Sunday, September 9, 2012

How much Cash Should I have?

If you have been reading this blog for some time you already know that there’s much truth in the “cash is king” saying.
When disaster strikes the “cash only” signs go up. When you have to buy / sell on the go, cash makes it happen. When banks go on holydays and everyone is looking for an ATM with some money left, Cash not only buys you good and services, it allows you to get some pretty nice deals. Since we’re talking deals, nothing gets you as many of those as a wad of cash at the right time. For someone looking to close a sale, the money being physically within hands reach, literally speaking, is an important factor.
When you have to leave everything behind, what you carry with you and what you have in the bank is all you have left, and if the banks happen to go down along with whatever is forcing you to leave, then what you have with you is all you have left.
Looking at different events around the world, if there’s one thing all refugees have in common is that they can all use a fat wad of cash.

Supplies are very important and what you have at hand may be all you have, so having a good supply of food, water, and basic gear is essential, but there’s areas where you can go overboard.
Remember that in the event of a)a disaster that compromises your home b)an event that forces you to move out and leave everything behind, in any long term bug out situation, your gear is reduced to what you can carry, the rest is gone. Sometimes it’s a couple suitcases, sometimes it’s a backpack, but what gets left behind I can assure you, you will wish you had the chance to have turned it all to cash on craiglist or a garage sale.  This is why balance and common sense is so important.
Should I have a life supply worth of nails and hammers? A year supply of toilet paper and other households instead of the cash saved up to buy those? Well… look at it this way, if you are in a situation where you’re using up the last of your year long TP supply, you should have left 11 months ago! A month goes by without a store being opened for you to buy TP or soap? You should be evacuating or relocating already.

A good supply of gear and supplies is important, but every once in a while do ask yourself:  What’s your situation if you have to leave everything behind? What if bugging in just isn’t an option? What could I take with me? More important, how much are you forced to leave behind?
Once we understand that cash as means of purchasing goods and services is important, the question is how much do I need. Here’s a quick approach that might work for you:

Minimum:
One month worth of basic expenses in cash. Think mortgage/rent, bills, car fuel and food.
Better:
One month worth of basic expenses + plane ticket for each family member to out of state/out of the country alternative location.
People have been forced to relocate abroad many times in history. It has happened to millions in recent history, it could happen to you.
ok:
Three months worth of expenses + plane tickets for each family member + 1month deposit plus two more months worth of rent in potential BO country.
This should cut you some slack to get settled and get back on your feet.
Even better:
Three months worth of expenses + plane ticket per family member + 1000usd/gold eagle bribe per family member + deposit and three months worth of rent + money for ok used car

The more financial resources you have, the better your chances are and the less traumatic will the experience be. Some of this could be in the form of gold. During war scenarios an ounce of gold may make all the difference in the world, and precious metals (our Sponsor, Precious Metal House) have the advantage of not going down along with paper money if the nature of the disaster affecting you compromises the fiat currency as well.
Join the forum discussion on this post!
FerFAL

3 comments:

Anonymous said...

Fernando,

This is hands down THE best site for all "contingency" people (even the word preppers has a negative aura). Your advice is extremely practical. Cash is indeed king. Precious metals (PMs) are very important (Gold and Silver only). However, I do think it is important to stress even to the most anti-currency people that currency is a required chunk (of your wealth mix). Potheads have a saying, "Weed will get you through times of no money better than money will get you through times of no weed." A lot of people think the same with PMs. And they are right, partially. If you feel a minor to full version of Argentina is coming to America (the most likely "doomsday" scenario), having your savings in PMs rather than the bank is a good choice. However, having a good chunk of cash on hand is an excellent way to go. Let's add up what Fernando is saying here: 3 months expenses, airfare for every family member, rent deposit and three months rent. You are looking at a minimum of $15K USD for a family of four. Let's not forget that in a crisis situation the prices of everything will probably rise considerably. If you have a lot of PMs and you need to move and move now, where are you going to cash in your PMs? Your local coin dealer/jewelry store/pawn shop? They will be guarding their cash supply as well (if they are even open when you need it). If there isn't an immediate rush for PMs your PMs will go down in value in the short term as they will give you less for them as they will need to ration their own supply of cash.

PMs are a good way to store, transport and transfer wealth. It can be turned to cash more readily than a lot of other things, however it is NOT the same as cash. It is not as universal as cash. More than 90% of the population (the US), wouldn't know a Gold Eagle if they saw one, let alone be able to tell if it's real and ascertain it's value. But 100% know what a dollar looks like and know it's worth. Do not forego cash and be REALISTIC about how much you should have.

Side note on the PMs to transfer wealth. My uncle recently passed away. He had two kids (wife was dead) and two nephews he was very close to. Upon his death, we were called together for the will. Included in the will was letter for each person. Included in the letter was a map of the house, a number and a series of numbers. The recipients of the letters were told in the letter to meet together at his house the following day to take inventory of the house. When I went to the house we all had the same map. It led to a spot in the wall behind a bookshelf. There was small "cubby" hole. Inside the cubby hole were four suitcase style personal safes with a number scratched in them. We each got our case. I opened mine and inside was a mix of silver and gold. Ingots, coins, etc. Mine was 3 1/2 oz gold eagles and a 2 troy oz ingot of gold and a mix of ingots of silver totaling 200 ounces. Aside from being really cool, the genius of it!!!!! I now got money without having to claim it. Also, untraceable.

Anonymous said...

Ferfal,

What is happening in Argentina? Is it true that gold sales are being restricted?

https://www.kitcomm.com/showthread.php?t=108688

Anonymous said...

Good on you, Anonymous #1. I wish my Aunt did that instead of leaving stocks that had to be sold, plus she died just in time for QE1, so the money was devalued and the stocks had lost nearly a quarter of their value. She had intended to leave me enough that I would never have to work again, as it was I got about half of what she intended.

On the other hand, I invested most of it in bar silver and the price as of today is more than double what I paid, so :).

I now live in Mexico and in addition to cash I have about 150 oz of silver Libertad Mexican govt bullion in a place where it will take about two hours work to get to it and nobody but me knows about it.

Hope Anonymous #1 is hanging onto his PMs because they are going no place but up right now.