RPF0481-Where_Should_I_Keep_My_Emergency

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00:00:14.320 | - Today on Radical Personal Finance,

00:00:17.940 | where should I keep my emergency fund?

00:00:20.720 | (upbeat music)

00:00:24.180 | (upbeat music)

00:00:26.760 | Welcome to Radical Personal Finance,

00:00:38.500 | the show dedicated to providing you with the knowledge,

00:00:40.260 | skills, insight, and encouragement you need

00:00:42.820 | to live a rich and meaningful life now,

00:00:45.660 | while building a plan for financial freedom

00:00:47.140 | in 10 years or less.

00:00:49.220 | An emergency fund is certainly a cornerstone

00:00:51.860 | of a good financial plan.

00:00:53.340 | Emergency fund allows you to withstand the storms of life,

00:00:56.820 | both literal and metaphorical,

00:01:00.300 | and is really one of the first places to start,

00:01:02.360 | but where should you put it?

00:01:03.780 | (upbeat music)

00:01:06.360 | I was inspired to do this show by a question

00:01:11.180 | in the Radical Personal Finance Facebook group

00:01:12.620 | this last week, where somebody in that group

00:01:14.640 | was asking their fellow group members,

00:01:16.900 | where should I keep my emergency fund?

00:01:18.340 | And there was discussion of certain banks

00:01:20.420 | and online banks, and most of the focus of the discussion

00:01:24.180 | was on interest rates and where to get

00:01:26.660 | the highest rate of return on money.

00:01:29.700 | And I was struck by the fact,

00:01:31.180 | and to those of you engaged in the conversation,

00:01:34.500 | this is not intended to be personally offensive to you,

00:01:37.000 | but I was just struck by the fact

00:01:37.980 | that nobody was talking about other considerations

00:01:40.260 | other than rate of return on money.

00:01:44.060 | And I think that with regard to emergency stashes of cash,

00:01:50.060 | interest rate, rate of return,

00:01:54.420 | is although not unimportant,

00:01:58.140 | it is perhaps the least important

00:02:01.260 | of the factors that you should consider.

00:02:03.300 | And today I'll share with you some of these other factors

00:02:08.120 | that I think bear your attention

00:02:11.260 | or should have your attention,

00:02:13.660 | as well as my thoughts on a diversity of options

00:02:18.460 | for where you should keep your emergency fund.

00:02:21.580 | Now, I'm gonna split today's show into two shows,

00:02:24.500 | meaning the same file that you're listening to now,

00:02:26.580 | but two different shows.

00:02:27.580 | There's gonna be part A, which is the intro level,

00:02:29.860 | which is applicable for the vast majority of listeners.

00:02:34.500 | And then there is the weird in-depth analysis level,

00:02:38.080 | which is applicable for a minority of listeners.

00:02:41.480 | I often have a habit of getting so deep into a subject

00:02:43.620 | that sometimes all of the advice makes sense in my head.

00:02:46.460 | It's a little convoluted for actual practical application.

00:02:49.020 | And I don't wanna do that because this show is too important

00:02:51.900 | and this topic is too important.

00:02:53.600 | So let's start part A right here and right now.

00:02:56.660 | The majority of people in the United States of America,

00:02:58.860 | and I dare say throughout the world,

00:03:00.260 | although I have no current data on a global basis,

00:03:02.980 | but the majority of people in the United States of America

00:03:04.840 | cannot come up with $1,000 cash right now if necessary.

00:03:13.360 | Majority of people, if faced with a $1,000 emergency,

00:03:17.400 | would rely upon a credit card

00:03:19.600 | or a loan from a family member or friend.

00:03:21.640 | This is a problem in our society

00:03:24.840 | because when our society is living so close to the edge,

00:03:30.580 | financially, as a majority of us are,

00:03:34.800 | it causes us to feel a significant amount of fear

00:03:39.480 | and it causes most of our thinking to be short-term

00:03:41.680 | rather than longer-term.

00:03:43.600 | It's hard to think long-term if you don't have enough money

00:03:46.520 | to cover a blown-out tire this month.

00:03:49.800 | And so my advice here in part A of the show is very simple.

00:03:56.180 | If you do not have an emergency fund,

00:03:59.140 | you should do only two things.

00:04:02.000 | Number one, you should scrimp, scrap,

00:04:06.020 | and do whatever you need to do to save $1,000

00:04:11.120 | in cash, and by cash here, I mean currency.

00:04:14.160 | I mean dollar bills, $20 bills,

00:04:17.920 | and you should stash that $1,000 in a safe place

00:04:22.040 | that you can have access to when necessary.

00:04:25.600 | If your living condition is stable

00:04:28.180 | and you find yourself in a place

00:04:29.600 | where you have your own living space,

00:04:33.160 | then perhaps your solution here is fairly simple.

00:04:35.640 | You might have a locking file cabinet

00:04:37.320 | or stash it in a small lockbox

00:04:39.480 | or maybe perhaps in a private bag

00:04:42.400 | that you put in some corner of your dresser.

00:04:45.200 | You probably don't need to go too extreme

00:04:47.580 | in hiding $1,000.

00:04:49.480 | If your living condition is less stable,

00:04:51.240 | you might need to be more thoughtful

00:04:53.500 | in how you approach this.

00:04:55.660 | If you are one of the millions of people

00:04:57.460 | who live in fear of your things being rifled through

00:05:00.560 | by your roommates or by your family members,

00:05:02.380 | then you need to be intelligent

00:05:04.160 | about where you stash your cash.

00:05:08.120 | Stash, funny.

00:05:09.600 | Makes me think, where do you stash your stash?

00:05:13.800 | Maybe you should find out where other people

00:05:15.440 | stash their stash and stash your cash in that same location.

00:05:20.320 | But putting a couple hundred dollars

00:05:21.760 | in the back of a favorite book is probably not a bad idea.

00:05:24.580 | Maybe put a little bit in your sock drawer,

00:05:27.740 | melt a carton of ice cream and put it in a plastic bag

00:05:31.420 | and stick it down at the bottom of our ice cream,

00:05:33.240 | something like that.

00:05:34.360 | Find some places to stick it around your house.

00:05:36.980 | But keep the cash close by

00:05:39.240 | because when you need to lay your hand on money,

00:05:42.000 | you need to lay your hand on money.

00:05:44.060 | And $1,000 will get you out of a large number of problems.

00:05:49.060 | It'll get you out of a flat tire.

00:05:51.120 | It'll get you out of a small car repair.

00:05:54.900 | It'll get you out of running out of money

00:05:57.200 | and not having enough money for groceries this week.

00:05:59.280 | It'll get you out of a lot of problems,

00:06:00.480 | but it needs to be accessible to you.

00:06:02.240 | So 1,000 bucks should be hidden and secured

00:06:06.700 | in the form of currency, $20 bills,

00:06:10.640 | somewhere nearby where you can get quick access to it.

00:06:13.280 | Once you have that, you're saving up for a little bit more.

00:06:19.300 | Anything up to, you know, say 10 grand

00:06:21.380 | should just be kept in a savings account

00:06:22.960 | at your current bank,

00:06:25.440 | at your bank where you currently bank.

00:06:28.900 | Put it in a savings account.

00:06:30.720 | Ideally, that savings account should have

00:06:32.800 | access to your checking account

00:06:35.720 | where you can do an instantaneous transfer

00:06:37.800 | into your checking account

00:06:38.880 | and have as close to instantaneous access

00:06:41.200 | to the money as possible.

00:06:42.560 | So if your emergency fund is anything in that amount,

00:06:46.400 | anywhere, and I'm making these numbers up,

00:06:48.400 | so if you think the number should be $7,000, that's fine.

00:06:51.140 | But anywhere from zero to $10,000,

00:06:53.360 | that's what you should do.

00:06:54.640 | Doesn't need to be complicated.

00:06:57.320 | Doesn't need to be anything more than that.

00:07:00.240 | Just keep something like 1,000 bucks close at hand

00:07:03.360 | and up to 10 grand just in a savings account

00:07:05.760 | connected to your checking account.

00:07:07.080 | This is part A of the show.

00:07:08.580 | But now we need to do part B

00:07:11.480 | because if we stop there,

00:07:12.960 | I will not adequately serve the majority of listeners,

00:07:17.840 | nor would I even adequately serve the majority of people

00:07:21.560 | in any of our towns that we all live in

00:07:26.000 | because almost no one except the very young

00:07:31.680 | should have only $10,000 in their emergency fund.

00:07:36.680 | Almost no one except the very young,

00:07:41.000 | perhaps a teenage low-wage earner

00:07:45.320 | should have only $10,000 in an emergency fund.

00:07:48.240 | I say that clearly hearing

00:07:52.480 | the perhaps sense of tone deafness

00:07:57.760 | that that would, the way that might come across.

00:08:01.680 | In a world where majority of our population

00:08:04.920 | can't lay their hands on $1,000 cash,

00:08:07.400 | to say that almost no one should have only $10,000

00:08:10.080 | in an emergency fund can sound a little silly.

00:08:13.040 | But here's why I say that.

00:08:15.840 | It's true.

00:08:16.680 | Almost no one except the very young, low-wage earner

00:08:20.800 | should have only $10,000 in an emergency fund.

00:08:26.320 | When I was going through my certified financial planner

00:08:28.680 | education years ago,

00:08:29.840 | they talked about the size of an emergency fund.

00:08:32.240 | And the CFP board would actually test on this

00:08:35.760 | on the CFP exam.

00:08:37.460 | And they gave criteria for defining how much

00:08:40.880 | of an emergency fund each family should have.

00:08:44.040 | And the way they approach it,

00:08:45.520 | I think made a lot of sense.

00:08:46.960 | They always recommend either three

00:08:50.000 | or six months worth of expenses.

00:08:51.960 | And as a financial planner,

00:08:53.360 | you're supposed to recommend to your clients

00:08:55.200 | that they save either three or six months worth of expenses.

00:09:00.200 | In order to determine whether the three months

00:09:03.160 | or six months is appropriate,

00:09:04.240 | look at the income flows for the household.

00:09:07.040 | Put simply, if you have a single income earner

00:09:09.080 | in the household, you go with six months.

00:09:12.120 | If you have two income earners in a household,

00:09:15.120 | you might go with three months.

00:09:17.440 | Now this makes sense.

00:09:18.440 | If you are a dual income family

00:09:22.520 | and one of you loses your job,

00:09:24.400 | well, you don't lose all your income.

00:09:26.040 | You lose some portion of your income.

00:09:28.000 | If there's a dramatic imbalance in the incomes

00:09:33.280 | of the two members of the household,

00:09:35.600 | then you should adjust accordingly

00:09:37.480 | in terms of how much of an emergency fund.

00:09:40.120 | But the only people that should have

00:09:41.520 | only three months of expenses

00:09:43.680 | are people who have dual income households

00:09:46.080 | according to the CFP board.

00:09:47.740 | So let's say that I have a client who's a single person

00:09:54.160 | and this client is earning $10 an hour.

00:09:58.200 | Well, $10 an hour times, let's just say a 40 hour work week

00:10:02.520 | is a total of $400 per week.

00:10:06.640 | Let's assume their expenses wind up being

00:10:08.380 | about $400 per week.

00:10:10.640 | This client as a single individual

00:10:13.360 | should have a six month emergency fund.

00:10:16.960 | $400 a week times 26 weeks would equal $10,400.

00:10:21.960 | That's how I get to that number, $10,400.

00:10:26.960 | But a normal person earning a median

00:10:34.560 | or above median wage, not a low wage earner,

00:10:37.560 | should have far in excess of that.

00:10:41.840 | Now, of course, I'm speaking in terms

00:10:43.920 | of both income and expenses.

00:10:45.940 | You should customize this to your expenses if you want to.

00:10:49.120 | If you know your actual expenses,

00:10:50.760 | just work with that number.

00:10:52.540 | But of course, most people spend most of their money

00:10:54.800 | so we can safely work with income.

00:10:57.240 | So let's talk about median wage earner

00:10:59.400 | of say $4,000 per month,

00:11:02.000 | who is spending about $4,000 a month.

00:11:07.000 | That means that an average emergency fund

00:11:11.880 | for a median wage earner,

00:11:13.800 | median meaning 50% of the population,

00:11:16.240 | higher 50% lower, is about $24,000.

00:11:20.480 | And you as a listener

00:11:21.320 | of the Radical Personal Finance podcast

00:11:23.000 | are statistically much likely to be far above

00:11:27.740 | a median wage earner than the general population.

00:11:30.480 | So a minimum emergency fund for most of us

00:11:32.780 | should be in excess of $25,000.

00:11:35.960 | And now you start to have to ask harder questions.

00:11:39.720 | Where do I keep $25,000?

00:11:42.320 | Where do I keep $50,000?

00:11:44.000 | Where do I keep $100,000?

00:11:45.860 | Where do I keep this large amounts of money?

00:11:50.200 | And so now let's start part B of the show.

00:11:53.000 | If you have or should have an emergency fund

00:11:56.080 | of higher than $10,000,

00:11:59.180 | let me give you some ideas on some considerations,

00:12:01.960 | some things you should think about.

00:12:04.880 | The place to start with emergency fund planning

00:12:09.280 | is with imagining a scenario,

00:12:12.240 | an emergency that you would be likely to face.

00:12:17.100 | These scenarios will vary

00:12:19.220 | depending on your life circumstances, and they should.

00:12:23.420 | Now, obviously we may all have some common scenarios.

00:12:28.400 | Perhaps the most common would be the loss of a job.

00:12:32.200 | This is certainly the scenario

00:12:33.320 | that most people would start with.

00:12:35.040 | And I think it's a good place to start.

00:12:37.200 | I've lost jobs.

00:12:38.160 | I think we've all lost jobs.

00:12:39.280 | If you haven't, and if you're a worker in a job scenario,

00:12:41.680 | you're just a matter of time.

00:12:43.400 | If you're not a worker in a job scenario,

00:12:45.120 | it's just a matter of time until you lose clients

00:12:46.840 | and you lose business.

00:12:47.780 | That's life, that's business.

00:12:49.940 | The loss of a job can be a devastating thing

00:12:53.720 | for many families.

00:12:54.720 | And so many times people are considering that.

00:12:57.420 | Well, it's not that hard to plan for the loss of a job

00:13:01.280 | in the financial sense.

00:13:04.300 | Money in a bank account spends

00:13:06.060 | whether you have a job or not.

00:13:07.800 | So if you keep the money in a savings account

00:13:09.720 | that you can get into the bank account, then it spends.

00:13:13.280 | That's a different emergency

00:13:16.640 | than Aunt Sally dying unexpectedly,

00:13:20.800 | and you're needing to buy five last minute plane tickets

00:13:25.800 | across the country to go to her funeral.

00:13:28.120 | Many of us have or will experience that.

