Now Is The Time To Set Cash Aside If You Haven’t Already
A guiding principle of preparedness is to have some cash on hand in the event there is a disaster and the typical currency exchange mechanisms (debit/credit card processing, ATM’s, etc.) are not functioning. The types of disasters that come to mind where this would be most useful are situations where you might have to evacuate (flood, hurricane, etc.) or a long term power outage. A little bit of cash might get you the fuel or supplies you need to flee the immediate area and get to a point where you can return to using your cards to pay for things.
Also, having some cash on hand can be useful for a personal disaster like the loss of a job or a cut back in hours at work. This money can then be used to help bridge the gap until a remedy can be found.
With the use of cash seemingly becoming extinct to a point, it is even more important to have some set aside in a safe place at home because it is even less likely that you will have any on your person as a result of relying on cards and their associated processing systems to make purchases.
Let me throw out another reason to hold on to your money in cash in a location that you control…Banking Institutions. The world is plagued with financial troubles and while the news will tell you that the United States is just fine because the DOW Jones Industrial Average hovering just under 18,000 points and Google’s shares are over $520, how could anything be wrong? We are not as well off as the talking heads would like you to believe.
We as a country have historically had monetary issues. The best example that comes to mind is the Great Depression but even as recently as 2008 there was a terrible financial collapse in the housing market that greatly impacted the nation. The effects of the 2008 crisis have been felt across the board and even seven years later, we continue to feel the impact in the housing market, credit market, unemployment, and a lack of funding in government at all levels.
With the push toward globalization, we are even more threatened. Look at Greece as a glaring example. Today happens to be significant timing because recently Greece formally defaulted on somewhere around $1.8 Billion dollars that they owed to the International Monetary Fund (IMF). The lead up to default included banking holidays and limits on how much account holders could withdraw from their accounts. The lines at the ATM were hours long and citizens scrambled to get the basic necessities together as they saw the writing on the wall.
“Self-preservation is kicking in. People are hoarding gasoline and groceries. I’m mocked all the time for saying to prepare. … But look how quickly things go down the moment you lose access to all the conveniences you assumed you were always going to have access to. Let me ask you a question: do you think we’ll be any different when our economic day of reckoning comes?”
In fact, things were so bad that the ATM limit was $66 and while Greeks were able to pay bills online, they were prohibited from moving their money out of the country.
How about the U.S.?
Could the United States end up in this position? I am certain that this could happen in America and while it might not look the same; the results would be similar. The only difference between us and Greece is that the Greeks have experienced this recently. Americans would lose their minds!
Over the last several years we have seen several times where the United States was staring down the barrel of default ourselves and while that was not comfortable, Congress and the president always pulled something together in the end because they knew the potential impact that default could have on the country.
Even with the threat of default, there were political moves to suspend the pay of the military. I can tell you that this move probably would have not worked very well, especially if it were long term. It may have led to the first military coup in the history of our country.
The current U.S. debt is over $18 Trillion dollars of which over one third is held by foreign interests (mainly China and Japan). We even owe somewhere around $66 Billion dollars to our beloved friends in Russia.
With China already not happy with us because of our current economic instability, could you imagine what would happen if they decided to demand payment in full of their debt? It would not go well and if I had to guess, it would lead to several other countries feeling insecure and demanding payment as well.
On top of everything else, are we really getting anywhere by continuing to take on more and more debt that we all know we will never be able to realistically pay back? I doubt it. While we may live to see another day from a debt ceiling perspective, all we are doing is passing the buck to our children and future generations. Even if stocks continue to go up and we have this false sense of security, the day will come when no one will lend us any money and then what will happen? Our house of cards will come crashing down.
A collapse in the United States may not happen all at once. It is reasonable to expect that things could get started by the fall of a few cities that serve as the first few dominoes along the chain of events that lead up to a financial collapse in the United States.
The first domino could be almost anywhere:
- Detroit, Michigan
- Stockton, California
- Jefferson County, Alabama
- San Bernadino, California
My apologies, these are not random cities. Those are a few of the cities that have already filed bankruptcy over the last few years.
The Weimar Republic
There is a scary parallel between what is happening in Greece and the United States today and the economic disaster that happened in the Weimar Republic. Following World War I, the government in the Weimar Republic had massive debt, tried to hyper inflate their currency as a way to repay those debts, and ultimately saw a collapse in the currency.
In the wake of currency collapse; there was high unemployment (almost 10% which we saw in the U.S. from 2009-2011 “officially”) as well as terrible food and energy shortages.
If a lack of resources wasn’t good enough, the Weimar government forced citizens to register their guns. Later, this registry provided the information necessary to confiscate all firearms in the Republic.
The decision was also made to legalize drugs and a downward slide in the morals and values of the country was well underway. In the end, the result was disastrous.
For those who don’t know; high unemployment and the devaluation leading to the collapse of the currency in the Weimar Republic gave a way for Hitler to rise to power. We all know how that worked out, right?
Massive debt? Check.
High Unemployment? Check.
Energy and food shortages? Check.
Restrictive gun laws? Check.
Legalized drugs? Check.
It sure seems like we are in great shape as a country based on what history has to tell us.
If all of that is not enough, our friends in Puerto Rico (who we have given territory status to) have also decided that they are not going to be able to pay their debts either. According to the governor of Puerto Rico, Alejandro Garcia Padilla, “The debt is not payable. There is no other option. I would love to have an easier option. This is not politics, this is math.”
Can you imagine how scary it might be if the United States started doing math at the federal level?
So what can you do to ensure that you are not standing in line at the ATM when things go south?
The best way to stay out of the ATM line is to already have what you would get with what you pull out of the ATM: Cash and Supplies.
Key takeaways from the situation in Greece include:
- By setting aside cash now, you will not find yourself in a struggle to try to get some together at the last minute if things hit the fan.
- Having a basic stock of extra supplies on hand can alleviate the need to panic buy at the last minute. There are several potential things that happen when panic buying ensues:
- You will buy things that you are not familiar with and therefore may or may not use.
- You will buy things that you will not use but get them because you are in panic mode.
- Prices may be jacked up on needed items because there is a limited supply.
- You put yourself at greater risk of injury or death while also being away from family and loved ones because of the need to hurry up and make key purchases.
- You will lose time trying to navigate through stores and waiting in long lines. This is time that could be spent doing other tasks or moving away from the impacted/problem area.
How much cash is enough?
The saying that comes to mind here is the more, the merrier. Obviously, having a huge stack of cash sitting around the house is not very realistic for anyone but the very wealthy. A realistic amount of cash to have on hand will vary from person to person and family to family but a good goal would a minimum of one month of the minimum required expenses.
Most individuals and families should try to have cash on hand for:
Shelter – Rent or Mortgage, Utilities
Food & Beverage – Human, Pet
Insurance – Homeowner or Renter, Vehicle, Life, Medical/Dental
Transportation – Car Payment, Public Transportation, Fuel
While potential areas where cash could prove useful are numerous, you will need to make a decision on what your priorities are. I would suggest food, water, and safety/security be your main priority.
Regardless of how much cash you end up with or what you decide that it should be set aside for, the single most important factor is to get started and set some cash in the rainy day fund.
photo credit: Pile of Cash via photopin (license)