Friday, June 30, 2023

An excellent analysis of how much "emergency money" you need


Divemedic, writing at Area Ocho, has produced a superb analysis of why you need to put money away in a "rainy day" or emergency fund.  It's so good, and so close to my own thinking, that I'm not going to excerpt much of it at all, except for this teaser.

One of the things that I have always blogged about is being ready for disasters. A disaster that involves the collapse of society is the one that preppers seem to find the most “sexy” and they spend their time planning on it- stockpiling guns, ammo, food, and the like. The thing with that is, it is also the disaster that we are least likely to experience.

The most likely disaster that we are likely to affect is a personal one. A disaster that affects just you, or your family. A personal disaster may be something as small as a flat tire, or as personally destructive as cancer, or simply being laid off from your job. We cannot know what that disaster will be, but there is a pretty good chance that the best way to fix it will be… money.

. . .

That’s why it amazes me that 57% of Americans can’t even deal with an emergency that would cost them $1,000. Sure, stockpiling food, ammo, or some other piece of cool gear is more fun, but money is going to be your friend in most disasters at some point. Having $1000 in emergency cash is going to help you out of more disasters than that new ACOG or that second 1911.

There's more at the link.  He's also written a follow-up post about the usefulness of precious metals (gold and silver, in his case with an emphasis on gold) as part of your emergency funds.

Without previously knowing his views, my wife and I have followed almost exactly the "recipe" he recommends for building up our reserve fund.  The only difference is that we can't afford much in the way of gold;  we're not that well off!  However, we try to maintain a couple of months' expenses in cash or our bank accounts, plus more in the form of silver coins that are securely stored out of harm's way.  There's also the value of our emergency preparedness supplies;  if we suddenly found ourselves destitute, we could eat for more than a week or two out of our stockpile.  The combination means that if everything went pear-shaped for us, and we both lost our incomes, we could survive for some time without hurting too badly.

(As I mentioned last Tuesday, that cash reserve came in handy when I found that our emergency water filtration supplies had been disabled by chemical interactions.  I was able to order replacements at once, and have them here within a couple of days.  Given how critically important potable water is to our health and safety, it was very comforting to be able to do that.)

Even if you can only afford a week's emergency financial reserve to start with, it's well worth putting it aside;  and, over the course of several years, it can grow until you have a couple of months' worth.  Go read what Divemedic has to say, and learn from him.  It's good stuff.



Clifford the Wonder Penguin said...

Resilience is critical, the lack of it can be fatal*, and it comes in many different flavors.

*for all the various values of "fatal."

James said...

Absolutely agree on precious metals and a cash fund. I believe that a cash fund should not be kept in a bank, as banks may not release funds in an emergency. I have some gold, but prefer silver. Gold has the edge in portability, but silver is easier to use for purchases in time of need because it is in smaller denominations. I don't want to have to be asking for change on my ounce of gold in sketchy situations. Also silver is currently vastly under priced compared to it's historic value ratio to gold.

HMS Defiant said...

A mistake is made when one thinks all those Rand matter, they don’t have any value at att at teotwawki

Peteforester said...

Our "powers that be" want nothing less than for Americans to be in perpetual debt. Being in debt means being under someone's thumb. Don't be one of those Americans! Pay off your debts and STAY OUT OF FUTURE DEBT!

DEFINITELY keep a cash reserve on hand outside the bank. There's really no such thing as being able to make a run on a bank anymore. 'Don't believe me? Try asking for, say, $10K in cash from your bank. You'll most likely be told you'll need to wait X-number of days for it, as the bank doesn't keep that much on hand. I needed to pull $7K out a few years back to buy a used tractor and got just that response. I yelled and screamed and finally got my money. Simply put, a bank can just cut you off from your cash. Of course, it can't cut d'gubmeyent off from your funds. 'See how that works?

Gold is hard to "make change" for, but it's not impossible. This problem has occurred throughout history and people being the smart apes they are, figured out a solution. Remember all those pirate books and movies where they talked about "pieces of eight?" The coins' denominations were too large for the average Joe, so they were cut into, you guessed it, eight pieces. I'm more a fan of silver myself. Yeah, it's heavier and bulkier, but it's easier to work with. It's also cheaper to buy, and can be bought in small quantities as finances permit.

Definitely keep your food larder full! Remember; when your belly's full you have a million problems. When it's empty, you've only got one!

Michael said...

Definitely keep your food larder full! Remember; when your belly's full you have a million problems. When it's empty, you've only got one!

I'm stealing this one Pete!!

And that goes double with safe water. With safe water and food you can have a million problems to work through.

No water or food, well the good news is you only have one or two problems worth worrying about.

Divemedic said...

It's about density. If you read the post, you will see that I recommend starting with silver, then moving on fractional and then ounce gold bars. The reason is that large amounts of cash can be stored in a small space.

For those that think "I can't spend gold/money/silver in TEOTWAWKI, so I won't keep any on hand" have obviously not read the post.

JohninMd.(HELP!) said...

It matters not what it will cost, to those of us who are broke....

markm said...

Peteforester: The "piece of 8" was not gold, but a Spanish silver dollar, worth 8 reales. The old US silver dollar was based on this. Right after the revolution, the most popular dollar coin was a silver dollar with a wagon wheel stamped on one side. There being a shortage of smaller coins, people cut these along the spokes into 8 "bits", 12.5 cents each. So when the US mint finally caught up with the need for change, the quarter was called "two bits".

The silver dollar was a large coin weighing nearly an ounce, and was discontinued about a century ago when the value melted down far exceeded one (inflated) dollar. Carrying a bag of these in your pocket would give you a limp, but $1 was 1 or 2 days pay for most men in the 19th century, so it wasn't very often that someone had enough of them for the weight to be a problem.

The gold dollar must have been smaller than a dime, and too easy to lose. $5 and $10 gold coins were more common.