Zombie Apocalypse. Are You Financially Prepared?
The Importance of Cash
Cash, or the standard physical medium of exchange issued by our government, is used to convey a certain amount of value, or purchasing power, enabling you to purchase goods and services. But we live in a time when the need of having and holding currency in the physical form is diminishing due to the more prevalent use of debit cards and new smart banking apps. The checkout line seems to stop these days when someone pulls out dollar bills because now that unfortunate cashier has to go through the process of making change. If this trend of going digital continues, would you be prepared if an economic, biological, or natural disaster impacted your ability to purchase items needed in a crisis? Will your digital assets be available if there is no electricity? Previously, I wrote on the importance of accumulating good capital when taking the necessary steps to survive a zombie apocalypse. In it I discussed the importance of possessing physical currency in a post-apocalyptic world. This includes how much cash we should accumulate and where we should keep it. These are important questions that every prepper needs to consider.
First, I will give the standard financial planning answer when considering emergency funds with or without a zombie apocalypse. It is highly recommended that each household should maintain at least three to six months’ worth of total monthly liabilities in liquid assets. In other words, total what you must have in order to pay all your monthly bills, and make a plan to accumulate three to six times that amount. Liquid assets means having your cash in a form that you can get access to quickly and easily. This is just wise advice no matter what you think the future may hold. My recommendation is to put one third of your liquidity needs in short term CD’s/savings, one third in a checking account, and I recommend you put the last third in actual cash, in the form of bills and coins, locked in a safe or a secure hiding place in or around your home.
Why Holding Physical Cash Is Important
If there is ever a catastrophe that somehow launches us into a zombie apocalypse, having immediate access to at least some of our cash could be the difference between life and death. There is a reasonable likelihood that in the initial throes of a crisis electrical power generation could be sporadic. As a result, access to bank accounts or the use of credit cards most likely would be limited. Or, if a global pandemic has us all quarantined, where will the bank tellers be? Quarantined in their homes. In that moment when things go from bad to frantic confusion, having real dollars in hand might be the difference between getting a full tank of gas and getting to your bug out spot, or finding yourself standing there with an unusable credit card. If a customer can show the person at the gas station the greenbacks, there is a much higher probability that somebody will find the means of getting that petrol out of the tanks and into his car. I’ve been there. I’ve walked into a grocery store when the power was off with everyone just standing around not knowing what to do. Having cash in hand during an emergency provides the power to grab a manager and say, “Here is real money. Can I buy this?” With just a debit card the answer would undoubtedly be no!
Having physical cash in your hand grants you immediate purchasing power. During the Great Depression of the 1930’s, currency, along with its purchasing power, deflated due to numerous bank failures. These failures made cash under the mattress a very real concept to many of our parents or grandparents. In a digital world, an EMP burst could just as easily wipe out our bank balances, for a while anyway, but it cannot erase those coins under our beds.
A Simple Way to Start Saving Cash
Currency, in the more durable form of coinage, has been around for thousands of years. I actually purchased, for less than twenty-five dollars what would have monetarily been the equivalent of a Roman penny from the second century C.E. that still looks somewhat close to the way it looked the day it was minted. Since this Roman penny has survived almost 1,800 years, coins in particular seem to be durable vehicles to store and save your emergency cash.
Here is an easy idea to start our cash savings. Use a coin jar, what we all typically use to drop loose change into at the end of each day. When it’s full, don’t just go to a coin machine to exchange the coins into bills. These coins should continue to be accumulated until we find ourselves with a nice hefty collection of coins. Over several months fifty to a hundred dollars in loose change can be painlessly accumulated with little to no effort at all.
Why Would Having Coins Be Useful
As I said in my prior article, it’s my belief that a post-apocalyptic world would not be inflationary, but highly deflationary as the apocalyptic crisis causes the population to decline rapidly, eviscerating debt based assets due to defaults. A rapid die off means fewer people left to pay taxes, debts, and mortgages. When you can’t pay your debts, the underlying loan becomes bankrupt, or worthless. The result would be that the monetary value of that loan is lost and literally disappears from the money supply. That is deflation, a rapid decline in the money supply. So, if you think our collective ability to repay the trillions of dollars of government debt is at jeopardy, investing in treasuries or anything the government guarantees, even with Bank FDIC protection, is not a logical long term investment strategy.
This kind of dramatic deflation can be hard to grasp. It is the opposite of the slowly growing inflation to which we have all grown accustomed. As a child, I can remember going to the store with fifty cents in my pocket and being able to purchase what seemed like mountains of candy. Today, it would be rather difficult to even buy a single candy bar for fifty cents. This is what inflation has done over the last fifty years as we have watched the slow decline in the purchasing power of our currency. On the US Government web site of The Bureau of Labor Statistics there is an interesting calculator. It shows that one dollar in 1965 had the same purchasing power as $7.55 does today. Looking back retroactively, this means that the candy bar that cost $1.00 today would have only cost 13 cents then. If we continue to experience inflation, along with our currencies correlative decline in purchasing power, it would be a total waste of time to save coins because those coins would buy less each year.
But, as in all things, we must remember not to overdo it. Having thousands of dollars in loose change in jars hidden under the bed may do nothing for us at all right now. Because of the effects of inflation, currency of all kinds is a wasting asset that will continue to depreciate. For this reason, I believe the prudent thing is to limit this emergency cash fund to one third of our three to six-month liquidity needs.
As an investment professional, my advice is to not only be prepared to survive a zombie apocalypse but to thrive financially after it is over. I believe, in financially difficult times, cash is king, and having available cash will be extremely important in surviving the beginning of a crisis. I also believe having cash even to the extent of accumulating loose change, just might provide some easily transferable capital allowing us to thrive after the crisis is over. Finally, the win-win here is we win from the benefit of having little to no debt and a nice emergency fund, so no matter what happens we will be prepared to face the normal challenges of life, or we win if we financially survive a zombie apocalypse.
Either way, you are prepared.
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