00:13:32.000 | Now, what's different about it?

00:13:38.240 | Well, I would focus on the fact

00:13:39.960 | that there's a difference in the speed of cash needed

00:13:44.360 | and the amount of money needed.

00:13:45.960 | When you lose a job, you don't all of a sudden incur

00:13:49.640 | $10,000 worth of expenses in one day.

00:13:53.000 | What happens is you have your normal mortgage payment,

00:13:55.700 | your normal food costs, et cetera, that can continue on.

00:13:59.640 | When you have a sharp emergency

00:14:01.600 | like flying your family across the country

00:14:03.320 | to go to Aunt Sally's funeral,

00:14:05.000 | you have a significant unexpected expense all of a sudden.

00:14:09.320 | And so you need to come up with the $10,000

00:14:11.680 | all of a sudden.

00:14:13.580 | So one of the factors of emergency fund planning

00:14:18.580 | needs to be access, the speed of access.

00:14:23.780 | How quickly can I get my hands on the money?

00:14:28.520 | Especially how quickly can I get my hands

00:14:32.180 | on large amounts of money?

00:14:35.280 | As you think about your emergency fund,

00:14:39.180 | you should consider some different scenarios

00:14:41.700 | that you are concerned about, that you're planning for,

00:14:44.700 | and think about how important it is

00:14:46.580 | to be able to get your hands on large amounts of money.

00:14:49.700 | Here would be a good follow-up question.

00:14:53.180 | How quickly do you need to get access to the money

00:14:56.180 | and in what form do you need to get access to the money?

00:15:00.060 | Should you be able to have access to the money

00:15:02.180 | in a digital form or in a physical form?

00:15:05.260 | Just a moment ago, I talked about buying plane tickets

00:15:09.460 | to go and see Aunt Sally.

00:15:10.780 | In that emergency, you need digital money.

00:15:13.980 | Can't walk into the airplane counter

00:15:15.480 | in the United States of America

00:15:16.900 | and plunk down $10,000 in $20 bills on the counter.

00:15:21.900 | You will be immediately flagged as a suspicious person,

00:15:28.780 | most likely a drug dealer,

00:15:30.860 | or also very likely a terrorist,

00:15:33.540 | perhaps a stupid terrorist.

00:15:35.860 | They will not laud you for your effective financial planning

00:15:40.340 | and for eschewing the use of debt and credit cards.

00:15:44.420 | The airline representatives, if they take the money,

00:15:47.620 | will file a suspicious activity report with the IRS

00:15:51.900 | because there's a cash transaction

00:15:53.940 | in excess of a few thousand dollars.

00:15:55.380 | Depends usually, any time you get near $10,000

00:15:58.020 | as a hard line, you break that.

00:15:59.940 | Depends on other transactions.

00:16:02.260 | Post Office has a, I think it's a $3,000 or $4,000 limit

00:16:05.860 | on cash transactions.

00:16:07.100 | Other places, it's $10,000.

00:16:08.940 | Or if you just simply do something that's suspicious,

00:16:11.080 | like using cash, you are now a suspicious person.

00:16:13.620 | And so you'll be doubly violated at the security lines,

00:16:17.020 | probably get called into the back room

00:16:19.220 | for a little bit extra questioning, et cetera.

00:16:21.520 | Don't use cash to buy a plane ticket.

00:16:25.340 | Not gonna work, bad idea.

00:16:27.340 | But what about our caller to the most recent Friday Q&A

00:16:31.540 | who was planning to move abroad to a country in Asia

00:16:38.100 | where he said he didn't wanna purchase property

00:16:40.620 | in that country or own property in that country

00:16:42.340 | because he might be kicked out of the country.

00:16:44.580 | What about that guy?

00:16:46.660 | What about his potential emergency flight

00:16:51.040 | out of the country?

00:16:52.880 | If I were in that situation, you can bet your dollar,

00:16:57.860 | you can bet a few of 'em pretty safely,

00:17:00.580 | that I would make sure that I had large amounts of currency

00:17:03.740 | readily at hand in order to buy my way out of that country

00:17:07.760 | if I became a disgraced person, a persona non grata.

00:17:11.500 | This happens every day all around the world.

00:17:15.820 | Within the last year, I have had significant,

00:17:19.980 | close interaction with three friends of mine

00:17:24.020 | from three different regions of the world,

00:17:26.180 | all of whom have faced similar interactions.

00:17:29.260 | One, a Venezuelan refugee trying to get out of Venezuela

00:17:32.820 | before the nightmare that is going on there.

00:17:36.820 | Another, a Filipino refugee.

00:17:39.220 | It wasn't a broader, the Venezuelan was a broader

00:17:44.540 | economic crisis which has now resulted in currently

00:17:47.020 | the highest inflation in the world.

00:17:49.460 | Really dramatic to watch it.

00:17:52.180 | I watch it with a mixture of absolute horror

00:17:57.180 | at the human suffering and the human cost

00:18:01.540 | of the lives of the men and women and children

00:18:04.740 | caught in the grip of the crisis there in Venezuela.

00:18:08.860 | And with another, I don't know if it's horror

00:18:12.380 | or satisfaction at watching the absolutely predictable

00:18:17.380 | result of socialism in that particular context.

00:18:22.460 | I was, it's particularly poignant to me

00:18:26.460 | because in college I studied under a group of professors

00:18:29.020 | who were extreme leftists and who held up

00:18:33.580 | in their instruction to me as a college student,

00:18:36.380 | Hugo Chavez and his work in Venezuela,

00:18:39.300 | both Hugo Chavez and also the Castro regime in Cuba,

00:18:42.160 | as model examples of what can be done to care for people

00:18:45.340 | when we actually care about people.

00:18:47.380 | And I haven't contacted them recently

00:18:50.620 | to find out what they said,

00:18:51.680 | but I continue to do my homework on that subject.

00:18:54.740 | Point is, when you got to get out of Venezuela,

00:18:56.540 | you may or may not be allowed to go.

00:18:59.060 | And so you may or may not need to get

00:19:00.220 | that midnight flight out, the midnight boat out.

00:19:03.140 | Similar circumstance with a friend of mine

00:19:07.300 | in the Philippines.

00:19:08.300 | Ran a successful business on an island in the Philippines.

00:19:11.980 | In that island in the southern part of the Philippines,

00:19:14.540 | in that town, there was an attack by the local expression

00:19:19.540 | of Muslim terrorists where they massacred

00:19:23.340 | about 40 to 50 people there in that town.

00:19:25.860 | Fundamentally destroyed the economy

00:19:27.820 | and he and his family basically fled

00:19:29.860 | in the middle of the night,

00:19:30.700 | just like you read in a fiction book.

00:19:34.260 | And then final example was a friend of mine from Nigeria

00:19:39.380 | who faced the confiscation of his house

00:19:44.380 | by the local governing authorities

00:19:48.780 | because of his noncompliance with the local code.

00:19:53.700 | Basically like a homeowners,

00:19:55.220 | our version of a homeowners,

00:19:56.820 | their version of a homeowners association.

00:19:58.960 | But there had been a strong storm

00:20:01.020 | that had destroyed part of the house.

00:20:02.300 | He didn't have the money to fix it.

00:20:03.780 | But because he fixed it, then after a period of time,

00:20:06.980 | this didn't happen immediately,

00:20:07.820 | but because he didn't fix it and he couldn't fix it,

00:20:10.060 | he didn't have the money, after a period of time,

00:20:13.260 | then his property was lined up to be confiscated

00:20:17.140 | by the local government because it was not safe to live in.

00:20:21.980 | Just crazy.

00:20:23.940 | Same thing that we face here

00:20:25.440 | when a homeowners association says to you

00:20:28.340 | that you can't park your work truck here,

00:20:32.780 | you can't let your grass grow,

00:20:33.940 | and then they start to foreclose on you

00:20:35.220 | and they can kick you out.

00:20:36.380 | Exactly the same thing, except different standards.

00:20:38.560 | It wasn't the grass was too long,

00:20:39.780 | it was that the back part of the house

00:20:41.420 | had been damaged in a windstorm

00:20:42.840 | and he hadn't been able to fix it yet.

00:20:44.380 | And it wasn't just a homeowners association,

00:20:46.240 | it was the official city government.

00:20:48.700 | So my point in sharing these examples

00:20:49.980 | is to say these are personal examples.

00:20:51.440 | All of those events have occurred,

00:20:53.340 | not all of those events have occurred in the last year,

00:20:55.380 | but all of those events have occurred

00:20:56.660 | within the last decade.

00:20:57.500 | I'm intentionally being a little bit vague on details

00:21:02.460 | to protect my friends.

00:21:04.060 | It's not the stuff of paranoia,

00:21:09.460 | it's the stuff of reality

00:21:10.680 | that a lot of people all around the world face.

00:21:14.580 | In all three of those stories,

00:21:16.340 | all three of those examples,

00:21:17.920 | those people had emergencies

00:21:21.300 | and they needed funds to get them out of the emergencies.

00:21:25.420 | And all three of them, the answer was the same,

00:21:27.940 | plane ticket, boat ticket, et cetera, out of the problem.

00:21:32.100 | So when you're planning your emergency,

00:21:34.420 | you need to think carefully

00:21:35.700 | about what's likely to affect you.

00:21:37.780 | I don't personally spend a whole lot of time

00:21:39.940 | worrying about needing to flee South Florida

00:21:44.940 | because the local government is going to take my house.

00:21:49.640 | And in most of these situations, there is time.

00:21:53.060 | There's time that you can get the cash together

00:21:56.000 | if that's what you need to do.

00:21:57.420 | There's time when the storm happens

00:21:59.720 | and you know you're starting to have confrontation

00:22:01.340 | with the local government, et cetera.

00:22:02.500 | You get the point, there's time.

00:22:04.420 | But when you come up with a scenario

00:22:05.860 | for which you might need quick access to money,

00:22:09.860 | you need to think about the speed of access.

00:22:12.540 | How quickly can you get access to large amounts of money?

00:22:16.100 | And in what form can you get access?

00:22:20.700 | Practically speaking, hurricane planning.

00:22:23.260 | We're just coming off the back end

00:22:26.620 | of Hurricane Irma here in Florida.

00:22:28.580 | During hurricanes, a few things usually happen.

00:22:30.380 | Number one, you usually need to purchase

00:22:32.180 | some level of supplies and preparation for a storm.

00:22:37.180 | And most of the time, everything is fine before the storm.

00:22:40.700 | You can do that all with digital money.

00:22:42.980 | But after the storm is where things change.

00:22:45.140 | Things have gotten better where more stores

00:22:48.420 | are prepared to do business electronically.

00:22:52.860 | But not all stores are, after a storm I mean.

00:22:55.900 | Not everybody has power.

00:22:56.980 | In an absence of power,

00:22:58.220 | or in the absence of an internet connection,

00:23:00.540 | many stores cannot run their digital transactions.

00:23:04.140 | So last week, we were across the state with my family,

00:23:07.140 | coming on personal reasons, came back across the state,

00:23:10.060 | and as I was passing through central Florida,

00:23:11.500 | stopped to get gas, pulled into the gas station, cash only.

00:23:14.060 | I asked why.

00:23:15.180 | Well, their internet connection was down.

00:23:17.080 | 'Cause the internet connection was down,

00:23:18.620 | none of the credit card pumps worked,

00:23:19.980 | none of the credit card authorizations inside worked,

00:23:21.980 | and they were only accepting cash.

00:23:24.140 | That happens after every single hurricane,

00:23:26.020 | again and again and again.

00:23:27.940 | Happens after a blackout, et cetera,

00:23:29.740 | again and again and again.

00:23:31.160 | So if a hurricane is predicted for your area,

00:23:33.560 | and you're looking around and saying,

00:23:35.340 | "Okay, I should probably have some cash on hand."

00:23:38.980 | Then what do you do?

00:23:40.500 | You go to the ATM, put your card in there,

00:23:42.940 | and you say, "I'm gonna get some cash out."

00:23:45.140 | Well, that's good.

00:23:47.040 | But you quickly hit your ATM and bank limits,

00:23:49.420 | which for most of us are about 500 bucks.

00:23:52.760 | You may be able to get a couple transactions,

00:23:54.560 | but I don't know if you've ever tried to get $5,000

00:23:57.320 | out of an ATM in one day,

00:23:58.480 | but unless you've made special provisions to do that,

00:24:02.940 | it usually doesn't work.

00:24:05.720 | Your bank will shut you down.

00:24:07.180 | If you are leading a family of multiple people,

00:24:12.120 | multiple children,

00:24:13.800 | $500 doesn't go very far after an emergency situation.

00:24:18.520 | Doesn't buy a whole lot of nights in a hotel room

00:24:21.560 | when they can't run your credit card.

00:24:24.040 | It's probably enough to get you out of the acute area.

00:24:26.700 | But what if you're on a Caribbean island,

00:24:29.920 | and you're a tourist on St. Martin,

00:24:32.900 | when Hurricane Irma roars through,

00:24:35.760 | and you can't get off the island before the storm,

00:24:39.060 | and so you wind up going through the storm,

00:24:41.480 | and now 70% of your infrastructure is destroyed.

00:24:45.440 | Now how do you get off the island?

00:24:48.680 | Now how do you get food?

00:24:50.020 | Are you prepared for that as a refugee in Hurricane Irma?

00:24:56.600 | Just look in the news,

00:24:58.440 | and you see this happening every single day.

00:25:00.440 | So you should think seriously about access,

00:25:02.840 | speed of access,

00:25:03.680 | and how quickly you can get access to appropriate amounts

00:25:06.280 | or even large amounts of cash.

00:25:08.100 | Number two, though, of ask access,

00:25:10.600 | you need to think about how to restrict access

00:25:13.200 | so that your money is not spent.

00:25:15.600 | I believe there's a useful and valid principle

00:25:18.880 | that can be applied and should be applied to money,

00:25:21.360 | at least for me.

00:25:22.520 | I've learned that it's probably often a good idea

00:25:26.280 | to keep a little bit of distance

00:25:27.600 | and a little bit of friction between me and my money.

00:25:30.560 | I don't want too much distance and too much friction,

00:25:32.400 | 'cause obviously I need to have access,

00:25:34.100 | but a little bit of distance and a little bit of friction

00:25:36.200 | is probably a good idea.

00:25:38.280 | Now, this was more important for me when I was younger,

00:25:40.760 | and I was more prone to emotional decisions

00:25:43.440 | rather than more thoughtful decisions,

00:25:45.900 | but it's changed as I've gotten older,

00:25:48.600 | but still probably a good idea

00:25:50.360 | to have a little distance between you and your money.

00:25:52.280 | Practically speaking,

00:25:54.000 | a little distance would involve

00:25:55.240 | keeping it at a separate account.

