It is the dream of many an escapist to finish a working career and, with money in the bank and retirement checks coming each month, set off in search of adventure.  If you’re like me, you spend way too many hours each week dreaming of that perfect boat sailing off into the sunset toward a beautiful island in the Caribbean or South Pacific.  Dreams of gorgeous anchorages, aqua blue waters, sandy beaches, and palm tree lined beaches have literally spelled disaster for many an afternoon’s work schedule.  But how often do any of these dreams include that occasional storm and the resulting consequences?  Do your dreams include the preparations necessary to weather the storms common to these adventures? Now, if you’re thinking this is just another one of those sailing articles being written by some parrot head who is typing with one finger on one hand while holding a margarita in the other you’d be wrong... at least about it being a sailing article.  Whether you dream of boats, wineries, or beautiful estates- if your finances are tied to savings or investments in the US your future is anchored to the ups and downs of the Dollar.  Understanding this could mean the difference between a wonderfully successful adventure or years of difficulty and possibly total failure. Just ask anyone who happened to have made their escape back in the 1990’s or early 2000 how important it is to plan for the Dollar’s rise and fall on the currency market.  Imagine purchasing a nice little house in Tuscany in 1999 knowing that your retirement would provide you with just enough to live comfortably.  Not even considering the Stock Market collapse, how would you then feel as you watched (and felt) the effects of the Dollar falling 30% over the next few years.  Could you survive living expenses rising 30% or would your wonderful dreams be seriously at risk?  Now, how would you feel when you hear the leaders of the world’s central banks making statements that the Dollar needs to fall another 20 to 30% to be in balance?   As you dream and plan your escape have you considered scenarios like this? Using the assistance of the sailing metaphor, this article will attempt to help readers better understand  currency fluctuations, what causes them, future trends, and strategies you can use to protect your financial assets and future retirement dreams.  This is a brief introduction designed to stimulate your thinking and studies in a topic seldom considered until the last moment.

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As an investor, whether you are seeking to retire at home or abroad, it is important to fully understand how your base (or anchor) currency will maintain its future worth or buying power against other currencies.  In a sense, whether or not the country’s actions and financial policies will work to maintain the integrity of the currency (your anchor) or corrode it until it ends in catastrophe by collapsing it into worthlessness.  Developing this understanding can only be achieved by fully grasping the issues mentioned at the bottom of the last paragraph as well as the geopolitical cat and mouse games countries are playing to gain economic advantages. 

In a sense, it is a little like being on a small boat on a large ocean.  The reality is you have no control over the ocean currents, tides, winds or storms.  The only thing you have is the control over is your little boat.  With a little knowledge and experience you can learn to navigate the tides, currents, winds, and even storms.   In fact you can even use them to your advantage. 

Reading Trends
In planning for and executing your long-term investment strategy it is very important to know and understand trends in currency.  Many who are new to this tend to focus on the day to day fluctuations often resulting in anxiety and poor decision making.  The day to day stuff can drive you mad.  What is important is understanding and acting on the long-term trends.  A trend is simply the direction something is headed over the long-term.  A perfect example with the Dollar is the trend over the past seven years against the Euro.  Where once one could purchase a Euro for about 87 cents it now takes over $1.30.

How does one decipher these trends aside from historical charts?  To do so requires an understanding of the areas mentioned earlier that directly affect currency fluctuations.  Spending time reading informational websites such as 321gold.com or picking up a copy of the soon to be released E-Book that EscapeArtist will be publishing (from another author) help greatly in building this understanding. 

So, what are the future trends for the Dollar?  First let me state that these are my thoughts based on my own due diligence.  You need to do your own due diligence and make up your own mind and act on what you believe will happen.  Remember, many a soothsayer’s predictions have dashed many a financial dream onto the rocks of failure.  So always verify everything you read or hear.

