Life delivers another warning about financial preparedness

 

We've discussed many aspects of "prepping" over the years in these pages.  Some topics come up repeatedly.  One of them is financial preparedness:  establishing an emergency fund, getting out of debt, paying cash rather than going into more debt, and so on.  Part of that advice has always been to have a certain amount of money available in cash, without needing to go to a bank to get it.  If communications systems go down, you won't be able to verify balances, pay by credit card, etc.  Better have some cash on hand to take care of essentials for a few days.

Monday's Internet outage provided graphic evidence confirming how essential such a cash-on-hand reserve really is.

It’s not just that people couldn’t place mobile orders for coffee at Starbucks or ask Alexa for the weather. Hospitals said crucial communications services weren’t working, and teachers couldn’t access their planned lessons for the day. Chime, a mobile banking service, was down, too, leaving people without access to their money. Ring and Blink cameras, along with most smart home devices, stopped working.

. . .

One expert already estimated the total impact of the disruption will be in the billions of dollars.

“It creates a very large single point of failure that then impacts operations at warehouses, deliveries, people being able to sell their goods and services on websites,” Jacob Bourne, an analyst at eMarketer, told CNN.

. . .

The Doughertys ... stopped for lunch at Cattleman’s Roadhouse, where the manager offered to pay for their meal because the restaurant was unable to process cards.

“He said, ‘This is no fault of yours, and you’re already eating. I don’t guess you all have cash?’” Debi Dougherty said. “And we both looked at each other, and I’m like, ‘Not enough to cover this meal.’”

. . .

Dia Giordano was spending her Monday trying to untangle the mess that the outage made for her three businesses: an Italian restaurant, eight mental health clinics and a couple of rental properties.

DoorDash was “blowing up” her phone starting at 2 a.m., warning that the online ordering system, which is run through Toast, was down.

“What that means is one-third of my business is gone for the day,” she told CNN. “At least with the publicity (of the outage), people might be understanding, but I’m still getting messages asking if we’re open, because the website is just gone. It’s just not there.”

Toast, when reached Monday, declined comment.

At Giordano’s mental health clinics, her practitioners and administrative staff members were unable to validate clients’ insurance information because the online clearinghouse for that information wasn’t working.

And on top of that, Venmo was down, meaning she couldn’t receive the rental payments she normally would.

There's more at the link.

I've spoken to several friends and acquaintances who found they were unable to buy their normal purchases because credit card services were down.  Others had a little cash available, but not enough for everything they needed, and so had to make rapid decisions over what to buy, and what to do without.  In one case where little children were involved, disposable diapers and baby food took priority, meaning the car didn't get filled with gas and the family had to make do with less for supper.

I always carry at least $100 in my wallet, and sometimes more, and I've asked my wife to do the same.  If we'd been out and about when the Internet outage hit on Monday, we'd have had enough to get home again, including gasoline, food, etc.  However, I think a lot of people would not have been so fortunate.  (Remember, too, to carry smaller bills.  Offering a $100 note to a small business might bring the answer that they don't have enough change to break it, so it's either give them the extra, or do without whatever you wanted to buy there.  My wallet usually contains a mix of $20 and $50 bills for that reason.)

It's also worth remembering that Monday's outage was resolved within a day.  If it had gone on for a week, there are businesses that would literally have gone bankrupt through being unable to process payments from customers or to suppliers.  If it had lasted a month, the permanent damage to the US economy would undoubtedly have run into at least hundreds of billions of dollars, if not the low trillions.  It might have put many people out on the street, for that matter.  For example, how many companies could keep their staff on the payroll when they have no money coming in to pay them?  How many rental agreements contain clauses allowing the landlord to evict tenants for non-payment of rent, particularly if they're already a few weeks, or a month or two, behind in their payments?  Landlords (particularly the corporate variety) aren't renowned for their loving-kindness and humanitarian instincts.

I've always tried to keep at least one months' routine expenditure in cash on hand (i.e. available immediately, not in the bank), so that I could pay our essential bills if the banking system went down.  After Monday, and looking at the potential for greater disruption from terrorism, economic sabotage, etc., I'm seriously thinking it might be a good idea to increase that to two months' worth.  I can't afford that at the moment, but it's a worthwhile target, I think.

(Also, from a personal perspective, I'm currently undergoing rehab after my surgery last month, and preparing for a bigger operation next year.  What if I couldn't pay for those sessions, or for the medications I need?  I definitely need a medical cash reserve, over and above a general-purpose one!)

Monday's Internet outage should be a useful reminder to all of us.  Emergencies arrive on their own schedule, not ours, and they usually don't provide much (if any) warning.  If we're not ready when they happen, we're not ready.  Period.  It helps to be as prepared as practically possible, to survive the interruption(s) to routine that they bring with them, and come out the other side as intact as possible.

Peter