00:25:56.840 | Millions of people all over the world

00:25:59.520 | are affected by identity theft each and every day.

00:26:01.900 | This can come down to your checking account being raided.

00:26:06.060 | I've experienced it, you probably have.

00:26:08.500 | According to the data breach this last week,

00:26:10.500 | which I will try to do a show on,

00:26:13.100 | angers me deeply,

00:26:14.860 | where Equifax has released the data of,

00:26:17.300 | I think it's almost 150 million people,

00:26:19.500 | saying like 143 million customers.

00:26:22.340 | Absolutely horrifying,

00:26:25.540 | but absolutely predictable thing

00:26:28.140 | in the world that we live in.

00:26:29.580 | If you're part of the 143 million Equifax clients

00:26:35.780 | and there's no way to opt out,

00:26:36.980 | the system works where you're just opted in

00:26:38.700 | whether you want to or not,

00:26:40.740 | you better take care of that.

00:26:42.420 | Guess what was a part of that breach?

00:26:45.280 | Your personal data.

00:26:49.420 | Say obviously,

00:26:52.100 | but your personal data

00:26:53.580 | with an extreme amount of granularity.

00:26:55.580 | It's my understanding,

00:26:58.060 | and I'm speaking without having fully done the research

00:27:01.040 | due to restricted access and hurricane preparation

00:27:02.900 | for myself here in South Florida this last week,

00:27:04.980 | so we'll do this one, I can confirm these.

00:27:06.760 | If this turns out to be wrong, let me know.

00:27:08.660 | But it's my understanding from the news reports

00:27:10.700 | that, let's go with this one.

00:27:12.180 | If you were an Equifax customer

00:27:13.900 | and you bought Equifax's credit monitoring service,

00:27:17.860 | your banking information was released to the hackers.

00:27:22.260 | The information that you used to buy

00:27:25.020 | credit monitoring protection from Equifax

00:27:29.220 | is now in the hands of criminals

00:27:30.660 | and could possibly be used against you.

00:27:33.900 | Well, let's say that you ran that from your checking account

00:27:37.120 | using your debit card,

00:27:38.980 | which you ran as a credit card with Equifax online.

00:27:42.740 | Now a thief has access to your credit card

00:27:44.420 | and they can start initiating fraudulent transactions

00:27:47.140 | against your account.

00:27:48.160 | You can drain an account real quick.

00:27:50.960 | One time I had my luggage stolen when I was traveling.

00:27:57.420 | I was traveling in Central America

00:27:59.080 | and our rental car was broken into,

00:28:01.260 | my backpack was in the trunk of the car.

00:28:06.060 | In that backpack, we were at the beach,

00:28:07.740 | in that backpack, my passport was stolen,

00:28:11.220 | as was some of my credit cards and information.

00:28:15.580 | You would not believe how quickly a thief

00:28:18.860 | can run hundreds of dollars of gas transactions.

00:28:23.260 | That's what all the transactions were,

00:28:24.500 | it was all at gas stations.

00:28:26.580 | Hundreds and hundreds and hundreds of dollars

00:28:28.900 | across multiple cards.

00:28:30.700 | At local gasoline stations.

00:28:32.540 | You wouldn't believe how quickly that can be done.

00:28:34.900 | That's done on your primary checking account,

00:28:37.360 | that wipes you out.

00:28:38.400 | So if you kept all of your emergency fund

00:28:41.900 | in your checking account,

00:28:43.580 | and your checking account was drained

00:28:45.300 | while you're in Costa Rica,

00:28:46.680 | guess I just gave up the country there,

00:28:51.020 | I was going to say Central America.

00:28:51.980 | While you're in Central America

00:28:53.980 | and your checking account is drained

00:28:56.120 | and your credit cards are drained,

00:28:58.200 | and you're trying to figure out how do I,

00:29:01.100 | with no passport and no money,

00:29:04.500 | if it was all in the bag,

00:29:06.080 | how do I get in contact with my bank

00:29:08.620 | and figure out how to get money

00:29:10.460 | so that I can get these things stopped

00:29:12.620 | and how do I figure out how I can pay for a hotel

00:29:14.740 | and how do I figure out how to work

00:29:15.780 | all these situations out.

00:29:17.260 | If all the money was in your checking account,

00:29:20.020 | you had a problem with access.

00:29:21.520 | You need to have some restriction on access.

00:29:25.140 | And I'm kind of conflating both access,

00:29:26.660 | restricting access for you personally,

00:29:28.620 | and also safety, which is the next thing.

00:29:30.580 | So let's talk about safety.

00:29:31.800 | You need to think about safety.

00:29:33.060 | Safety in multiple formats.

00:29:34.560 | Number one would be safety from thieves.

00:29:36.820 | How do you keep your money safe from thieves?

00:29:39.560 | The theft can be something like I just described.

00:29:43.620 | If you have a big wad of cash

00:29:45.200 | and you put it all on a backpack

00:29:46.440 | and leave it in a rental car

00:29:48.760 | on the beaches of Central America,

00:29:50.900 | you're inviting a problem with your emergency funds.

00:29:55.140 | But what if you are in a contentious situation

00:29:58.940 | with creditors?

00:30:00.700 | I've done some crisis financial counseling

00:30:04.160 | with people from time to time

00:30:05.540 | who are facing severe problems,

00:30:08.540 | woefully behind on their debt.

00:30:10.620 | And I want to be clear, this is the word theft.

00:30:15.620 | I don't want to paint with a broad stroke.

00:30:19.280 | The thief in the situation of somebody

00:30:21.940 | who has unpaid debts is the person

00:30:23.380 | who hasn't paid their debts.

00:30:24.420 | They've stolen from the creditor.

00:30:26.140 | But what often happens is as that person

00:30:28.460 | is seeking to make restitution and pay back the creditor,

00:30:32.960 | sometimes the creditor can come

00:30:34.420 | and invade the person's accounts without permission.

00:30:38.260 | And so this arrangement is one in which

00:30:42.580 | there is no legal or moral theft being committed.

00:30:45.580 | You can't go before a judge and say,

00:30:47.740 | judge, I owe this creditor a lot of money

00:30:50.140 | and they came into my account

00:30:51.300 | and they took back what was theirs.

00:30:53.140 | Judge says, well, you owe them the money.

00:30:54.540 | You were the thief, you're the debtor.

00:30:55.940 | You're the person who stole from your creditor

00:30:57.660 | because you became behind on your bills

00:30:59.260 | and you didn't make the payments as agreed.

00:31:01.440 | But in the context,

00:31:03.700 | I should have chosen a different example,

00:31:04.900 | but in this context, I'm just simply referring

00:31:06.340 | to the fact that you've got to figure out

00:31:07.680 | how to keep your money safe.

00:31:09.700 | If you're in that situation,

00:31:10.680 | you're fighting your way out of debt,

00:31:12.200 | you're fighting your way out with all of these creditors,

00:31:15.540 | you can't have a bunch of money stuck in a place

00:31:17.780 | where the creditors can get access to it.

00:31:19.860 | The problem this faces for the person who's going through,

00:31:22.540 | and if you're doing counseling

00:31:23.940 | with somebody in this situation,

00:31:25.260 | somebody who's going back, they're paying off their debts,

00:31:27.380 | they're making restitution,

00:31:28.740 | is oftentimes the daily existence is so hand to mouth,

00:31:32.000 | the money is so tight

00:31:36.020 | that if any dollar is unaccounted for,

00:31:38.820 | wrecks the whole thing.

00:31:39.980 | What I have people do in that situations

00:31:42.540 | is to establish entirely different accounts.

00:31:45.500 | Ideally, to fix it, usually,

00:31:49.220 | I'd encourage the person to go to an all cash lifestyle,

00:31:53.200 | where every bill is paid in cash,

00:31:55.180 | and all budgeting is done in cash,

00:31:56.860 | because usually the reason why somebody is behind,

00:32:00.060 | especially if they have lots of credit cards,

00:32:01.520 | lots of creditors like that,

00:32:03.200 | usually it's due to chronic overspending

00:32:06.320 | and lack of discipline and lack of a plan

00:32:08.260 | with their finances.

00:32:09.960 | This is different if you're maybe doing counseling

00:32:12.300 | for somebody who has experienced a large business loss,

00:32:14.980 | and they had a business to turn around,

00:32:16.140 | and they got a huge debt,

00:32:16.980 | but it's one or two huge debts,

00:32:18.220 | that's a very different circumstance.

00:32:20.700 | But your neighbor who is struggling,

00:32:23.060 | who's facing severe crisis

00:32:24.400 | because they overspent on their credit cards,

00:32:25.780 | and now they're trying to figure out their way out,

00:32:27.300 | the answer is they need to go to cash.

00:32:28.980 | And any bills that need to be paid,

00:32:30.420 | just pay them with a money order.

00:32:31.660 | It's worth the 60 cents you pay

00:32:33.940 | to buy a postal money order

00:32:35.500 | in order to send the money off

00:32:36.620 | and not have to deal with the checking account.

00:32:37.900 | Keep the checking account secure.

00:32:40.300 | Maybe only use it to pay the mortgage company.

00:32:42.700 | But you have to think about

00:32:43.540 | how do you protect the emergency funds?

00:32:46.100 | So that's one aspect of safety.

00:32:47.460 | The obvious examples would be thieves, things like that.

00:32:50.260 | I would not keep $100,000 in my spare bedroom,

00:32:56.120 | especially given my own personal risk profiles.

00:33:00.100 | Being a public figure, talking about money,

00:33:01.780 | I have to take a very different approach

00:33:03.620 | to financial safety and security than you do.

00:33:06.980 | You have a different risk profile.

00:33:08.780 | But what about the stability of the money?

00:33:12.720 | Stability is another aspect of safety.

00:33:17.480 | You have to think about the safety of your funds

00:33:18.960 | with regard to the stability of the bank.

00:33:21.360 | FDIC insurance in the United States is very important.

00:33:25.520 | You want to protect yourself

00:33:26.520 | and make sure that you are effectively using the FDIC limits.

00:33:30.680 | If you keep more than $250,000

00:33:33.120 | as part of your emergency fund portfolio,

00:33:34.660 | diversify that account into multiple account titling

00:33:37.600 | so that you can maintain FDIC insurance.

00:33:39.840 | And you can take this discussion of stability far beyond.

00:33:44.020 | Obviously, you should think carefully

00:33:45.640 | about the stability of the type of savings that you have.

00:33:49.900 | And here, you always have moving targets.

00:33:54.480 | You could just simply keep US dollars.

00:33:57.260 | US dollar, probably the safest currency in the world,

00:33:59.720 | very, very stable, the world's reserve currency at present.

00:34:03.180 | That's one thing.

00:34:05.120 | But what do you do if you are banking

00:34:06.720 | in a different currency?

00:34:08.520 | Or if you're concerned about the stability

00:34:10.920 | and safety of your US dollars?

00:34:14.380 | Your US dollars can quickly be eroded by inflation risk.

00:34:19.380 | If the Federal Reserve is unable to curb inflation

00:34:23.600 | and there starts to be a time

00:34:25.020 | of significant overall mass inflation or hyperinflation,

00:34:29.140 | very rare in Western economies, but it does happen.

00:34:31.920 | It's happening in Venezuela right now.

00:34:33.700 | All of a sudden, the money that you thought was safe

00:34:35.580 | in the bank, protected from thieves,

00:34:39.540 | is now experiencing a different risk.

00:34:42.040 | So think about the different risks

00:34:43.220 | that it can impact your money.

00:34:45.000 | You should also think about protecting yourself

00:34:47.440 | against things like sovereign risk.

00:34:50.240 | What do you do if you are living and working

00:34:52.280 | in the United States and earning money,

00:34:55.020 | saving within the US financial system, et cetera?

00:34:57.500 | And all of a sudden, the US government declares

00:35:00.320 | that you are unwelcome

00:35:03.820 | because you don't have a stamp on a piece of paper

00:35:08.820 | that says that you have the permission

00:35:11.980 | to be in this physical geographic location and to do work.

00:35:16.120 | Well, if you face such a circumstance,

00:35:18.920 | that can dramatically impact your banking life.

00:35:21.360 | That can dramatically impact

00:35:23.120 | just about every aspect of your life.

00:35:25.000 | You might need to put in place a better strategy

00:35:28.980 | with your money to make sure that you have a fallback plan,

00:35:31.760 | if that were to ever happen.

00:35:33.360 | Bring in some diversification.

00:35:35.800 | Well, same thing happens in all kinds of other areas.

00:35:38.360 | Back to our caller, US citizen.

00:35:40.860 | So he doesn't have to worry about the US government

00:35:42.960 | putting a little stamp on a piece of paper

00:35:44.840 | that says he's allowed to be in a certain place

00:35:46.480 | and to do a certain kind of work.

00:35:48.400 | But now he's moving abroad and he has to think,

00:35:50.920 | well, what do I do with my money

00:35:52.440 | and how do I protect myself from my risk in this country?

00:35:56.520 | Briefly in that call, that was where I encouraged him.

00:35:58.640 | And I said, if I were in Asia,

00:36:00.160 | I'd make sure to set up a financial life

00:36:03.680 | and put in place financial planning strategies

00:36:05.600 | in Hong Kong or Singapore, whatever's most convenient,

00:36:08.200 | where he can get to least inexpensively.

00:36:11.360 | Appropriate measures of diversification

00:36:13.080 | apply across all of this, but you have to consider,

00:36:14.800 | what are the risks that I face?

00:36:16.480 | What are the most likely risks?

00:36:17.980 | None of these things are likely if you have $3,000.

00:36:20.360 | Nobody cares about $3,000 from, you know,

00:36:24.200 | the government of so-and-so doesn't care about that.

00:36:26.800 | But the local drug dealer that knows you keep $3,000

00:36:30.400 | in your right front pocket does.

00:36:32.360 | So that's safety.

00:36:34.200 | Number one was access.

00:36:37.720 | Number two is safety.

00:36:40.160 | Number three is rate of return.

00:36:42.400 | Rate of return matters.

00:36:45.620 | But remember what we're talking about here,

00:36:48.520 | an emergency fund.

00:36:50.060 | And in an emergency,

00:36:54.500 | it's the return of your money

00:36:58.520 | or the access to your money

00:37:02.200 | that matters more than the rate of return on your money.

00:37:08.660 | We're not talking about an investment.

00:37:11.380 | We're talking about an emergency fund.

00:37:15.640 | So I will, me personally, I will give up

00:37:21.180 | potential rate of return

00:37:23.900 | if I can gain greater access

00:37:30.260 | and greater safety.

00:37:31.500 | Now, if I can get more,

00:37:35.380 | if I get rate of return and diversification

00:37:37.440 | and, sorry, rate of return and access and safety,

00:37:41.180 | that might be good.

00:37:42.020 | But I, you know, I kind of think that these are

00:37:44.300 | one of those old choose two.

