Struggling with your electric bill? Get an energy assist from SDG&E and SAFE. You may qualify for an 18% discount. Visit sdge.com/fera to find out more. - Today on Radical Personal Finance, where should I keep my emergency fund? (upbeat music) (upbeat music) Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less.

An emergency fund is certainly a cornerstone of a good financial plan. Emergency fund allows you to withstand the storms of life, both literal and metaphorical, and is really one of the first places to start, but where should you put it? (upbeat music) I was inspired to do this show by a question in the Radical Personal Finance Facebook group this last week, where somebody in that group was asking their fellow group members, where should I keep my emergency fund?

And there was discussion of certain banks and online banks, and most of the focus of the discussion was on interest rates and where to get the highest rate of return on money. And I was struck by the fact, and to those of you engaged in the conversation, this is not intended to be personally offensive to you, but I was just struck by the fact that nobody was talking about other considerations other than rate of return on money.

And I think that with regard to emergency stashes of cash, interest rate, rate of return, is although not unimportant, it is perhaps the least important of the factors that you should consider. And today I'll share with you some of these other factors that I think bear your attention or should have your attention, as well as my thoughts on a diversity of options for where you should keep your emergency fund.

Now, I'm gonna split today's show into two shows, meaning the same file that you're listening to now, but two different shows. There's gonna be part A, which is the intro level, which is applicable for the vast majority of listeners. And then there is the weird in-depth analysis level, which is applicable for a minority of listeners.

I often have a habit of getting so deep into a subject that sometimes all of the advice makes sense in my head. It's a little convoluted for actual practical application. And I don't wanna do that because this show is too important and this topic is too important. So let's start part A right here and right now.

The majority of people in the United States of America, and I dare say throughout the world, although I have no current data on a global basis, but the majority of people in the United States of America cannot come up with $1,000 cash right now if necessary. Majority of people, if faced with a $1,000 emergency, would rely upon a credit card or a loan from a family member or friend.

This is a problem in our society because when our society is living so close to the edge, financially, as a majority of us are, it causes us to feel a significant amount of fear and it causes most of our thinking to be short-term rather than longer-term. It's hard to think long-term if you don't have enough money to cover a blown-out tire this month.

And so my advice here in part A of the show is very simple. If you do not have an emergency fund, you should do only two things. Number one, you should scrimp, scrap, and do whatever you need to do to save $1,000 in cash, and by cash here, I mean currency.

I mean dollar bills, $20 bills, and you should stash that $1,000 in a safe place that you can have access to when necessary. If your living condition is stable and you find yourself in a place where you have your own living space, then perhaps your solution here is fairly simple.

You might have a locking file cabinet or stash it in a small lockbox or maybe perhaps in a private bag that you put in some corner of your dresser. You probably don't need to go too extreme in hiding $1,000. If your living condition is less stable, you might need to be more thoughtful in how you approach this.

If you are one of the millions of people who live in fear of your things being rifled through by your roommates or by your family members, then you need to be intelligent about where you stash your cash. Stash, funny. Makes me think, where do you stash your stash? Maybe you should find out where other people stash their stash and stash your cash in that same location.

But putting a couple hundred dollars in the back of a favorite book is probably not a bad idea. Maybe put a little bit in your sock drawer, melt a carton of ice cream and put it in a plastic bag and stick it down at the bottom of our ice cream, something like that.

Find some places to stick it around your house. But keep the cash close by because when you need to lay your hand on money, you need to lay your hand on money. And $1,000 will get you out of a large number of problems. It'll get you out of a flat tire.

It'll get you out of a small car repair. It'll get you out of running out of money and not having enough money for groceries this week. It'll get you out of a lot of problems, but it needs to be accessible to you. So 1,000 bucks should be hidden and secured in the form of currency, $20 bills, somewhere nearby where you can get quick access to it.

Once you have that, you're saving up for a little bit more. Anything up to, you know, say 10 grand should just be kept in a savings account at your current bank, at your bank where you currently bank. Put it in a savings account. Ideally, that savings account should have access to your checking account where you can do an instantaneous transfer into your checking account and have as close to instantaneous access to the money as possible.

