking as the title might make it sound. However, most personal finance advice is very dated in its direction.
You’re mainly told to save for retirement. Now it’s starting to look like you might not actually get the chance to retire at all because the earth will be unliveable before you’re old and grey.
It’s not nice to think about, but this is our reality. Things are bad, they’re going to get worse, and you’ll have to do some financial planning for the future we’re going to live in. Here are some ways to financially prepare for the coming environmental crisis from climate change.
Avoid living and working in regions vulnerable to extreme weather events
Home ownership is a big dream for many, but it’s not always an easy one to accomplish. Most people only concern themselves with the high cost of real estate, but you should also be considering the vulnerability to climate change. The last thing you want to do is over-leverage yourself for a home you’ll have to evacuate.
Avoid buying a home or establishing yourself in:
- a coastal state or province vulnerable to rising water levels
- an area prone to wildfires or flooding, as these will continue to increase year over year
- an area prone to extreme weather events (ie. storms, tornadoes)
Nowhere on earth is completely safe from climate change, but there are some regions that are safer than others. Choosing a city that will be liveable for the most number of years as possible is the most important aspect of deciding where to live and work. Neglecting to take this into consideration when establishing your career and settling down with your family will likely result in a very expensive correction later.
Maintain a large balance of cash at all times
The stock market produces the best return on your investment, but it’s vulnerable to fluctuations and not particularly liquid in the event of a crisis. It should be expected that as the effects of climate change and political instability increase, so will the volatility of the stock market.
To protect yourself, you should hold a portion of your net worth in cash, as well as keep some cold hard cash in your home in the event of a climate crisis.
Keep at least $1,000 in cash in your home in case of an emergency evacuation
You should keep a decent sum of cash in your home in case you need to evacuate. If your city is flooding or under the threat of wildfires, you might not have time to stop at an ATM.
$1,000 of cash is enough to take with you in case it will be 24-48 hours before you can access your bank. A family of four may need to keep as much as $2,000 to $3,000.
Keep your cash, as well as passports and other important documentation in a fireproof, waterproof document bag like this one. You’ll need something durable that’s also grab-and-go in case you need to make a quick exit.
In the event of an evacuation, this money can be used towards transportation, food, accommodations, clothing, toll roads, and any other costs. Essentially you are planning for the event that you would have to travel for 12 to 24 hours without access to a bank or retailers that accept debit or credit cards.
Invest in Cryptocurrency
You should be allocating a portion of your net worth to cryptocurrency as a defense against political and economic instability.
Cryptocurrency isn’t a sure bet against chaos, but it’s certainly a valuable hedge against increasing insecurity and unpredictability. Crypto, particularly Bitcoin and Ether, are global currencies unregulated by any one nation’s government. They facilitate peer-to-peer transactions, which will make it easier for you to pay for things should you ever find yourself in circumstances where fiat currency is not accepted.
Hold as much as 10% to 15% of your net worth in cash & crypto
You may need to access large sums of cash in the event of a crisis. It’s hard to say how much or for what, but it’s more likely than not you will need cash more than shares in your favorite tech company in the event of a climate crisis.
You have to imagine a world in which even the most basic necessities become very expensive, the stock market is not a reliable source of income or wealth, and there may be a premium on securing safe accommodations, healthcare, and more.
Maintaining 10% to 15% of your net worth in cash and crypto insulates you against stock market fluctuations. It also is easier to withdraw by eTransfer or bank draft, in the event that you’ll need to make a large purchase.
It’s hard to say what exactly you’ll need to buy, but knowing you can afford it even if the price tag is $50,000 or $100,000 is the best defense you can possibly have against catastrophe. Not there yet? Don’t worry. Remember, we have until 2050 for the things to really go to hell.
Choose ethical and green investments
Once you have a decent cash cushion to protect you in the event of the worst, use the rest of your dollars to vote for more environmentally friendly business practices. Look for ethical investments, like green technology ETFs.
Many banks and brokerages recognize consumers want to do good for the planet, while also continuing to grow their wealth. Robo-advisors like Wealthsimple offer socially responsible portfolios, and you can also check out iShares ETFs for green choices. Just make sure to look at exactly what securities are being held in a fund to ensure they align with your values.
Because corporations are really built to serve investors, YOU as an investor can have a lot of say in how they conduct business. Not only will cash flowing into ethical businesses entice other companies to improve their practices, you get voting rights as a shareholder and therefore can cast a ballot for a better tomorrow.
Do your part to reduce your carbon footprint
While we seem to be careening towards the point of no return, there is still the faint hope that we can turn things around. While most of the changes really need to come from government and big business, there are a few things you can do as an individual to reduce your impact on the world. The best part is most efforts to be green also serve your budget!
One of the easiest ways to lower your personal environmental impact is to curb your eating habits. Removing meat from your diet, even for only a few days or meals per week, is an easy way to easily do some good. You can check out The Cheapest Ways to Eat Vegan for inspiration. You can also opt for vegetarian meals once a week or more if you subscribe to a meal delivery service.
Switch your commute from a car to public transit, or find a way to bike or walk to work. Not only will this reduce the emissions you personally put into the atmosphere, but it will also probably improve your mood as well. Spending more time in nature and less time in traffic is shown to reduce stress levels and increase well-being.