00:37:48.580 | You can have this good, cheap, or fast.

00:37:50.500 | You pick any two you want.

00:37:51.980 | I kind of feel like, in this circumstance,

00:37:53.940 | I feel like that's what this is.

00:37:56.060 | I don't know any way to get all three of these

00:37:58.540 | in any one particular financial product

00:38:00.860 | or any one particular financial decision

00:38:04.500 | or financial choice.

00:38:05.980 | I think it's a matter of what's the proper emphasis.

00:38:09.340 | And in the places where you're probably

00:38:13.460 | going to get more return,

00:38:15.200 | you're giving up something else.

00:38:17.600 | You might be giving up safety

00:38:19.680 | or you might be giving up access.

00:38:21.460 | Let's go with some examples to demonstrate the point.

00:38:25.600 | Number one would be a savings account.

00:38:27.200 | Well, right now, savings accounts pay you about 0.0

00:38:30.280 | in terms of rate of return,

00:38:35.040 | or at least your local bank

00:38:36.080 | or your local credit union is paying you that.

00:38:38.680 | But sometimes, by setting up a banking relationship

00:38:42.900 | with a different bank, perhaps an online bank,

00:38:46.620 | you could get a higher rate of return.

00:38:49.280 | The problem is this.

00:38:50.160 | If you don't regularly bank with that online bank

00:38:53.120 | that's offering the higher rate of return,

00:38:55.560 | you might get a little bit more in interest,

00:38:57.200 | but you give up access.

00:38:59.120 | If you have two separate banking institutions,

00:39:03.600 | you can't do simultaneous same-day transfers of money.

00:39:07.480 | And I have, in my lifetime,

00:39:08.800 | often found that to be a very valuable feature.

00:39:11.260 | There've been times I see something, it's a good deal.

00:39:15.800 | I bought cars this way.

00:39:17.200 | I bought all kinds of stuff this way.

00:39:18.760 | Hey, this is a good deal.

00:39:19.640 | I need money.

00:39:20.460 | I don't have this much money in my checking account.

00:39:22.280 | I want to write a check.

00:39:23.340 | I may not have the cash.

00:39:24.840 | Boom, transfer the money from savings to checking,

00:39:27.160 | go to the ATM, get a bunch of cash out.

00:39:29.480 | If I keep my emergent, that's an opportunity really,

00:39:33.360 | but if I'm keeping my emergency fund in an account

00:39:36.600 | that's different from my primary bank,

00:39:38.900 | I might have higher return, but I'm giving up access.

00:39:42.560 | That's important.

00:39:43.400 | Another example, buying a CD.

00:39:48.720 | I think having a laddered CD portfolio

00:39:51.880 | is an excellent strategy for some of your emergency fund.

00:39:56.240 | When you buy CDs, certificates of deposit,

00:40:00.080 | you can often get a significant rate of return

00:40:03.100 | or a more significant rate of return

00:40:04.760 | than just simply using the money,

00:40:06.840 | having the money in a savings account

00:40:08.440 | or a money market account.

00:40:10.320 | A CD, because it's a contractual agreement

00:40:13.360 | where you're going to leave the money in

00:40:14.520 | for a certain amount of time,

00:40:15.480 | is often willing to pay you more interest.

00:40:18.080 | And what you can do is you can set up a laddered portfolio.

00:40:21.400 | The idea of a laddered portfolio

00:40:23.560 | is you purchase investments,

00:40:27.000 | let's just go with you purchase CDs

00:40:28.600 | that have different rates of maturity

00:40:31.120 | so that they come mature at different times.

00:40:33.940 | The longer amount of time that you purchase on a CD contract

00:40:38.940 | the higher the rate of return that you'll get.

00:40:40.820 | So if you buy a 12-month CD,

00:40:41.980 | you'll get a higher rate of return than a three-month CD.

00:40:44.500 | And so the idea of a laddered portfolio

00:40:46.460 | is let's say that you're going to keep $120,000

00:40:49.740 | in an emergency fund.

00:40:52.180 | No, let's use $10,000 in emergency fund for simpler math.

00:40:56.040 | We're gonna use $10,000 in emergency fund.

00:40:58.460 | And you think that in general,

00:41:01.160 | the emergency you're primarily concerned with

00:41:03.400 | is something like a job layoff, et cetera.

00:41:06.640 | But you know that if you face something like a job layoff,

00:41:08.920 | you wouldn't need our money all of a sudden,

00:41:11.220 | you would need the money over time.

00:41:12.640 | And so what you may do is you take your $10,000

00:41:15.240 | and you purchase a three-month CD, a six-month CD,

00:41:18.960 | a nine-month CD, and a 12-month CD.

00:41:22.600 | And you go ahead and purchase four individual CDs

00:41:25.240 | and you line them up so that each quarter

00:41:27.040 | one of those CDs is going to become mature.

00:41:29.620 | Well, you're gonna get a higher rate of interest

00:41:30.900 | on the 12-month CD than you are on any of the others.

00:41:34.380 | Three months from now, when your $2,500 CD matures,

00:41:38.220 | you go ahead and at that point in time,

00:41:39.820 | you purchase a 12-month CD.

00:41:42.420 | And then from here on out, every single quarter,

00:41:45.360 | you purchase a new 12-month CD.

00:41:47.740 | You've now built a laddered portfolio

00:41:50.060 | where every quarter you have a CD that's becoming mature,

00:41:55.940 | thus releasing the cash and the interest,

00:41:58.480 | and is earning you a higher rate of interest.

00:42:01.860 | And you've set it up so that every quarter

00:42:03.780 | you're gonna have access to that $2,500.

00:42:06.540 | That's what a laddered portfolio is.

00:42:08.460 | I think that's an excellent strategy,

00:42:10.360 | an excellent strategy for some of your emergency funds.

00:42:13.800 | But what you're getting is restricted access.

00:42:18.840 | Yes, you can invade the principal when you need to.

00:42:21.020 | With most CD contracts, you can get the principal,

00:42:22.860 | you just give up the interest.

00:42:24.140 | So you do still have some access,

00:42:26.140 | but you don't get the instantaneous access

00:42:27.980 | that you get in the savings account.

00:42:29.860 | You certainly don't get the instantaneous access

00:42:31.680 | that you get of having currency.

00:42:34.160 | You might keep $1,000 of currency, cash,

00:42:37.720 | physical greenback, green paper, in your pocket.

00:42:41.960 | And now you have the ability to have money

00:42:47.740 | that's ready at hand.

00:42:50.100 | You have tremendous access.

00:42:52.240 | It's right there.

00:42:53.080 | You can buy anything that you want with it,

00:42:54.740 | other than plane tickets.

00:42:55.980 | But now you have to contend with safety of that money.

00:43:00.460 | Well, in a way it's safe because it's in your hands.

00:43:03.500 | So you don't have to worry about somebody else

00:43:05.420 | just simply taking it from your account.

00:43:08.240 | But now you have to figure out the safety from thieves

00:43:11.160 | that might rob you at gunpoint

00:43:13.060 | or steal your backpack out of your car.

00:43:15.020 | And you've given up the rate of return

00:43:19.220 | that you might have by having the money invested.

00:43:22.620 | It's not that you shouldn't keep cash in your pocket.

00:43:25.340 | You should.

00:43:26.920 | But it's a balancing act among these three factors.

00:43:29.540 | So I believe that you should consider the rate of return

00:43:35.100 | as one part of your planning.

00:43:37.500 | But think carefully and don't run the risk

00:43:42.280 | of not having access to your money when you need it

00:43:44.880 | because you were laser focused on rate of return

00:43:48.860 | as being the discriminating factor.

00:43:51.540 | I wanna close out today's show

00:43:53.080 | with some rapid fire discussion

00:43:54.880 | of just a number of different ideas on emergency funds

00:43:58.580 | and some very practical tips that I hope will help you

00:44:02.040 | and will serve you.

00:44:03.880 | I don't claim that this list is exhaustive,

00:44:06.240 | but these are some practical tips,

00:44:09.160 | some things that will help you.

00:44:10.960 | The number one access to money that most people will employ

00:44:13.240 | when they face an emergency is in the form of credit.

00:44:15.880 | And I think that's perfectly fine.

00:44:19.680 | So here are some things that you should consider

00:44:21.440 | with regard to credit.

00:44:22.720 | Most people, that means a credit card.

00:44:24.560 | And credit cards are tremendously useful

00:44:26.800 | because unless there's a physical emergency,

00:44:29.640 | unless a hurricane has just flown over St. Martin's

00:44:32.280 | while you're on the island,

00:44:34.080 | and you were there on vacation in St. Martin

00:44:35.960 | and Hurricane Irma came through, you couldn't get out,

00:44:37.920 | now your credit cards don't work

00:44:39.020 | because the whole infrastructure is destroyed.

00:44:40.840 | That happens.

00:44:41.680 | You should be prepared.

00:44:42.640 | Hint, hint, when you travel, you should make sure.

00:44:44.720 | One rule I teach people,

00:44:46.440 | and I've encouraged lots of people,

00:44:48.400 | is whenever you travel,

00:44:49.480 | always make sure you have enough cash to get home.

00:44:52.000 | So when you are traveling close to home,

00:44:55.520 | you can often do that just simply with currency.

00:44:58.080 | If you're traveling far from home,

00:45:00.220 | then you may be able to do that with currency,

00:45:02.780 | or you might need to do that

00:45:04.020 | with something like precious metals.

00:45:05.840 | In a moment, I'll talk about tangibles.

00:45:07.480 | But if let's say that you're on St. Martin

00:45:09.640 | and you need to get home,

00:45:10.880 | well, money speaks, cash speaks.

00:45:13.840 | Problem is, how much cash do you need to get home?

00:45:16.560 | What if the airlines aren't going

00:45:17.680 | and you gotta book a trip on a boat

00:45:19.320 | to another Caribbean island?

00:45:21.740 | Because many of the larger countries of the world

00:45:25.160 | have diminished the large denomination of bills

00:45:28.760 | that are printed,

00:45:29.600 | the US government doesn't print anything bigger

00:45:30.420 | than a $100 bill.

00:45:31.760 | Used to be you could use a 500 euro bill.

00:45:34.560 | It was a huge amount of money that was very compact,

00:45:36.680 | and you could carry enough cash in that form.

00:45:39.600 | But many of the governments have been rolling back

00:45:41.960 | printing larger denomination currencies.

00:45:44.560 | And so if I were going to St. Martin,

00:45:47.360 | I'd wanna make sure that I had a couple of gold coins

00:45:50.320 | that I could take to a local coin shop and swap out.

00:45:52.920 | Wanna make sure that I had some currency

00:45:55.360 | in large denominations stashed away that could get me home.

00:45:59.080 | So always carry enough cash to get you home.

00:46:01.640 | I got off track.

00:46:02.480 | Oh, credit.

00:46:03.760 | So the number of circumstances in which that could happen,

00:46:08.040 | sorry, those examples of when credit doesn't work

00:46:11.720 | are few and far between.

00:46:13.120 | You basically need a loss of infrastructure

00:46:15.000 | in order for digital money to not work

00:46:16.540 | or digital credit to not work.

00:46:18.240 | Credit cards are effective.

00:46:19.880 | So think about your credit card strategy.

00:46:22.240 | Number one, make sure that you have access

00:46:24.080 | to a diversity of credit card issuers.

00:46:27.400 | If Visa's not taken, maybe MasterCard will be.

00:46:31.920 | If American Express isn't taken, maybe Discover will be.

00:46:35.240 | I face this a lot with traveling.

00:46:37.880 | Oftentimes there'll be one brand that's approved,

00:46:40.220 | but another one that's not.

00:46:41.560 | And sometimes it'll be in the strangest places.

00:46:44.480 | You'll find an establishment that won't,

00:46:46.220 | they'll sell you stuff, but they won't sell you stuff

00:46:48.140 | if you're trying to use a MasterCard.

00:46:50.980 | So you can diversify your credit card holdings.

00:46:54.860 | Have a Visa, have a MasterCard,

00:46:56.540 | have an American Express, have a Discover.

00:46:58.640 | You can diversify those credit cards

00:47:00.900 | and then have access to them when you need them.

00:47:03.580 | Of course, you need to make sure

00:47:05.580 | that you have significant balances available to you

00:47:08.460 | on those credit cards.

00:47:09.940 | The caveat here is if you don't have a spending problem.

00:47:14.800 | Significant balances can be a major problem

00:47:17.320 | and a major temptation if you have a spending problem.

00:47:20.280 | It could be a major help

00:47:21.760 | if they're there for an emergency situation.

00:47:24.000 | Credit cards, however, are a great form of emergency cash

00:47:31.040 | for an emergency that's short-term

00:47:35.120 | in order to get you out of a problem.

00:47:39.420 | But you better only use them

00:47:40.960 | if you actually have the money to pay 'em off.

00:47:44.060 | The best use of credit cards is travel.

00:47:46.840 | When you travel, you should carry with you

00:47:49.580 | a diversity of credit cards.

00:47:52.200 | And those credit cards should be placed

00:47:56.200 | in a diverse arrangement in your luggage and belongings.

00:47:59.980 | Credit cards are wonderful from a safety perspective

00:48:03.960 | because of the enhanced consumer protection

00:48:06.780 | in the case of fraud.

00:48:08.240 | So you might have, of course, your normal card

00:48:12.320 | that is has, maybe you're doing foreign travel.

00:48:15.200 | You might have your normal card

00:48:16.480 | that has the most advantageous currency,

00:48:20.320 | no currency conversion charges and a good conversion rate.

00:48:24.000 | And that's the card that you keep in your wallet

00:48:25.920 | that you use while you're abroad.

00:48:27.400 | And that's the card that would be your primary situation,

00:48:30.040 | your primary card to refer to

00:48:32.280 | in a situation where you need to buy something.

00:48:34.400 | You need to buy a plane ticket home

00:48:35.760 | because you just found out that your daughter is sick

00:48:37.480 | and you gotta get home.

00:48:38.560 | Well, you whip out that card

00:48:39.660 | and that's the one that you use.

00:48:41.400 | But of course, you should have a second one.

00:48:43.120 | I'm gonna speak generally here, stuck in your shoe.

00:48:46.440 | And you put it under your shoe so that if your credit,

00:48:48.680 | if your wallet is lifted, it's pickpocketed,

00:48:53.040 | then you still have enough of a way

00:48:55.560 | to book a, buy a collect call or get yourself to the,

00:49:00.560 | get yourself home, buy a train ticket,

00:49:02.320 | whatever you need to do.

00:49:03.760 | Had my wallet stolen, been there, done that,

00:49:05.280 | learned the hard way.

00:49:06.320 | So when you travel, you should have,

00:49:07.680 | and you should have a Visa and a MasterCard

00:49:09.360 | and an American Express all able to come to hand easily

00:49:11.980 | in case you're in a place where you need that money.

