Preparing For Financial Disasters, Being Prepared
Over the years I have tried to do everything possible to protect my assets and be prepared for any financial emergencies. My financial advisor routinely reviews my financial life to make sure that I am adequately prepared by manipulating my asset allocation and purchasing adequate insurance.
In my adult life, I have only experienced 2 mini-disaster, a city evacuation which was during California fires in San Diego and a 2-day electrical outage in the same city. I recall unbelievable lines at the gas station and ATM machines during the fires.
Most disasters are short-lived, often lasting hours, days and maybe weeks. If you can make it through this period without selling your resources for less than they are worth, you likely will come out far ahead.
In this post, I have compiled a few points that should help you prepare financially for the most common disasters. These are on you since such scenarios are too rare for a financial advisor to address.
I consider the following scenarios as disasters:
- major electrical grid failures
- massive cyber attacks
- identity theft/hacking
- health epidemics
- destruction of infrastructures due to attacks
- price inflation of commonly needed household goods
Immediately available Cash
I am not one of those who believes in having weapons and defending my life at all cost against threats, I am too lazy. I don’t believe in having underground bunkers and ammunition if someone wants my shit bad enough, they are welcome to it.
This post is more about getting through temporary disasters without feeling inconvenienced and without depleting our financial reserves.
During most disasters, people freak out, they will flood the streets and crowd the ATM and supermarkets, the last places you would want to have to visit.
If you have around $10,000 in cash, you should be able to navigate your way through most situations.
Electrical outages will prevent ATM’s from working. Cyber hacks may cause freezing of access to accounts. Airlines and gas stations won’t be able to take credit cards and a check won’t get you very far at the hardware store.
Don’t just store $100 bills. Have plenty of $1, $5 and $20 bills. And yes, have some cigarettes & booze to trade for those of you who are advanced preppers.
Access to larger stores of cash
In a savings account or checking account, it would be beneficial to have access to even larger sums of money.
For the purposes of disasters which will blow over within a couple of weeks, having bank access to around $20k should be more than sufficient, based on the various disaster scenarios I researched.
During financial disasters, banks can also limit your access to cash. Yea, that money you have parked in the bank account, it’s yours, but that doesn’t mean you can get to it when you want.
ATM’s will limit how much you can withdraw from an ATM in a 24 hour period. It depends on your bank and the ATM you’re withdrawing money from. You can actually set your limit on your bank’s website but don’t expect it to be much higher than $1,500.
Again during a financial disaster, ATM’s will likely either deplete their bills due to high demand or they will limit the amount that can be withdrawn.
Cash in foreign currency
I’m a fan of having some money in a foreign currency stored in a bank overseas, though honestly, it’s definitely a bit overkill.
If you are someone who believes in the possibility of hyperinflation and disruption of currency due to economic collapse, then it might make sense for you to hold $10k-30k in another currency, in another country.
Transporting currency across borders isn’t always easy, though many can get away with it. During economic disasters, I wouldn’t bet on the honesty of border patrol agents.
If you like traveling, fly your tail over to Canada or Australia, open a savings account and hold some of that country’s respective currency in that account. If you are uber-paranoid, hold the money in cash and store it in a safe deposit box.
If you are uber-paranoid, hold the money in cash and store it in a safe deposit box.
Wanna take it up another notch? Remember to store paper assets in a safe deposit box high off the ground (in the case of floods) and store valuable coins lower to the ground to prevent tarnishing. Yea, it gets that detailed.
Gold & Silver
Fucking hell, you knew these 2 metals were going to make it somewhere on this list. Though completely falsely categorized as the most precious of metals, these 2 have historical significance.
During disasters, people tend to fall back on what they know. Bartering suddenly becomes the norm, cigarettes, alcohol, gold and silver become the currency of choice.
Records of your account balances
It’s wise to download your net worth statements from time to time. Having physical or digital copies of your investment/savings accounts is important in case of cyber attacks.
The point isn’t to prove that you own something in case of complete destruction of records. Instead, think of it as a way to expedite the process of reconciling accounts which may have gotten mixed up during major computer glitches.
After all, account balances are stored in digital files. These can get hacked, corrupted, the institution bankrupted etc. Having your own records will help you recover the value of your account should shit hit the fan.
Don’t forget your credit report. Not only should you be getting a copy of your credit report once a year to screen for any funny business, but you should also try to have a copy in case of similar discrepancies caused by the situations above.
Access to water
The key here is having a supply of water, heat, and electricity in case prices for such resources are so obscenely high that paying for them would drastically hurt your net worth.
A portable water filtration device may help you get through water contamination without having to pay for overpriced water bottles from stores.
As I’m writing this, there are South American countries experiencing such massive economic disasters to the point that the citizens are spending every last dollar trying to secure the most basic of staples.
If you are fortunate to live in climates where you can safely overcome cold weather without a heating source then you can skip this topic.
It’s false to think that you can secure enough electricity to provide heat. Electricity is a convenient yet very inefficient way of providing heat. A portable propane heater is much more efficient and easy to store.
Access To Electricity
For those who have wells, electricity can be a big deal. For the rest of us, electricity is often a convenience, something we can live without for quite some time.
An efficient solar panel can be sourced which is easy to store, made of flexible material and can power various personal tech gadgets.
During a nearly 2 day electrical outage in San Diego, I just took out my car battery, hooked it up to an inverter and was able to run my phone and laptop from the comfort of my home with plenty of juice left in the battery.
In an emergency, the best generator can be found parked in your garage. If you have access to plenty of gasoline but no electricity, use that 4,000 lbs hunk of steel to power up your gadgets.
So, let’s just say that some families apparently have food storage systems that would rival a fucking grocery store. That’s fine, if you have the means to store food in such mass quantities then do so.
Yes, you can store meat in jars for up to 10 years and have the most delicious pre-prepared items stored so that they are good 5 years from now.
During a disaster, I don’t really care that I have parmesan sprinkled on my angel hair pasta, but you might so prepare accordingly.
If you can store flour, cooked beans, and some veggies then you should be good to go. Keep some salt, yeast, baking soda and baking powder and you would have most staples needed to prevent an excursion to the grocery store overrun by zombies.
Wanna get fancier? Keep some plant milk in cartons, some dried pasta, and canned tomato sauce.
Why the food stores?
- Because you may not want to leave the house during a health epidemic.
- You may not want to visit a grocery store which you know will be packed and full of agitated individuals.
- Because grocery stores may inflate their prices obscenely.
- The streets may not be safe to leave your house during riots.