I know this is heresy in a community that advocates buying “experiences” over stuff, but seeing the world isn’t actually all that great if it’s burning. If possible, reduce the number of times you hop on a plane each year, and try to reduce your visits to sensitive ecosystems. Steer clear of other environmentally destructive travels, like vacationing on cruise ships.
Curb your consumption
This isn’t easy, but it’s one of the most impactful actions you can take. Try to avoid single-use anything, whether its disposable coffee cups, straws, or fast-fashion tops.
You might be tempted to buy cheap if you’re on a strict budget, but anything that’s going to be a throwaway so you can buy more is probably not a great investment for you or the planet. Implement a series of no-spend days, and always bring your travel mug to the cafe. It might seem like little actions, but over years and years, it really adds up.
The world is ending, but there’s still hope
I know it’s looking bleak, but there IS actually still time for us to turn it all around. Doing your part and encouraging your friends and family to do the same is a great start, but make sure to also rally for governments to take more aggressive action towards climate change.
It’s good to reign in your personal behavior, but global legislation against countries and corporations violating environmental protection standards is the only thing that can really save us. In the meantime, keep saving up to buy your ticket to Mars.
“Keep saving up for your ticket to Mars.” ??????
I’m loving this post even with all its doom and gloom. I’m still somehow hopeful that we can turn things around, but turning them around will still come with some serious climate problems even in the best case scenario because we passed the point of “no impact” some time ago.
Yep. It’s super depressing and we are in crisis but maybe we can rally and fix it at the 11th hour…
Thank you for writing about this. I’ve been wondering whether personal finance gurus would begin addressing this – I think it’s becoming clear that planning for some future beyond 2050 is a real pipe dream and we need to pull our heads out of the sand and recognize the crisis we’re in. Thank you!
You’re very welcome!! I’m glad this post resonated with others because it’s something I think about a lot. Sometimes with money it feels like I’m working so hard and saving so much for a future that won’t even exist. It’s depressing but I’m still hoping we can turn things around.
This article is so timely – my husband and I were just talking about this today. Saving for retirement vs. saving for leaving our planet (if that’s even an option) is a heartbreaking eye-opener. Climate change is genuinely affecting our decisions on whether or not to have children (and right now, it’s leaning toward a hard no).
Thank you so much for writing this, Bridget. It makes a lot of us that are working hard to do good things feel like we’re not alone in this which is a hopeful. It’s also great to see someone who is passionate about the world of finance also be very aware of environmental concerns because those 2 things are often considered mutually exclusive. Thank you again.
You’re very welcome James. Happy this post resonated with so many!
Have you ever considered helping people to discover some better investment opportunities that are available these days to have their portfolios do their part for the fight against climate change? It is a growing sector & one that myself and many others of our generation are interested in and passionate about. There are many SRI funds available these days whether it be an ETF or mutual fund. There are also global equity options for Canadians these days that are entirely fossil fuel free (RBF910 or CCM5013) This may be something your followers are interested in.
Where in Canada does not have flooding, fires or drought (no drinking water)? No place to move to.
There is nowhere that’s 100% safe obviously, but you could last longer in Edmonton than Vancouver, etc.
Good points for someone who in all probability will not see 2035 let alone 2050. Have not gone vegan yet, have not flown anywhere for 2 years (except a funeral) and never been on a cruise, but do worry about a future for grandkids. But your last comment “hooked on travelling” begs the question of how and how far? Oh yes, I live in BC’s Lower Mainland above any projected high tides and do not expect to freeze to death a la Edmonton or Calgary. But as the effects of climate change cannot be predicted vis a vis recent floods in eastern North America and little to no rain on the west coast, I will take my chances on staying in the frying pan vs the fire. Thanks.
I will see 2035, don’t be foolish.
The “hooked on traveling” is part of my author bio, not the article.
Congrats on your living location?
Thanks for being one of the few financial authors to honestly address what will be THE largest issue in financial planning in the next 10-20 years. Since you first wrote this article, in June of 2019, have you reviewed the state of the science on global warming? Manyl the things you expected to happen at or beyond 2050 are now projected to happen well before that. The IPCC “Pathways” have all turned out to be too optimistic.
For decades, climate scientists have warned about the danger of various climate systems passing “tipping points”. The Fires, Storms, Floods, and Droughts we’ve seen since last summer have all been the worst ever seen, and things will only continue getting continually worse going forward. These are signals of tipping points being surpassed. Another clear sign that things are happening “faster than previously expected” (google that) is the loss of Arctic Sea Ice, and the condition of glacial ice in Greenland and Antarctica. Several key papers and studies published in the last year indicate that these crucial climate systems are in states and conditions not experienced since humans first evolved. I’ve read more than a few articles where climate and ecological scientists use terms like “Vertebrate Annihilation”, “Abrupt Climate Change”, and even “Inevitable Near Term Human Extinction”. These are rational, sober, intelligent, and well educated people. These are not terms thrown around by people planning their retirement. I think the time table to plan on climate change has been moved up. Like, to today.
100% agree with you, Dana. I will need to review the data and update this post accordingly; it definitely grows more dire by the day.