00:49:14.580 | But you can, you should stash your cards

00:49:18.560 | in a diversity of ways.

00:49:19.440 | So you're enhancing your safety

00:49:21.160 | because you're protecting yourself

00:49:22.880 | so that you have emergency funds

00:49:24.160 | so you can get home if necessary.

00:49:26.160 | You have emergency funds that are stable,

00:49:28.120 | they're safe from thieves.

00:49:29.520 | If the card is stolen, you won't be liable.

00:49:31.480 | You're not risking your personal

00:49:33.560 | checking account information in a foreign location

00:49:36.800 | where that information could be problematic

00:49:38.880 | if it were disclosed.

00:49:40.480 | And you have backup, so if your luggage is stolen,

00:49:43.120 | you have the credit card in your pocket.

00:49:44.520 | If your wallet is stolen, you have the credit card

00:49:46.320 | that you stashed in your luggage, et cetera.

00:49:48.520 | The point of all this is that you can apply,

00:49:51.920 | as you're thinking about your personal emergency planning,

00:49:56.560 | you can apply a thoughtful approach

00:49:58.860 | to the credit cards that you have

00:50:01.160 | to make sure that they are diverse,

00:50:03.720 | that they're safe, and that they're useful to you

00:50:05.880 | in a time of emergency.

00:50:07.880 | Other applications of credit would be something

00:50:10.400 | like a home equity line of credit.

00:50:12.720 | Many people have significant home equity,

00:50:15.080 | and there could be circumstances in which

00:50:17.400 | you need to have access to that money for an emergency.

00:50:20.820 | Best to line that up in advance.

00:50:24.080 | Best not to go and try to be applying

00:50:26.260 | for a home equity line of credit

00:50:27.380 | and getting the appraisal done with the bank

00:50:29.880 | at the time of the acute crisis.

00:50:32.360 | Maybe you had emergency surgery,

00:50:34.600 | or you've had an emergency C-section,

00:50:37.680 | your wife has had an emergency C-section,

00:50:39.680 | and now all of a sudden you need to have $30,000

00:50:42.120 | to pay the hospital bill.

00:50:43.360 | That's not the time to go and try to figure out

00:50:46.120 | how to make the home equity line of credit appear.

00:50:47.820 | Do it in advance.

00:50:48.920 | Get it laid aside.

00:50:50.360 | Another example of credit would be something

00:50:53.220 | like a 401(k) loan.

00:50:54.640 | A 401(k) loan can be a very reasonable and serviceable way

00:50:57.960 | for you to have access to money.

00:50:59.700 | As part of your emergency plan.

00:51:02.840 | There are risks to a 401(k) loan.

00:51:06.280 | If you're losing your job and you have a 401(k) loan,

00:51:09.200 | that's a problem, 'cause now you gotta figure out

00:51:11.120 | how to get that thing paid back,

00:51:12.960 | and it's gotta be paid back pretty quickly.

00:51:14.660 | But there are benefits to a 401(k) loan.

00:51:16.400 | A 401(k) loan can often be gotten very quickly

00:51:19.960 | without any questions asked

00:51:21.360 | as far as the purpose of the money.

00:51:23.700 | And often when you need money,

00:51:25.680 | you kinda need money without needing to tell anybody,

00:51:29.620 | or defend it to anybody.

00:51:30.920 | So perhaps you might prepare for that

00:51:33.680 | by reading about your accounts

00:51:36.200 | and reading what has to happen in order for a 401(k) loan

00:51:39.400 | to happen at your local, in your personal plan.

00:51:43.120 | So that'd just be examples of credit.

00:51:45.800 | Another example of credit would just be the personal credit

00:51:48.320 | that you have with family and friends.

00:51:50.580 | Are you the kind of person who is reliable?

00:51:53.600 | Are you the kind of person who does what you say

00:51:56.360 | and who will make sure that if you need money,

00:52:00.180 | you borrow it, you borrow it and you pay it back?

00:52:03.380 | What often happens is the people

00:52:04.660 | who are the most desperate for money

00:52:07.580 | find it the hardest to get

00:52:09.760 | because nobody has any confidence in them

00:52:11.600 | that they would ever pay it back.

00:52:13.740 | I'm sure you know somebody

00:52:14.900 | who is just always looking for money,

00:52:16.380 | always looking for a source of money,

00:52:17.700 | and they'll often find that no matter what door

00:52:20.300 | they knock on, it's closed.

00:52:22.280 | But if you're a person of your word,

00:52:26.640 | you can find that many doors will open to you.

00:52:29.600 | And it's important not to be so fixated

00:52:32.840 | on the mainstream approach to money

00:52:36.120 | that you miss out on the traditional approach to money.

00:52:41.360 | What happens is the stupid Equifaxes of the world

00:52:44.640 | and the Experian and the TransUnion

00:52:46.800 | have us all trained like little monkeys

00:52:48.640 | that jump for a credit score.

00:52:52.160 | Well, a credit score is one way of measuring risk.

00:52:56.840 | And it's certainly a very valid way of measuring risk,

00:52:59.980 | but it measures risk across financial transactions

00:53:02.900 | and accounts that are mainstream.

00:53:05.180 | It measures risk and it's a risk mitigating factor

00:53:07.620 | for somebody who has an impersonal relationship with you.

00:53:11.660 | It's a wonderful invention.

00:53:16.100 | The modern credit system is a wonderful invention

00:53:18.980 | because it allows there to be a level of trust

00:53:23.980 | between people who have no historic experience together

00:53:28.480 | of trust, it's wonderful.

00:53:30.460 | Little annoyed, I just said stupid Equifax

00:53:32.620 | because there's some things I hate about it

00:53:34.400 | and I hate it, the stupid data breach,

00:53:36.340 | but little offended by that.

00:53:39.060 | And I'm a little bit annoyed because it's inevitable,

00:53:41.680 | but anyway, point is it's a wonderful system,

00:53:46.520 | but it's not the only system.

00:53:48.620 | If you needed money today,

00:53:52.580 | if you needed to be bailed out of jail,

00:53:54.540 | would you have to go to the bail bondsman?

00:53:58.680 | Or could you make a phone call to somebody

00:54:00.420 | that you think would have the money

00:54:01.540 | and they would come down and bail you out,

00:54:03.220 | knowing that you're good for it?

00:54:04.780 | If you're doing a deal, you're doing a business deal,

00:54:10.180 | and you are running a little bit short,

00:54:13.720 | are you the kind of person who can say to somebody,

00:54:17.660 | "Listen, I might need some money, can you write me a check

00:54:20.460 | "and I'm good for it?"

00:54:23.740 | This happened to me one time, I was doing a deal,

00:54:25.860 | I had enough money, I thought I was good,

00:54:28.220 | but then I started to get nervous.

00:54:30.400 | And I went to somebody and I said,

00:54:31.820 | "Listen, I don't think I'll need it,

00:54:34.380 | "but if I do, I'd like to have access to it."

00:54:39.840 | They wrote me a five-figure check,

00:54:44.020 | I had it available if I needed to cash it,

00:54:47.420 | wound up, my planning was good, I didn't need their money,

00:54:49.740 | took it back and shredded the thing and was good to go.

00:54:52.780 | But that's how all kinds of stuff happens every day.

00:54:56.660 | This happens all the time.

00:54:59.780 | Happens in the context of buying and selling houses.

00:55:02.220 | Most people buy in houses and they wind up

00:55:04.100 | and all of a sudden they need money.

00:55:05.700 | So don't ignore your personal creditworthiness.

00:55:09.540 | You don't have to go on some dramatic way to say,

00:55:12.740 | "Let me work together my financial statements."

00:55:14.660 | Although there's a place for that,

00:55:15.980 | if you're in business and you're expanding your business,

00:55:19.020 | just putting together some financial statements

00:55:20.780 | so that your creditors can be confident

00:55:22.820 | in doing business with you has a place.

00:55:24.100 | But for most of us,

00:55:25.180 | it's just called being a person of your word,

00:55:27.300 | saying what you're going to do and doing what you say.

00:55:30.300 | The credit is certainly the number one aspect,

00:55:33.780 | thing that most people will tap in an emergency.

00:55:36.980 | So don't ignore it.

00:55:38.140 | What about cash?

00:55:40.740 | Well, of course, here you got cash in your wallet.

00:55:43.000 | I think that's really wise to always make sure

00:55:45.180 | that you have cash in your wallet.

00:55:46.780 | My generation seems to have a disease

00:55:48.820 | where they just don't want to deal with cash

00:55:50.520 | and it's to our detriment.

00:55:52.180 | I see nothing good that comes from it.

00:55:54.180 | People talk all the time about safety.

00:55:55.940 | Well, I just feel unsafe walking around

00:55:58.500 | with money in my wallet.

00:56:00.340 | Well, I've lost wallets, I've been robbed,

00:56:02.280 | but I've never been robbed because I was walking around

00:56:04.580 | with money in my wallet and somebody came

00:56:06.340 | and stuck a gun in my ribs.

00:56:09.040 | So the idea of you're walking around

00:56:11.980 | with money in your wallet is really not all that dangerous.

00:56:14.460 | It's absurd.

00:56:15.460 | But having cash in your wallet is important.

00:56:17.740 | Having cash stashed in a place

00:56:19.340 | that you can get to quickly is important.

00:56:21.300 | There might be an amount of cash

00:56:22.900 | that you want to have at home

00:56:23.980 | and consider diversifying where you have that.

00:56:26.860 | Consider hiding it carefully, securing it carefully.

00:56:31.740 | All of this needs to be amount appropriate.

00:56:33.900 | Don't buy a vault that costs you $1,000

00:56:37.300 | just to stash $1,000.

00:56:39.780 | But if you're going to have $100,000 at home,

00:56:43.900 | better make sure it's protected.

00:56:45.500 | I probably, and sometime I probably will do a class on this.

00:56:49.540 | I have a bunch of ideas on home security

00:56:52.500 | and kind of not all cheap, but inexpensive,

00:56:57.160 | but effective tools of home security.

00:57:00.820 | So I've done a lot of research on the subject.

00:57:02.620 | And just a little tip for you.

00:57:04.340 | If you ever need a safe, you ever need a home safe,

00:57:06.940 | the safest kind of safe for money or for valuable items.

00:57:11.140 | This doesn't work for guns, things like that,

00:57:12.780 | except handguns, you need a gun, you know, a long gun safe.

00:57:15.740 | If you're going to have, try to do that,

00:57:17.420 | which many people, those are the easiest ones

00:57:18.740 | to find everyone.

00:57:19.620 | You can find those everywhere.

00:57:20.460 | But if you just want a safe to protect your valuables,

00:57:22.100 | safe to protect cash,

00:57:23.900 | the safest approach is a floor safe.

00:57:28.900 | And a floor safe can be more effectively hidden

00:57:33.180 | than almost any other safe.

00:57:34.620 | So go with, if you need a place,

00:57:38.180 | if you're the kind of person who you're going to keep

00:57:40.020 | $100,000 of cash in your house,

00:57:42.560 | go with a floor safe and then make sure

00:57:44.700 | that you've stashed it in a place

00:57:46.460 | that's not in your master bedroom.

00:57:48.180 | It needs to be protected and it needs to be hidden.

00:57:51.700 | A hidden floor safe is very secure

00:57:55.900 | from the invasion of a thief.

00:57:58.180 | Most thieves, if it's effectively hidden,

00:58:01.540 | hidden under carpet, under furniture, et cetera,

00:58:04.740 | most thieves are probably not going to find it

00:58:07.300 | unless you've disclosed its location

00:58:09.140 | and the thief is a personal acquaintance.

00:58:11.540 | So that's effective protection against that,

00:58:14.200 | which is a big one.

00:58:15.580 | It's effective protection against

00:58:17.960 | many of the physical dangers that exist.

00:58:21.040 | A tornado will blow your house off of it,

00:58:22.620 | but the safe will still be there in the floor.

00:58:24.680 | A fire will have less heat down low on the floor

00:58:29.480 | and your items will be more protected from heat

00:58:32.240 | than in an above ground safe.

00:58:35.200 | And your major risk that you face

00:58:37.120 | with a floor safe is flooding.

00:58:38.720 | So of course it's below, if your house is flooded,

00:58:40.600 | your items will be flooded.

00:58:41.640 | So waterproof your items that you have in the floor safe.

00:58:44.760 | But it's very reasonable for you to do that.

00:58:47.800 | You could do it yourself.

00:58:49.280 | Run a jackhammer and knock a hole in the floor

00:58:51.200 | and fill it up, put a safe in and fill it up with cement.

00:58:53.800 | YouTube is your friend.

00:58:55.000 | Of course, you can stash your cash

00:58:57.320 | in a local safety deposit box.

00:58:59.080 | Wonderful scenario.

00:59:01.280 | Gives you a great amount of protection from many risks.

00:59:05.080 | Not perfect protection from all things,

00:59:07.480 | but a great amount of protection from many risks.

00:59:10.920 | And then of course you can stash your cash abroad

00:59:13.680 | or some other place in the next town over.

00:59:16.020 | If you stash some cash in a safe deposit box

00:59:19.040 | in the next town over,

00:59:19.880 | you have the benefit of quick access when you need it,

00:59:22.800 | but a little bit of distance where it's hard to get to.

00:59:25.320 | You got to really think about it on the way there.

00:59:27.460 | If you are concerned about having money outside

00:59:30.880 | at your sovereign risk,

00:59:32.120 | my friend in, or my caller in,

00:59:34.840 | my friend caller in on the Friday show,

00:59:37.640 | if I were in a discontented country in Asia,

00:59:40.760 | I would set up cash in a safe deposit box in Hong Kong.

00:59:43.940 | For those of you who are US citizens,

00:59:46.760 | the United States government requires you to report

00:59:49.560 | any financial relationships that you have

00:59:51.920 | and any money that you have anywhere in the world.

00:59:54.420 | So if you are opening a Hong Kong bank account

00:59:58.320 | and you're a US citizen,

00:59:59.560 | you need to report that account to the US government.

01:00:04.520 | However, currency that is held in a foreign country,

01:00:08.600 | as long as it's not held with a banking institution,

01:00:11.740 | a strong box with currency in it is not reportable

01:00:15.480 | to the best of my understanding at present.

01:00:17.580 | So if you read the law,

01:00:19.400 | obviously it's one thing to be concerned

01:00:20.940 | about the US government.

01:00:21.860 | It's another thing to be concerned about

01:00:23.600 | the local terrorists who stick an AK-47 in your ribs

01:00:27.560 | and say, "We're going to take all the money in your house."

01:00:32.560 | If I'm living in the Southern Philippines,

01:00:34.600 | I'm not keeping a floor safe in my house.