So if your emergency fund is anything in that amount, anywhere, and I'm making these numbers up, so if you think the number should be $7,000, that's fine. But anywhere from zero to $10,000, that's what you should do. Doesn't need to be complicated. Doesn't need to be anything more than that.

Just keep something like 1,000 bucks close at hand and up to 10 grand just in a savings account connected to your checking account. This is part A of the show. But now we need to do part B because if we stop there, I will not adequately serve the majority of listeners, nor would I even adequately serve the majority of people in any of our towns that we all live in because almost no one except the very young should have only $10,000 in their emergency fund.

Almost no one except the very young, perhaps a teenage low-wage earner should have only $10,000 in an emergency fund. I say that clearly hearing the perhaps sense of tone deafness that that would, the way that might come across. In a world where majority of our population can't lay their hands on $1,000 cash, to say that almost no one should have only $10,000 in an emergency fund can sound a little silly.

But here's why I say that. It's true. Almost no one except the very young, low-wage earner should have only $10,000 in an emergency fund. When I was going through my certified financial planner education years ago, they talked about the size of an emergency fund. And the CFP board would actually test on this on the CFP exam.

And they gave criteria for defining how much of an emergency fund each family should have. And the way they approach it, I think made a lot of sense. They always recommend either three or six months worth of expenses. And as a financial planner, you're supposed to recommend to your clients that they save either three or six months worth of expenses.

In order to determine whether the three months or six months is appropriate, look at the income flows for the household. Put simply, if you have a single income earner in the household, you go with six months. If you have two income earners in a household, you might go with three months.

Now this makes sense. If you are a dual income family and one of you loses your job, well, you don't lose all your income. You lose some portion of your income. If there's a dramatic imbalance in the incomes of the two members of the household, then you should adjust accordingly in terms of how much of an emergency fund.

But the only people that should have only three months of expenses are people who have dual income households according to the CFP board. So let's say that I have a client who's a single person and this client is earning $10 an hour. Well, $10 an hour times, let's just say a 40 hour work week is a total of $400 per week.

Let's assume their expenses wind up being about $400 per week. This client as a single individual should have a six month emergency fund. $400 a week times 26 weeks would equal $10,400. That's how I get to that number, $10,400. But a normal person earning a median or above median wage, not a low wage earner, should have far in excess of that.

Now, of course, I'm speaking in terms of both income and expenses. You should customize this to your expenses if you want to. If you know your actual expenses, just work with that number. But of course, most people spend most of their money so we can safely work with income.

So let's talk about median wage earner of say $4,000 per month, who is spending about $4,000 a month. That means that an average emergency fund for a median wage earner, median meaning 50% of the population, higher 50% lower, is about $24,000. And you as a listener of the Radical Personal Finance podcast are statistically much likely to be far above a median wage earner than the general population.

So a minimum emergency fund for most of us should be in excess of $25,000. And now you start to have to ask harder questions. Where do I keep $25,000? Where do I keep $50,000? Where do I keep $100,000? Where do I keep this large amounts of money? And so now let's start part B of the show.

If you have or should have an emergency fund of higher than $10,000, let me give you some ideas on some considerations, some things you should think about. The place to start with emergency fund planning is with imagining a scenario, an emergency that you would be likely to face. These scenarios will vary depending on your life circumstances, and they should.

Now, obviously we may all have some common scenarios. Perhaps the most common would be the loss of a job. This is certainly the scenario that most people would start with. And I think it's a good place to start. I've lost jobs. I think we've all lost jobs. If you haven't, and if you're a worker in a job scenario, you're just a matter of time.

If you're not a worker in a job scenario, it's just a matter of time until you lose clients and you lose business. That's life, that's business. The loss of a job can be a devastating thing for many families. And so many times people are considering that. Well, it's not that hard to plan for the loss of a job in the financial sense.

Money in a bank account spends whether you have a job or not. So if you keep the money in a savings account that you can get into the bank account, then it spends. That's a different emergency than Aunt Sally dying unexpectedly, and you're needing to buy five last minute plane tickets across the country to go to her funeral.

