Financially Just In Time

Financially we have become a just-in-time society.

It began with manufacturing, where factories would order parts from suppliers as they were needed because it was more efficient. Today, because of America's affluence, we as individuals live our lives 'just-in-time.' We eat out at restaurants, we rent our entertainment from the local video store, and buy everything with credit cards. It's more efficient, but what happens when disaster strikes? Oh I'm not talking about the Jericho scenario, but something more likely, such as the electric-grid going down, or a solar flare taking out a communications satellite; something happens that shuts down communications for a week or so. Are we prepared?

This scenario hit home for me during the blackout of '03. My brother was in the Detroit area at the time and described for me some of his hardships. It wasn't bad at first, he had some food and water in his house. It was when he went out to buy extra supplies that he ran into trouble. You see, my brother lives on credit cards. He buys everything with them because it's safer and more convenient. Unfortunately, when the store can't communicate to the credit card company, he can't buy anything. How many Americans are in the same boat? Sure, we can prepare for "The Big One," but are we prepared for "The Little Ones?" Are we prepared for a storm that shuts down power to the city for a week? Can we live without a credit/debit card for a week to 10 days?

The solution to this is to have a store of cash on-hand, but there are two problems: security, and acquisition. First, there is risk involved with storing cash. A thief could break in; the house could burn down; etc. Therefore, this risk should be mitigated by having a fire-safe bolted to the floor. This keeps the cash safe from fire, and prevents a thief from waking out with it.

Acquiring cash is a bit more tricky. Sure one could pull out a stack of money from the bank, but that may cause hardship; I recommend a more gradual approach. Two techniques I've found useful are saving cash-back rebates from those "evil" credit cards, and rolling change. It's surprising how much change one gathers over the course of a year; last year I managed to roll almost $500. Is that enough for a week? Maybe, if it's just the grid that goes down. Maybe not, if one has to buy supplies to repair his house in a disaster area. Regardless, it is a way to acquire a basic emergency fund without suffering a financial hardship throughout the year. A final note about cash, it's better to have many smaller denominations than a few large. One cannot expect to get change for $100 when cash is scarce.

While preparing for the next disaster, please remember to include cash in your plans. Credit/Debit cards are great for the convenience they offer, but they are useless if the transaction cannot be processed. Besides having food, water, and shelter, we too need to be prepared financially in this just-in-time society.

We always keep a stash of cash on hand, but in a power outage or satellite problem, you can't buy anything anyway, at least in most stores. Nothing has a price tag, they have barcodes, so the clerk does not know how much to charge you. Then, even if a price is available, the cash drawer won't open without electricity. You can't buy a burger at McD's, 'cuz the clerk only knows how to push the button with the picture of a Big Mac, and the bagger (or whatever they call them) doesn't know what to put in the bag or on the tray, 'cuz they get their order info from a computer screen, and it isn't working anymore. You can't buy gas, the pump is computerized. The list goes on and on. We are totally dependent on power and computers...

Not completely.

Your smaller, non-meglomart stores will be able to function. Even if it a smaller chain, like TrueValue or a regional grocery store, they can adapt easily enough if the manager on duty has to brain cells to rub together. That's part of why I do business with them.

You have had much better luck than I have...

I also live in a small town. It probably helps.

Look for the little mom&pop stores, the corner markets run by Asians and Pakistanis. And don't forget the dollar stores -- they never scan, just count.

When we had the wind storms last year, the local market was down to generator power, which ran lights and cash registers, and nothing else. And they stayed open, bless their little pea-picking hearts. They had no freezers, no refrigeration, no card scanners (I don't think), no lighted sign, no hot deli.

But they continued to receive deliveries of canned goods, drinks, bottled water, bread, etc.

And, something of a miracle: they gave away all their frozen products, and sold all their meat while it was still good, as soon as it was obvious the power wasn't coming back on: One dollar for each package of meat, and that meant hamburger, steaks, hams, turkeys, etc. And, since the power outages were rather checkerboard in nature, many people still had power, and were taking in friends and family, and could use the extra food.

All told, a nice bit of management.

Sue

It was after that same blackout that I started trying to save up cash to have on hand. I was lucky and already had the "stuff" I needed and didn't need to purchase anything, because I too had very little cash on hand. My budget is very very tight, so loose cash is hard for me to come by, but little by little I've managed to have an amount that will be helpful should I find myself in a similar situation again. Probably not "enough" but much better than before. And I'm still putting a little away every paycheck - even if it's just a fiver. Also - Most of it is in smaller denomonations as during the black out those stores (or individuals selling stuff) that were open didn't always want to make change from a big bill.

The big stores have a plan in place. I worked at a store through college and we had a couple power failures and a system failure.
The cashiers instruction is to keep the line moving and customers happy. So after a few minutes of waiting for the system to come back up a manager gives the ok to go into manual mode. The store switches to backup generator which can run for a few hours and the registers act as basic adding machines. The managers from various departments are called up front to help with any price disputes but unless its a large ticket item you make the prices up as you go. We jokingly said that those were the biggest sales they have since your taking customers words on prices but they want the customer back another day so they are willing to take a short term loss.

Another thing that seems counterintuitive: paper.