01:00:36.680 | I'm keeping a box, a secure box in Hong Kong.

01:00:43.240 | Or I did the story where I talked about,

01:00:47.240 | a few weeks ago I talked about Mexico City

01:00:49.360 | and some of the Mexican drug cartels that pay off people

01:00:53.920 | or just simply extort the people in the local bank,

01:00:58.240 | the employees of the bank to disclose

01:01:00.000 | how much money people have in their accounts.

01:01:02.640 | In that situation, if I live in Mexico City,

01:01:05.000 | I'm going to take different actions.

01:01:06.680 | So you got to think about your situation and be practical,

01:01:09.500 | but think carefully about your situation

01:01:12.280 | and consider carefully where you stash your cash.

01:01:15.360 | There are lots of options.

01:01:17.320 | Choose and develop a plan that gives you the safety,

01:01:21.960 | sorry, the access, the safety and the rate of return

01:01:25.360 | that's appropriate for you.

01:01:26.800 | Let's talk about banking.

01:01:28.400 | If you're in the United States, focus on making sure

01:01:31.280 | that your bank accounts are protected by the FDIC.

01:01:34.680 | If you are abroad, make sure that your bank accounts

01:01:37.080 | are protected by whatever the local version

01:01:39.840 | of deposit insurance is.

01:01:42.400 | Very, very important.

01:01:44.280 | Very, very valuable.

01:01:45.720 | United States FDIC protection is up to $250,000 per account,

01:01:49.420 | but it's based upon account titling.

01:01:51.400 | So if you need to stash more cash

01:01:53.520 | and you are in excess of that number,

01:01:55.860 | just diversify the way that your accounts are titled.

01:01:59.080 | You may have an account for,

01:02:01.640 | I may have an account for me,

01:02:03.080 | I may have an account that has exclusively

01:02:05.000 | my wife's name on it, and we may have a joint account.

01:02:07.160 | Well, under the way that the US law is written,

01:02:09.120 | you could put $250,000 in each of those accounts,

01:02:11.680 | and that amount of money is protected by FDIC insurance.

01:02:16.360 | Banks go belly up.

01:02:18.000 | You need to protect yourself.

01:02:19.440 | The credit union,

01:02:21.120 | what's it called, the credit deposit guarantee.

01:02:23.040 | Credit unions, there's a credit union version of the FDIC,

01:02:25.760 | which is just as good as the FDIC,

01:02:28.240 | and credit unions are better in that context

01:02:32.000 | than in many contexts.

01:02:34.000 | They're very good.

01:02:35.120 | Think about FDIC.

01:02:36.740 | Think about the diversity of your banking relationships.

01:02:40.500 | There is value to banking with a large

01:02:44.660 | national or international bank.

01:02:48.400 | Tremendous amount of value in it.

01:02:50.860 | If you have an account with a Bank of America,

01:02:55.840 | anywhere in the United States, there's a local branch.

01:02:58.720 | That can be very helpful.

01:03:00.720 | If you have an account with HSBC,

01:03:03.240 | practically anywhere in the world,

01:03:04.420 | you can find HSBC offices,

01:03:07.040 | especially in Asia, as an example,

01:03:09.120 | and pick the regional version.

01:03:11.280 | So there may be benefit for you of banking

01:03:13.680 | with a regional or international or national bank,

01:03:18.120 | especially one that has brick and mortar locations.

01:03:23.080 | On the flip side, there are advantages

01:03:24.640 | to banking with a bank that does not have

01:03:26.300 | brick and mortar locations,

01:03:27.480 | that has a purely digital footprint.

01:03:31.240 | That can get you higher rates of return, lower costs.

01:03:34.080 | There are benefits there.

01:03:35.560 | There are benefits in banking with banking institutions

01:03:39.320 | that are brick and mortar, but that are exclusively local.

01:03:44.320 | If you're looking for private money,

01:03:46.620 | don't go to Bank of America.

01:03:49.060 | Lots of reasons you shouldn't go to Bank of America,

01:03:51.880 | but if you're looking for private money,

01:03:53.040 | there's not reason to go there.

01:03:55.040 | But you might be able to find a little out-of-the-way bank

01:03:57.360 | with a few branches in some little out-of-the-way corner

01:04:00.680 | of the world that is perfectly safe,

01:04:02.880 | but would allow you to stash your cash in their bank.

01:04:06.680 | Buys you a much more private banking relationship

01:04:10.320 | than other opportunities.

01:04:11.680 | Now, you give up some of that access.

01:04:14.760 | Might be hard for you to bank with that little

01:04:17.520 | out-of-the-way bank in a little rural part of the world,

01:04:22.880 | but it does buy you more safety, buys you more privacy.

01:04:26.680 | And in some kind of emergencies,

01:04:28.160 | that privacy and that safety is significant.

01:04:30.820 | Or perhaps the same thing applies to you

01:04:33.320 | with cross-border banking.

01:04:34.820 | You live in Mexico, but you bank in the United States,

01:04:37.680 | or you live in the United States, or you bank in Canada,

01:04:39.800 | or you live in Canada and you bank in somewhere.

01:04:43.660 | You get the point.

01:04:44.560 | There are benefits to having things set up

01:04:48.080 | across the border.

01:04:49.000 | Again, just think about that story that I heard

01:04:52.040 | from the people down there in Mexico.

01:04:54.900 | I would be very careful banking with a Mexican bank

01:05:00.240 | in that circumstance.

01:05:01.920 | Obviously, there's gonna be a certain level of requirement

01:05:05.600 | of you gotta pay your bills,

01:05:07.720 | and there's gotta be drawn on a local bank.

01:05:09.860 | But in terms of keeping large amounts of funds there,

01:05:14.640 | sorry, but that's a risk that would be too high for me.

01:05:18.720 | So obviously, credit, cash, and banking relationships

01:05:22.120 | are going to be wonderful solutions for you

01:05:24.780 | and good places for you to keep your emergency fund.

01:05:26.760 | What else?

01:05:27.800 | Well, securities.

01:05:29.480 | Certain types of securities can be tremendous places

01:05:32.560 | for you to keep your emergency funds.

01:05:35.240 | Your securities could be treasuries, T-bills,

01:05:37.520 | or bonds or notes, depending on your duration.

01:05:41.720 | But just having a T-bill account

01:05:44.680 | directly with the federal government,

01:05:47.080 | have you ever thought about the problem of,

01:05:48.240 | if you had $10 million and you needed to keep it in cash,

01:05:51.160 | where would you keep it?

01:05:52.840 | The answer is obvious, it's T-bills.

01:05:55.160 | That's what you do.

01:05:56.120 | It's safe, it's guaranteed, it's secure.

01:06:00.340 | You get reasonable interest, market rate of interest,

01:06:05.600 | and you get reasonable access.

01:06:07.200 | So that might be appropriate for you.

01:06:10.520 | And there are other types of securities as well

01:06:14.600 | that may be helpful for you.

01:06:16.560 | You might have some bonds or some stable bond funds

01:06:20.640 | that are part of your emergency funds.

01:06:22.760 | You don't need to have 400, I mean, depending on the scale.

01:06:26.160 | Most normal people don't need to have $200,000

01:06:30.760 | available to them for an emergency.

01:06:32.880 | You don't need $200,000 in your home safe.

01:06:37.280 | For most people, that would be silly

01:06:38.800 | in the scale that most of us are living at.

01:06:41.400 | Too much opportunity cost on the money

01:06:43.000 | and what kind of $200,000 emergency would be faced

01:06:46.160 | where you'd have to have the cash?

01:06:48.480 | I'm not involved in that world, and I doubt you are either.

01:06:53.000 | But on the flip side, maybe you're a landlord

01:06:56.040 | and you have a significant number of properties

01:07:00.280 | and you're choosing to self-insure

01:07:02.000 | and carry high deductibles

01:07:04.280 | and carry significant personal risk

01:07:07.780 | on some of your insurance contracts.

01:07:09.620 | Well, it wouldn't be unreasonable in that situation

01:07:12.840 | for you as a landlord to need to have access to $200,000.

01:07:16.880 | Hurricane Irma wipes through Florida,

01:07:19.520 | damages a number of your properties,

01:07:21.840 | you've got big deductibles all around.

01:07:24.400 | What do you do?

01:07:25.920 | You don't need all of the money sitting in the bank.

01:07:28.440 | You might need some of the money sitting in the bank,

01:07:31.000 | but that's where you come in and you could be very safe

01:07:33.880 | and feel very confident about having some of that

01:07:36.400 | in some sort of stable bond fund.

01:07:38.440 | Perfectly responsible thing to do.

01:07:42.160 | And by diversifying your approach,

01:07:44.960 | you can have access to the money

01:07:46.120 | from a diversity of sources.

01:07:47.680 | So there are lots of securities,

01:07:49.240 | obvious ones, treasuries, T-bills,

01:07:51.200 | but there are lots of securities

01:07:54.300 | that give you that stability and that safety.

01:07:57.460 | The other thing to remember

01:07:59.960 | on the subject of treasuries or bonds,

01:08:02.480 | even individual bonds,

01:08:03.920 | is assume for a moment that you've covered yourself

01:08:07.120 | from a diversification need.

01:08:09.320 | So let's ignore corporate bonds

01:08:10.560 | and let's just focus on treasuries.

01:08:12.200 | You can set up for yourself

01:08:13.520 | a laddered portfolio of treasuries

01:08:16.520 | that would meet your needs in that example

01:08:18.120 | that I described as a landlord.

01:08:20.200 | You have a need to have significant amounts of cash on hand

01:08:23.240 | and you have a need to have amounts of cash available

01:08:26.280 | if you had some sort of significant problems.

01:08:29.360 | Well, you could set that up

01:08:30.360 | with a laddered treasury portfolio

01:08:32.400 | and you purchase a series of laddered treasury notes.

01:08:36.600 | That portfolio can be established simply,

01:08:40.700 | inexpensively, and safely.

01:08:43.900 | And you can have treasury notes

01:08:45.700 | that are regularly coming mature.

01:08:48.240 | People often have a concern about treasuries

01:08:53.460 | that's related to interest rates.

01:08:55.800 | We all can start from the fact or say,

01:08:58.260 | well, if interest rates go up, values go down, right?

01:09:01.860 | In bond investing, there's an inverse relationship

01:09:04.740 | between rates and values.

01:09:07.220 | If rates go down, bond values go up.

01:09:10.760 | But the key is for you in a situation

01:09:12.700 | like I've just described,

01:09:14.100 | there's no risk because you know,

01:09:17.020 | there's no risk of interest rates

01:09:18.940 | because you know what the overall value is

01:09:23.020 | and you're not investing in a fund.

01:09:25.140 | In a bond fund, you have to deal with something

01:09:27.700 | called the duration of the portfolio,

01:09:29.260 | which is a measurement of when do these various bonds

01:09:33.500 | that are in the portfolio, when do they mature?

01:09:36.300 | And depending on the duration of the portfolio,

01:09:39.140 | you'll face more or less risk of prevailing interest rates.

01:09:43.980 | So with a long-term duration portfolio,

01:09:48.140 | small changes of interest rates can have a significant effect

01:09:51.300 | on the value of the portfolio.

01:09:53.080 | That may or may not be appropriate

01:09:55.840 | for your personal emergency fund

01:10:00.580 | 'cause you might not want to have that amount of risk

01:10:03.580 | in terms of the fluctuating values.

01:10:07.980 | The longer the term of the bond,

01:10:10.020 | the higher the fluctuation when interest rates change.

01:10:12.900 | But you could still set up

01:10:13.980 | and you could still use treasuries

01:10:15.340 | in a small treasury portfolio, even as an individual,

01:10:18.580 | you could still use that as a component

01:10:20.460 | of your emergency fund.

01:10:22.740 | Now, I don't know if that's worth doing for you,

01:10:24.220 | just an idea to say that don't ignore securities

01:10:27.880 | as being useful for you in your emergency fund

01:10:32.880 | and in your emergency fund needs.

01:10:35.180 | Another example would be insurance contracts.

01:10:38.020 | I think insurance contracts,

01:10:39.900 | specifically cash value whole life insurance contracts,

01:10:43.500 | have a unique place and a unique value

01:10:46.220 | as part of an overall emergency fund approach.

01:10:50.040 | That is one of the things that I most like

01:10:52.460 | about the personal whole life insurance contracts

01:10:56.160 | that I own for me and my family members.

01:10:59.020 | I view them as a significant aspect

01:11:03.080 | of my emergency plans.

01:11:07.540 | They have a few effective, useful things

01:11:10.120 | in the context of emergency funds that I particularly like.

01:11:13.960 | Number one is they have high stability.

01:11:16.000 | And here I'm talking about a traditional

01:11:18.240 | portfolio-based life insurance product,

01:11:21.340 | not a variable contract.

01:11:23.140 | When you have a traditional

01:11:25.100 | portfolio-based life insurance contract,

01:11:27.700 | you have a life insurance contract that has values

01:11:30.640 | that are very, very stable.

01:11:32.280 | They are contractually guaranteed to go up,

01:11:35.660 | and then depending on the type of contract that you have,

01:11:38.660 | they'll go up at differing amounts,

01:11:40.660 | but they're contractually guaranteed to go up.

01:11:43.340 | I like that because it means

01:11:44.900 | I have a high stability of money.

01:11:47.500 | I give up return in exchange for safety,

01:11:52.020 | but I have much more return in a life insurance contract

01:11:58.500 | than I do in a local bank account.

01:12:01.860 | I have less access in a life insurance account

01:12:04.020 | than my local bank account.

01:12:05.320 | But one of the unique factors of life insurance contracts

01:12:08.780 | is you have pretty good access.

01:12:10.380 | Now, there's two sides to this coin.

01:12:12.320 | Number one is you have to talk about the contractual access,

01:12:16.140 | the guaranteed access, depending on the company,

01:12:18.180 | and the practical access.

01:12:20.320 | How is business actually done?

01:12:22.660 | The contractual access in many life insurance contracts

01:12:25.720 | with many companies is if you request a loan

01:12:29.920 | on your portfolio or to cash out a life insurance contract

01:12:33.940 | 'cause you need the money and cash it out entirely,

01:12:36.400 | the insurance company can often have a contractual protection

01:12:41.400 | where they don't need to send that

01:12:44.340 | for up to about six months.

01:12:45.800 | So there's a difference between contractual and practical.

01:12:50.360 | In reality, if I need money,

01:12:53.380 | and I need money right away from my insurance contracts,

01:12:56.840 | I can have the money wired into my account

01:13:00.160 | in a day or two days from the time that I request the money.

01:13:04.380 | So I really like a whole life insurance contract

01:13:09.680 | as being a component of emergency funds.

01:13:12.160 | And the money that I have in whole life contracts,

01:13:16.880 | I mentally categorize it as primarily emergency funds.