Here is what we do know.  First, the US Dollar is the reserve currency for the globe.  This has allowed the US benefits and privileges others don’t have.  Good for Dollar holders in the sense that other countries with tons of Dollars in their treasuries work hard to support it.  Bad, in the sense that it has allowed the US government, Federal Reserve, and the American people to be financially irresponsible- to the point of insanity.  Current on record debt is over 8 trillion with long-term liabilities (off ledger debt) somewhere between 45 and 70 trillion.  The US needs to borrow over 2 billion a day to operate, an amount equaling almost 80% of global savings.  Savings rates for US citizens has been or is near zero for the past two years while countries such as China have rates as high as 30%.  The money supply has been doubled in less than 10 years.  In less than 30 years, the US has gone from the largest creditor nation on earth to the greatest debtor nation in the history of mankind.  During this same period, the country went from being a net global producer of goods to a dependent consumer of goods. 

Now, I could continue on ad nauseam but this should provide you with a good visual of the situation- at least from the perspective of the contrarian crowd.  No matter if you are a contrarian or believer in those who praise the current economic situation as healthy, it makes sense be to prepared by designing and implementing financial strategies that can weather any storm.

Developing Strategies
Now that we have discussed currency fluctuations and the importance of understanding future trends it only makes sense to delve into strategies for navigating successfully through these waters and, if possible, around the large storms.  Jumping back on board our boat analogy, most retirement strategies can be described in a visually interesting way.  Imagine the boat is the retirement plan and the anchor and chain is the supporting financial investments, income, uncontrollable events such as currency fluctuations, geopolitical conflicts, and so on.  A few of the questions we all need to ask ourselves are:  How safe/strong is the anchor and chain I have attached to my dream boat?  How big an anchor do I need to hold my boat?  Or, how big of a boat will my anchor safely hold?  Is it safe to be attached to only one anchor?  What are the actions of others who can impact my anchorage? And what storms do I see on the horizon?  Asking questions like these is the beginning of developing your own strategy. 

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1.  Be the Captain of Your Own Financial Boat
The only person who really cares about your plans is you (read- spouses, family, etc.).  The only one who would share in your pain if your dreams end shattered on the rocks is the same.  Do you think some advisor or broker will share in your loss?  Would they even lose any sleep?  Remember the investment world has one objective- to make themselves money.  This is dangerously so with hedge funds.  This does not mean that you have to manage your own portfolio or become a day trader.  It means you must know and understand your current investment strategies and ask if they will ultimately take you where you want to go.  Asking those managing your portfolios the right questions is the first step in taking control of the helm. 

2.  Education & Due Diligence
Taking control of your financial destiny will mean you need to do your homework.  The internet has made this process much easier and transparent.  Where in the past information was highly controlled, today it can be accessed almost immediately with numerous perspectives available to help you understand it.  Again, websites like 321gold.com are good resources from which you can access a wealth of information.  Although you might think of this as a gold oriented site, it collects articles from some of the best economic minds world wide.  By visiting this site one or two hours a week you can access a wealth of information important to an escape artist’s economic health.

3.  Diversification
The analogy presented above is to visualize how risky it can be if all of your dreams are attached to one anchor by one chain.  The key to mitigating as much risk as possible and the damage that can occur from currency fluctuations is to diversify your investment portfolio.  Doing your due diligence will help you better understand how to diversify into real assets such as gold and silver and foreign investment markets.  EscapeArtist.com also offers numerous business and investment opportunities into which readers can also diversify. 

4.   Lifestyle
The most important aspect of any long-term retirement strategy is lifestyle.  Whether you are just 20 years old and starting to dream or 75 and already on your escape, the most important thing you can do is live a lifestyle that is balanced and well within it’s financial means.  The importance of living a financially sustainable lifestyle can not be understated.  Failure to do so will always lead to problems if not total failure.

Summary
This article was written with the intention of raising awareness of the importance of understanding how currency fluctuations can affect your future dreams and adventures.  Far too many dreams have failed because they did not consider currency fluctuations into their financial plans.  If you are just beginning the process of building a financial program for a future retirement, I hope you will find this information helpful in maximizing its success.  If you are already cruising along in your offshore retirement boat and haven’t seriously considered currency fluctuations, I hope it will be helpful in assessing and strengthening of your financial anchoring system.  So, next time your dreaming about that foreign getaway or sitting on the beach enjoying one, try imagining how your dreams might weather a storm.  It will help you in finding holes in your plans and give you the opportunity to fix them before they are real trouble.  Remember, hope for the best while planning for the worst.
 

Happy Sailing!
 

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