You can call the credit card company and get approval - it takes a while, but it works. Just need a back-up carbon-copy based system. We did this at the restaurant I worked in (during high school), as well as the hospital where I worked (after college). It's just short-sighted of stores to do away with a stand-by system.

I remember working at Staples, and I had to explain to a lot of the high school kids what the manual card imprinters were. But the stand by plan there was to process the customers on hand, and lock the doors unless they could show cash.

Geez, I hated that place.

I remember having those carbon based ker-chunk things for a backup.
There was a local store here that would always make a carbon copy, then someone picked through their trash and used those carbon copies to do some internet shopping as that was before the extra digits on the back. now when someone wants to make a carbon copy of my card I tell them to cancel the order and go somewhere else.

Collecting my change is one way to build up usable cash reserves that don't get tapped, at every little "emergency" that occurs.

Coins don't usually melt in a house fire either.

Keeping real cash AND coins as part of your emerg kits is only common sense. Those of us watching the post disaster event unfold on the TV see it every time. Cash money talks ...and bulls%#$&^$% walks.
Even if you are just evacuating it makes sense. 'Cuz where you run to may have their own communication challenges and the stops along the way will almost always take cash...though I'd use plastic (debit or credit) as long as I could.
I figure slowly contributing change and gradually pigeon-holing cash is the way to go ...well ...unless you already have a chunk of cash in the bank and move it out to a locked safe in the house.
I figure a couple grand should be enough for most likely events. Its not too practical for most people to have too much cash secreted away waiting for the big disaster.
Though I admit ...if I lived in the south where hurricanes come every year ...I might do things different.
And I agree ...smaller bills would seem better. And hey ...its easier to hide a fiver from yourself every week than a 50 or 100 spot. I rarely even see 50's or 100's these days, what with auto pay check deposit and such.

Always a great strategy. I work for a credit union and we limited the cash withdrawals to $500 per account holder during the Rita evacuation. In an real emergency $500 will not last long.

I understand that the ATM's and credit card machines did not work in South Louisiana and Mississippi for some time after Katrina.

Also there was a short disruption during the first hours of 9/11.

Great minds must think alike. I use the same tactic, except I collect one denomination of coins until I've complete an entire roll. I hardly miss the change and it usually adds up to a roll per three or four weeks. I also have given up and afternoon Coke and candy bar. The upside is that I take the $1.50 or so and I eat less junk food in the process. Hopefully, I'll lose enough weight so that it will cancel out all of that extra change that I'm carrying.

I've decided to spread out some of the "reserves" so that it won't get lost in one event. I've placed about $25.00 in fives and ones, $25.00 gas gift card and a few $10.00 restaurant gift cards in my car for emergencies (I'm less tempted to raid the gift cards than the cash). Perhaps I should add a roll of quarters, dimes and nickels to the car.

This thread made me re-think my plan....while I do have money styashed in cash and coin ... I didn't really consider anything buy grabbing my little pkg of $$ with my other already packaged supplies and weapons and hittin' the door running.
Now I'm re-thinking the packaging and possibly splitting it up into 2 pkgs in separate safes.
Will have to look out for an appropriate wallet type item for wads of money. Might vacuum seal some too ...which will make it pack smaller.
Right now I'm using an old check box .... the little boxes blank checks come in. Maybe something small and zippered would work.

One more advantage to having cash around the house: no more ATM fees. Need cash in a hurry but don't have access to your bank's ATM? Grab it fee-free from your "emergency-cash." Of course you'll have to repay it once your bank opens, but use this as an opportunity to save some more. Slap yourself with your own "fee" and add that to your emergency stash. Why pay the bank to give you your own money? Those $2.50, and $5 "machine fees" add up, not to mention the "network" charges. Over the course of a year, I estimate one could add an extra $100 or more to an emergency cash fund and not see a measurable diffeence in cash-flow. All it takes is a little discipline. Just my 2 cents.

On the other hand, how much should you store? At £1000 the interest is worth around £50 a year, which is getting expensive.

Good question Brangdon, I hadn't taken the "opportunity cost" of interest into account, nor had I taken inflation into account. How much is needed? Perhaps some folks who lived through the aftermath of Katrina can help us out? How much did they need, and for how long did they need it?

There are two scenarios: bug-out, and dig-in. If I bug-out, how much will it cost for me to reach safety? A WAG to get from DC to the back-woods of Michigan over 3 days would be $1,000 (250 gas, 600 lodging, 150 food/water). So, like any good engineer, I'm going to take my wild guess and double it to $2,000. I'll offset the opportunity-costs by using my emergency fund instead of out-of-network ATMs when I need cash.

As for the dug-in situation, my brother didn't really need all that much money when the power-grid went down. He just needed enough cash to pay for his bar tab, and to top off his pantry with food and water for the week. I think my bug-out estimate of $2,000 would have worked well for him.

How much did the folks who dug-in for Katrina and then had to rebuild need? That's the real question. MrDrysdale mentioned that his credit union limited people to $500 of their own cash, and that would not last long in an emergency. Assume we have access to that cash, would an extra $2,000 in bug-out money be sufficient to rebuild? What costs were there, and how long was the cash needed?

"...600 lodging..."

I'd skip those motels and camp/boondock along the way as much as possible...