01:13:21.880 | Whole life contracts don't work well

01:13:23.960 | for short-term investment needs, in my opinion,

01:13:25.800 | in my experience, in my analysis.

01:13:29.240 | I don't even love them for retirement planning,

01:13:31.800 | although they have a place.

01:13:34.120 | I don't ever start with that.

01:13:38.280 | But I love them for giving me some form of safe,

01:13:43.280 | stable money that I can have easy access to,

01:13:48.060 | but I have decent return.

01:13:50.640 | And I like the fact that with whole life contracts,

01:13:54.300 | my favorite thing is I get both of these things of access.

01:13:57.100 | So with access, I talked about speed of access

01:13:59.680 | and ready access to large amounts,

01:14:01.760 | but also restrictive access,

01:14:03.100 | kind of this double-edged sword,

01:14:04.920 | and I think both are valuable.

01:14:06.600 | So number one, with life insurance contracts,

01:14:09.060 | I can have quick and speedy access to my money

01:14:12.100 | without anybody asking questions.

01:14:14.120 | So if I want to take out a policy loan,

01:14:16.000 | again, I can have the money wired directly into my account,

01:14:18.240 | or I can have a physical check FedExed to me

01:14:20.840 | in a day or two under all normal circumstances.

01:14:25.840 | I don't even remember what the contractual limits are

01:14:28.420 | in the contracts that I own,

01:14:30.340 | but I can have practical access to the money very quickly.

01:14:33.820 | A day or two is very, very reasonable for emergencies.

01:14:38.020 | And so that allows me to have a significant amount of money

01:14:42.460 | that's locked away in something that's safe, that goes up,

01:14:45.080 | that's protected from the claims of creditors in my state,

01:14:47.980 | and also that I can have quick access to,

01:14:51.200 | and a decent rate of return,

01:14:52.600 | a pretty decent rate of return for a safe, stable asset.

01:14:55.800 | But on the flip side,

01:14:57.920 | because it's a little bit of a hassle,

01:14:59.880 | I have a little bit of restriction on the access.

01:15:04.360 | And so I like that.

01:15:05.200 | It puts a little distance between me and my money.

01:15:07.520 | It makes me have to think twice.

01:15:09.880 | Do I really want to get this money out?

01:15:13.320 | And that makes me happy.

01:15:14.920 | I like both of those things.

01:15:16.280 | I think life insurance contracts,

01:15:19.060 | whole life and portfolio-based

01:15:20.540 | whole life insurance contracts actually fit

01:15:23.500 | this particular application really well.

01:15:26.980 | I'm a big fan in this application.

01:15:29.580 | One of the nice thing about whole life insurance contracts

01:15:31.780 | is you can have quick access to the money

01:15:33.620 | with no questions asked.

01:15:35.380 | And again, if you need quick financing for something,

01:15:38.740 | you can do it with no questions asked,

01:15:40.900 | which is helpful in certain circumstances.

01:15:45.300 | Shop carefully in the world of life insurance.

01:15:49.020 | Finally, we get to tangibles.

01:15:51.900 | That's my last aspect.

01:15:54.680 | I think you should always consider tangibles

01:15:57.980 | in the context of emergency funds

01:16:01.520 | and emergency fund planning.

01:16:03.540 | Now, a simple example would be tangibles

01:16:05.880 | such as precious metals.

01:16:08.200 | Precious metals have a tremendous usefulness

01:16:11.200 | in the context of emergency funds

01:16:13.680 | and in emergency fund planning.

01:16:15.640 | If you want a compact store of wealth,

01:16:19.200 | I don't know of anything that's a more compact

01:16:21.440 | store of wealth than gold, gold coins.

01:16:25.440 | You could put hundreds of thousands of dollars

01:16:27.560 | of gold coins in a coffee can.

01:16:29.800 | I mean, it's crazy, especially if you're measuring

01:16:34.440 | the value in terms of US dollars, it's crazy.

01:16:37.920 | And in terms of universal access to the money,

01:16:41.840 | there is no currency that is so broadly spoken

01:16:44.840 | on a global basis as gold coins.

01:16:48.760 | US dollars will get you out of a pinch

01:16:50.840 | just about anywhere in the world.

01:16:52.740 | Frequently, I have found in traveling

01:16:54.400 | to little out of the way places that locals

01:16:57.160 | and places I would have no clue existed.

01:17:02.160 | Well, number one, I'll do a transaction with me

01:17:04.040 | in US dollars and we'll get great rates

01:17:06.500 | in US dollar exchanges.

01:17:09.360 | There've been times in traveling,

01:17:11.460 | when you're traveling with a large group of people

01:17:12.960 | in a place that's not an ordinary, normal tourist place,

01:17:17.960 | and you can give a big old stack of US dollars

01:17:22.920 | to a local person and they'll come back

01:17:25.360 | with a nice stack of local currency.

01:17:27.760 | So US dollars are pretty ubiquitous all around the world.

01:17:32.120 | But there are places in the world

01:17:33.440 | where US dollars don't speak and they don't work,

01:17:36.040 | either because they're barred,

01:17:37.440 | and it's considered to be a black market transaction

01:17:39.140 | to do things in dollars, i.e. Venezuela,

01:17:42.760 | or because they're just simply not accepted

01:17:45.160 | in the local economy.

01:17:47.780 | But I don't believe there's any place in the world

01:17:50.280 | that you can't take a gold coin

01:17:53.760 | to a local experienced merchant,

01:17:56.680 | or to a local pawn shop, or to a local banker,

01:17:59.720 | or to a local coin dealer.

01:18:02.080 | I don't think there's anywhere in the world

01:18:04.120 | that you can't take a gold coin

01:18:06.240 | and come out with a stack of cash.

01:18:09.120 | And once you get outside of the US,

01:18:11.160 | it's hard to spend a gold coin in the United States.

01:18:13.600 | It's really hard.

01:18:15.000 | But there are a whole lot of markets in the world

01:18:16.600 | where you walk in with a gold or silver coin

01:18:20.040 | and you can work a very reasonable deal

01:18:23.160 | for a transaction that you need.

01:18:26.160 | So when it comes down to something like emergency cash,

01:18:28.920 | it's hard to get better than a gold coin,

01:18:33.640 | or if you have the space, silver coins.

01:18:37.280 | The other aspect of tangibles

01:18:38.900 | and how they apply to your emergency

01:18:42.140 | and your emergency planning

01:18:44.380 | is oftentimes you need to have the tangibles

01:18:48.720 | in order to stave off the emergency.

01:18:51.820 | Here in South Florida,

01:18:53.900 | we just passed through Hurricane Irma.

01:18:55.060 | I'm recording this on September 12, 2017.

01:18:58.260 | And the frenzy of Hurricane Irma

01:19:01.020 | was rather obvious to see,

01:19:03.300 | it just, I had a front row seat to it.

01:19:06.060 | And last week I recorded these shows on Hurricane Harvey.

01:19:09.020 | I talked about price fixing laws,

01:19:11.140 | aka anti-price gouging laws.

01:19:14.540 | And then a week later,

01:19:16.820 | unexpectedly I had a fresh front row seat

01:19:18.660 | at a whole, watching the whole thing play out

01:19:20.380 | right here where I live in South Florida.

01:19:22.580 | What happens when there's an emergency,

01:19:25.180 | such as a hurricane,

01:19:26.440 | is the economy changes.

01:19:29.400 | So there are price fixing laws

01:19:33.620 | that make it illegal to charge higher prices for items.

01:19:38.620 | And what actually happens

01:19:41.140 | in the face of the price fixing laws,

01:19:43.260 | that instead of changing prices,

01:19:46.060 | the companies and the merchants

01:19:47.520 | that sell the goods and services,

01:19:51.300 | they change the quantities.

01:19:52.980 | And so bottled water,

01:19:54.460 | two weeks before the hurricane,

01:19:56.660 | you could buy practically unlimited amounts

01:19:58.820 | of bottled water at my local Costco.

01:20:02.860 | Best price on bottled water,

01:20:04.460 | Kirkland brand bottled water works great.

01:20:06.340 | You could buy practically unlimited quantities.

01:20:07.980 | You could load up a whole cart with a bunch of it.

01:20:11.360 | But then as soon as the emergency started

01:20:14.820 | and the forecast turned it straight to South Florida,

01:20:20.700 | so it's the day after Labor Day,

01:20:22.260 | immediately the Costco put up a five limit per person,

01:20:27.220 | per water rationing system.

01:20:31.240 | So now you could only buy five cases of bottled water.

01:20:34.840 | Then that was quickly sold out.

01:20:36.260 | The next day I came back and it was two cases per person.

01:20:40.980 | And in later transactions,

01:20:42.740 | there was a friend of mine

01:20:43.580 | who I was helping with some things.

01:20:44.940 | And I actually wound up back at the Costco again,

01:20:47.940 | day or two before the,

01:20:49.380 | two days before the,

01:20:50.540 | a day before they closed for the hurricane,

01:20:51.860 | kind of just basically last minute.

01:20:53.620 | And they were so strict on their rationing policy

01:20:57.420 | that they would not even literally

01:20:59.740 | even put four cases in my cart,

01:21:02.840 | even though I was shopping with my friend

01:21:04.480 | who was on a different aisle.

01:21:07.060 | Said, no, he has to be here with his own cart.

01:21:09.720 | Only two cases per member.

01:21:11.880 | So what happens?

01:21:12.720 | Well, my point here is not to reiterate

01:21:14.720 | my comments on price fixing laws.

01:21:17.200 | My point is to focus on the fact

01:21:19.160 | that there are times when the money doesn't work.

01:21:23.180 | Now that was a very minor emergency.

01:21:27.460 | There was still plenty of bottled water.

01:21:29.140 | If you just went to another store

01:21:30.300 | and you could go to six stores

01:21:31.560 | and buy two cases at each store and come back, sort of.

01:21:34.820 | Most of the stores,

01:21:35.660 | even the big ones that were very focused,

01:21:37.080 | they did sell out,

01:21:37.920 | but they usually were resupplied the next morning.

01:21:40.060 | Very impressed with the way the merchants

01:21:41.720 | hustled to resupply.

01:21:44.180 | Very impressive.

01:21:45.820 | But the money didn't work.

01:21:46.700 | Didn't matter how much money I had.

01:21:47.980 | I could buy thousands of cases of bottled water.

01:21:51.420 | The bottled water wasn't available.

01:21:53.840 | So sometimes you need to think about the item

01:21:55.820 | that would be needed in an emergency

01:21:59.120 | and get the item first.

01:22:02.100 | Was on YouTube the other day.

01:22:04.540 | I was watching the Yankee Marshalls channel

01:22:06.880 | and he had done a video

01:22:08.580 | and the question that was written into him was,

01:22:13.580 | "What kind of gun can I buy for self-protection

01:22:16.040 | "for under $200?"

01:22:18.400 | And the scenario that was described to him

01:22:20.260 | in a letter by one of his viewers,

01:22:24.060 | the viewer was a 15-year-old younger brother

01:22:28.620 | of a young lady who was married to an abusive husband.

01:22:33.540 | And there had been a long history of physical abuse

01:22:37.340 | and her husband had actually been convicted of abuse.

01:22:42.340 | He had been sent to prison

01:22:44.540 | and then he was getting out of prison

01:22:47.100 | and he had vowed to family and friends,

01:22:49.580 | getting out of prison early,

01:22:50.980 | and he had vowed to family and friends

01:22:52.940 | that he was going to go and he was going to kill her.

01:22:55.780 | He was gonna go and kill his wife.

01:22:57.540 | Now this lady had thought she had more time

01:23:00.820 | to plan for her physical safety

01:23:04.060 | because his release date

01:23:06.460 | was supposed to be several months later,

01:23:09.020 | but he was being released early.

01:23:10.740 | And so now she was in a bind.

01:23:14.180 | She needed to get a gun for self-protection,

01:23:17.020 | but she only had about $200 saved.

01:23:19.700 | And the question was, to the Yankee Marshall,

01:23:22.820 | you can go watch the video

01:23:23.780 | and it's on his channel, Yankee Marshall.

01:23:26.420 | The question to him was, what kind of gun should she get?

01:23:31.180 | When I viewed the video,

01:23:35.060 | I was just thinking about this show

01:23:36.220 | because I knew I was gonna do it.

01:23:38.340 | And how vivid of an example to say

01:23:41.140 | that sometimes you face an emergency

01:23:44.220 | and what you need is not the money.

01:23:45.980 | What you need is the thing.

01:23:49.180 | Now in the case of this woman,

01:23:52.140 | thankfully she has enough time

01:23:53.620 | where she can go and she can get,

01:23:58.220 | she had been doing training.

01:23:59.100 | I think she had gotten a permit, a carry permit,

01:24:02.940 | but she has the time where she can go and still

01:24:06.660 | and get the gun and she has enough time to do it.

01:24:09.520 | But what it faces, if she doesn't have a permit,

01:24:11.980 | in Florida they have mandatory waiting laws

01:24:14.940 | where you need to buy a gun and you can't get one.

01:24:17.060 | You gotta wait.

01:24:17.880 | I can't remember how long it is.

01:24:19.460 | But there's a mandatory minimum amount of time.

01:24:22.300 | And so picture yourself as a woman

01:24:24.940 | and your abusive husband has sworn

01:24:27.300 | he's gonna come and kill you

01:24:28.740 | and you need a gun to protect yourself.

01:24:30.300 | You don't have anybody that you can do

01:24:32.260 | and the money doesn't work.

01:24:33.740 | Money doesn't work in that situation.

01:24:37.020 | You can't get the gun 'cause there's a waiting law.

01:24:41.680 | And so you've gotta have already had the thing that you need.

01:24:46.020 | So if you anticipate different emergencies,

01:24:47.740 | you can think about this and you can consider

01:24:50.820 | what is the thing that I would need in the emergency?

01:24:53.660 | And let me square that away first.

01:24:56.060 | To get out of the hurricane zone, I'm gonna need gasoline.

01:24:59.620 | And yes, I can save the money to buy the gasoline,

01:25:03.380 | but maybe what I should do is consider the fact

01:25:07.380 | that the gasoline's not gonna be available.

01:25:09.980 | And so let me grab a couple of five-gallon cans

01:25:12.420 | and put them out on my back porch

01:25:15.260 | or tuck them away in the back shed or the back garage

01:25:19.340 | so at least I can fill up my tank and get out of town

01:25:21.500 | if there's a hurricane coming.

01:25:23.580 | Or let me go ahead and grab some cases of water now

01:25:25.700 | while it's abundant so at least I have some water

01:25:27.900 | and some batteries if there's a hurricane coming.

01:25:30.440 | Same thing with food.

01:25:33.900 | My wife and I have always tried to maintain a deep pantry,

01:25:37.900 | as deep as possible.

01:25:39.580 | Well, I've lived on a highly fluctuating variable income

01:25:43.420 | for practically all of my adult life.

01:25:46.940 | And there were a lot of times

01:25:48.820 | where when my income was very small

01:25:50.980 | and it would be small for extended periods of time,

01:25:54.620 | where I'd find myself taking a great amount of comfort

01:25:56.900 | of the fact that we didn't have to go to the grocery store.

01:25:59.900 | We just had enough food in the pantry.

01:26:01.700 | We didn't have to go to the grocery store.

01:26:04.240 | I've read all kinds of accounts of people

01:26:06.620 | who lost their job and the fact that they had food saved

01:26:10.340 | was what got them through.

01:26:13.020 | So the point is, don't ignore the tangibles

01:26:18.020 | that you would need in an emergency.

01:26:20.260 | Make sure that you have them.

01:26:23.260 | And you may find them to be very, very helpful.

01:26:27.500 | It really just struck hard to me,

01:26:30.380 | watching, and it's still ongoing,

01:26:34.280 | just watching the aftermath of what's happening

01:26:36.340 | in some of the Caribbean islands

01:26:37.640 | in the aftermath of Hurricane Irma.

01:26:39.740 | There was a big article in the New York Times yesterday

01:26:41.980 | about St. Martin, just the total devastation there.

01:26:45.420 | And it just reinforced again to me

01:26:48.940 | the importance of these comments that I'm making

01:26:52.680 | on thinking ahead about the tangibles

01:26:55.860 | and the things that you would need

01:26:57.920 | and preparing for them

01:26:59.280 | because you can't do everything with money.

01:27:01.740 | One thing I try to do when I travel

01:27:03.300 | is I always try to make sure that I have some water with me.

01:27:06.420 | And because the Transportation Security Administration

01:27:11.100 | has decided that water is a very dangerous substance

01:27:16.100 | to passengers, they've decided that it's fine

01:27:20.020 | to bring a container,

01:27:20.860 | but you can't bring the container full of water.

01:27:22.460 | So whenever I travel, I always try to make sure

01:27:25.460 | that I have a container for water.

01:27:27.340 | And this is partly because I'm offended

01:27:29.300 | at the idea of paying $5 for a bottle of water

01:27:31.620 | in an airport, my frugal, thrifty ways.

01:27:35.060 | And partly just because of having been in circumstances

01:27:38.620 | where you're sitting on a plane

01:27:40.020 | and you're sitting on the tarmac

01:27:41.180 | and all of a sudden you're there for a long time

01:27:43.500 | and they can't get up,

01:27:44.420 | the flight attendants can't get up and serve water,

01:27:46.740 | but you're stuck there with a two and a half hour delay.

01:27:48.460 | And if you don't plan ahead and have your own water,

01:27:50.260 | you're sunk.

01:27:51.340 | Which incidentally, on the subject of carrying water,

01:27:53.260 | have you ever noticed that the great threat of water

01:27:58.260 | and the idea that water is a bomb,

01:28:01.740 | you know, it's a huge threat, of course.

01:28:03.460 | And so what we do is we take the most crowded,

01:28:06.660 | packed place in the airport

01:28:08.980 | where there are lots of people close together,

01:28:11.340 | standing still, and we use a secure fixed position

01:28:16.060 | 'cause the security gates don't move.

01:28:18.420 | And then we say,

01:28:19.540 | well, let's drop all of these potential bombs

01:28:22.660 | into this container right here by these lines of people

01:28:25.900 | where, of course, they'll be the safest 'cause lines of,

01:28:29.980 | I digress, but you get my point.

01:28:32.260 | Such a stupid approach.

01:28:36.260 | The threat of your bottle of water,

01:28:37.500 | so let's keep that threat right here

01:28:38.980 | and just have you toss it in the trash can

01:28:40.460 | 'cause you can't take a swig

01:28:41.420 | and take it through the machine.

01:28:43.540 | So let's toss it in the trash can

01:28:44.780 | right next to these 85 people lined up

01:28:46.780 | or 185 people lined up who are just perfect targets for us.

01:28:50.740 | Forgive me, I lose my self-control sometimes.

01:28:56.180 | So I try to take water with me.

01:28:57.860 | And it's good to have a container of water.

01:29:00.500 | You travel enough in places

01:29:02.140 | where you can't drink the water from the tap.

01:29:03.620 | And one of the first things that you do

01:29:05.180 | when you get into such a place,

01:29:06.260 | you should set aside for yourself a little stash of water.

01:29:09.780 | Make sure that you have enough water

01:29:10.940 | so you don't go thirsty.

01:29:11.780 | It's bad for your health.

01:29:12.720 | It's bad for your ability to absorb

01:29:15.180 | and assimilate the local food.

01:29:16.500 | Just make sure that you have water.

01:29:19.060 | And then a good backup consideration

01:29:20.860 | is make sure that you carry a water filter.

01:29:22.460 | There are all kinds of wonderful

01:29:23.300 | little portable water filters that you can travel with.

01:29:26.060 | You can travel with their integrated in the bottle, et cetera.

01:29:29.100 | That stuff can save you from a bad case

01:29:32.740 | of the Katmandu quick step

01:29:34.180 | just simply by taking a few precautions.

01:29:37.620 | Or it can save your life.

01:29:40.040 | When there's a hurricane afoot

01:29:42.620 | and you're stuck on a Caribbean island,

01:29:44.100 | you can't get off.

01:29:45.660 | And all of a sudden, Hurricane Irma roars over your head.

01:29:49.300 | So read the news,

01:29:50.700 | read the article in the New York Times yesterday,

01:29:53.180 | and pay attention to the fact

01:29:56.660 | that money doesn't buy you out of every emergency.

01:30:03.740 | Sometimes you got to make sure

01:30:06.140 | that you've made provisions other than money.

01:30:09.160 | I want to close with two final comments.

01:30:12.340 | Number one is pay attention to your insurance contracts.

01:30:16.340 | I briefly mentioned insurance contracts a little while ago

01:30:19.980 | in the context of talking about whole life insurance

01:30:21.900 | as being an appropriate place for you

01:30:23.740 | to maintain some of your emergency funds.

01:30:27.740 | But pay attention to the fact

01:30:30.220 | that if you can have an emergency from something,

01:30:35.220 | you should seriously consider insuring yourself

01:30:39.020 | against the emergency.

01:30:40.260 | You shouldn't always do it.

01:30:43.340 | There are tons of things that people buy insurance from

01:30:45.420 | that I don't think are a good solution,

01:30:47.260 | or at least not a good solution

01:30:48.340 | once you've accumulated some money.

01:30:50.700 | And one of the major benefits

01:30:52.480 | of accumulating emergency funds

01:30:55.460 | is you can forego insurance contracts

01:30:57.960 | that other people need to pay for.

01:31:00.620 | If you have $10,000 in an emergency fund,

01:31:05.620 | you don't need insurance on your cell phone,

01:31:08.260 | you don't need insurance on your TV,

01:31:10.820 | and you probably don't need comprehensive insurance

01:31:12.920 | on your $2,000 car.

01:31:14.440 | You can self-insure for the cell phone,

01:31:18.500 | and if you can't get a different phone,

01:31:21.640 | although I have a soft spot for expensive phones

01:31:24.940 | because I realize they can be very productive.

01:31:27.340 | You can self-insure against the TV.

01:31:29.540 | If you can't, you shouldn't have bought the TV.

01:31:31.540 | And you can self-insure against the loss of the car.

01:31:33.420 | It's more efficient for you when you're driving a cheap car

01:31:35.820 | to keep the money in cash and protect yourself

01:31:38.180 | and just maintain the ability to go buy another car.

01:31:44.260 | But there are a lot of things

01:31:45.660 | that if you face an emergency,

01:31:47.840 | you need to calculate that risk.

01:31:49.460 | Go back to that real estate investor I described

01:31:51.020 | where you might need $200,000 saved up.

01:31:53.500 | Better make sure that's a comfortable number.

01:31:55.060 | If not, you need to adjust your insurance contracts.

01:31:58.860 | So always pay attention to insurance.

01:32:01.400 | Do it thoughtfully, rationally, and logically,

01:32:05.340 | but don't depend always on emergency funds.

01:32:09.900 | It's a two-way street.

01:32:10.820 | Don't buy insurance for everything

01:32:12.100 | when you can self-insure

01:32:13.540 | and keep that risk yourself with your funds.

01:32:17.260 | And don't put everything on funds

01:32:20.280 | when you can insure a risk away.

01:32:23.060 | Don't plan exclusively on your emergency fund

01:32:25.200 | when you can insure a risk away.

01:32:27.700 | Final comment I wanna make is simply this.

01:32:30.340 | I've heard it said,

01:32:31.980 | if money solves your problems,

01:32:33.820 | you don't really have a,

01:32:36.820 | what was it?

01:32:37.660 | I don't know how it was said.

01:32:38.480 | If money solves your problem, you don't have an emergency.

01:32:40.540 | It sounds a little cold and a little cavalier sometimes.

01:32:44.220 | So especially it sounds cold and cavalier

01:32:46.940 | if somebody has lost their house,

01:32:49.860 | or they're out of money,

01:32:50.700 | or they ruined their car and all that stuff.

01:32:53.560 | But I really, although I don't,

01:32:54.740 | I can't, haven't thought of a poetic and elegant way

01:32:56.940 | to convey the words.

01:32:59.820 | I really am increasingly convinced of the truth,

01:33:06.380 | that if you have a problem that can be solved with money,

01:33:10.740 | a lot of times it's not really all that big of a problem

01:33:12.620 | in the grand scheme of things.

01:33:14.640 | Now, let's not be stupid and ignorant of the fact

01:33:18.020 | that problems are caused,

01:33:21.260 | and they can be fixed by money.

01:33:22.460 | And money problems are real problems.

01:33:24.300 | They affect people every day.

01:33:25.140 | I'm here to try to help solve some of your money problems.

01:33:28.660 | But when you're facing an emergency,

01:33:30.460 | just always recognize,

01:33:32.220 | your problem can be solved with money.

01:33:34.020 | In many ways, it's not as big of a problem

01:33:35.700 | as some other people's.

01:33:36.860 | So do the planning now, do the preparation now.

01:33:40.900 | If you don't have an emergency fund, get saving.

01:33:44.140 | And if you are someone who is in part A,

01:33:47.380 | you don't have a thousand bucks stashed in your house

01:33:49.980 | and 10,000 bucks stashed in the bank

01:33:52.300 | that's at your savings account at your local bank,

01:33:54.020 | right next to your checking account.

01:33:56.300 | If you don't have that, ignore all of part B here

01:33:59.260 | in an hour and 30 minutes of Joshua

01:34:00.780 | talking about the intricate ways of working out access

01:34:04.340 | and rate of return and safety

01:34:06.100 | and all these weird scenarios that I've come up with.

01:34:09.700 | Just go back and put in place part A.

01:34:12.140 | Put a thousand bucks in your house,

01:34:14.540 | put 10,000 bucks in your bank account,

01:34:16.700 | and then come back and listen.

01:34:19.580 | And for those of you who have heard part B

01:34:21.780 | and thought about it,

01:34:23.020 | I just encourage you, consider your actual scenarios

01:34:26.060 | and consider actual emergencies.

01:34:27.940 | When I read the news, I always read

01:34:29.340 | with reading about the emergencies that someone else faces

01:34:32.020 | and I always think, okay, Joshua, how do you plan for this?

01:34:35.540 | Feel that responsibility to help you plan for it,

01:34:37.780 | you, my listener,

01:34:39.180 | and I feel the responsibility to plan for it myself.

01:34:41.940 | So think it through.

01:34:43.220 | I think if you apply that thinking process,

01:34:45.340 | consistently thinking through and planning for things,

01:34:50.420 | I think you'll start to come up

01:34:53.580 | with an appropriate plan for yourself.

01:34:55.540 | Please, there are two shows,

01:34:57.260 | and I don't have internet right now,

01:34:58.780 | so I can't look up the number

01:35:00.940 | because the easiest way is to look them up on my site.

01:35:04.020 | So I can't remember the name of them.

01:35:05.460 | But it is a show on insurance strategies.

01:35:07.900 | I think if you just search the website

01:35:09.180 | for insurance strategy, you can find it.

01:35:11.100 | And you can find my discussion of the types of risk

01:35:13.660 | and what's the most sensible way to deal with certain risks.

01:35:16.780 | That's important.

01:35:18.140 | And the second show,

01:35:19.580 | I just blanked on this.

01:35:23.100 | Oh, the second show I want you to think about

01:35:25.900 | is the concept of scale.

01:35:27.300 | The show that I did on the concept of scale.

01:35:29.340 | Remember, everything in financial planning

01:35:32.480 | is a matter of scale.

01:35:34.380 | That's what I'm expressing

01:35:35.380 | when I talk about part A and part B.

01:35:37.420 | If you don't have $1,000 of cash,

01:35:39.780 | don't go and try to figure out how do I buy gold coins.

01:35:43.100 | It's silly.

01:35:43.920 | If you don't have $10,000 of cash in the bank,

01:35:47.420 | don't figure out how do I go and buy gold coins.

01:35:49.820 | Start with simple, normal, practical things.

01:35:52.940 | And then adjust according to scale.

01:35:55.720 | Pay attention to your situation

01:35:59.500 | and analyze the place that you are in your current scale.

01:36:03.700 | Thank you so much for listening to today's show.

01:36:06.140 | I'll get this out to you as soon as I can.

01:36:07.540 | I gotta go find a working internet connection to do it.

01:36:10.740 | And then I gotta finish recovering

01:36:12.260 | and get back on track here from Irma.

01:36:14.900 | Appreciate all of you who have given us good well wishes.

01:36:17.280 | I released, hopefully concurrently with the show,

01:36:19.500 | I released to you an audio file with a report on that.

01:36:21.700 | We are well and everyone is well.

01:36:24.300 | And I'll be back with you as soon as I can

01:36:25.900 | and try to get back here on the normal schedule

01:36:28.420 | as soon as I'm able to.

01:36:29.580 | Deal with our emergencies.

01:36:31.980 | Thank you all for listening

01:36:32.820 | and I'll be back with you very soon.

01:36:34.660 | If you'd like to support the show,

01:36:35.500 | if this was helpful to you,

01:36:37.380 | radicalpersonalfinance.com/patron.

01:36:39.060 | Send some money my way if this was helpful,

01:36:40.580 | if I saved you some money and I gave you some clarity,

01:36:42.700 | radicalpersonalfinance.com/patron.

01:36:44.700 | Thank you.

01:36:46.520 | (upbeat music)

01:36:49.100 | - This show is part of the Radical Life Media network

01:36:57.160 | of podcasts and resources.

01:36:59.420 | Find out more at radicallifemedia.com.

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