Many of us have or will experience that. Now, what's different about it? Well, I would focus on the fact that there's a difference in the speed of cash needed and the amount of money needed. When you lose a job, you don't all of a sudden incur $10,000 worth of expenses in one day.

What happens is you have your normal mortgage payment, your normal food costs, et cetera, that can continue on. When you have a sharp emergency like flying your family across the country to go to Aunt Sally's funeral, you have a significant unexpected expense all of a sudden. And so you need to come up with the $10,000 all of a sudden.

So one of the factors of emergency fund planning needs to be access, the speed of access. How quickly can I get my hands on the money? Especially how quickly can I get my hands on large amounts of money? As you think about your emergency fund, you should consider some different scenarios that you are concerned about, that you're planning for, and think about how important it is to be able to get your hands on large amounts of money.

Here would be a good follow-up question. How quickly do you need to get access to the money and in what form do you need to get access to the money? Should you be able to have access to the money in a digital form or in a physical form? Just a moment ago, I talked about buying plane tickets to go and see Aunt Sally.

In that emergency, you need digital money. Can't walk into the airplane counter in the United States of America and plunk down $10,000 in $20 bills on the counter. You will be immediately flagged as a suspicious person, most likely a drug dealer, or also very likely a terrorist, perhaps a stupid terrorist.

They will not laud you for your effective financial planning and for eschewing the use of debt and credit cards. The airline representatives, if they take the money, will file a suspicious activity report with the IRS because there's a cash transaction in excess of a few thousand dollars. Depends usually, any time you get near $10,000 as a hard line, you break that.

Depends on other transactions. Post Office has a, I think it's a $3,000 or $4,000 limit on cash transactions. Other places, it's $10,000. Or if you just simply do something that's suspicious, like using cash, you are now a suspicious person. And so you'll be doubly violated at the security lines, probably get called into the back room for a little bit extra questioning, et cetera.

Don't use cash to buy a plane ticket. Not gonna work, bad idea. But what about our caller to the most recent Friday Q&A who was planning to move abroad to a country in Asia where he said he didn't wanna purchase property in that country or own property in that country because he might be kicked out of the country.

What about that guy? What about his potential emergency flight out of the country? If I were in that situation, you can bet your dollar, you can bet a few of 'em pretty safely, that I would make sure that I had large amounts of currency readily at hand in order to buy my way out of that country if I became a disgraced person, a persona non grata.

This happens every day all around the world. Within the last year, I have had significant, close interaction with three friends of mine from three different regions of the world, all of whom have faced similar interactions. One, a Venezuelan refugee trying to get out of Venezuela before the nightmare that is going on there.

Another, a Filipino refugee. It wasn't a broader, the Venezuelan was a broader economic crisis which has now resulted in currently the highest inflation in the world. Really dramatic to watch it. I watch it with a mixture of absolute horror at the human suffering and the human cost of the lives of the men and women and children caught in the grip of the crisis there in Venezuela.

And with another, I don't know if it's horror or satisfaction at watching the absolutely predictable result of socialism in that particular context. I was, it's particularly poignant to me because in college I studied under a group of professors who were extreme leftists and who held up in their instruction to me as a college student, Hugo Chavez and his work in Venezuela, both Hugo Chavez and also the Castro regime in Cuba, as model examples of what can be done to care for people when we actually care about people.

And I haven't contacted them recently to find out what they said, but I continue to do my homework on that subject. Point is, when you got to get out of Venezuela, you may or may not be allowed to go. And so you may or may not need to get that midnight flight out, the midnight boat out.

Similar circumstance with a friend of mine in the Philippines. Ran a successful business on an island in the Philippines. In that island in the southern part of the Philippines, in that town, there was an attack by the local expression of Muslim terrorists where they massacred about 40 to 50 people there in that town.

Fundamentally destroyed the economy and he and his family basically fled in the middle of the night, just like you read in a fiction book. And then final example was a friend of mine from Nigeria who faced the confiscation of his house by the local governing authorities because of his noncompliance with the local code.

Basically like a homeowners, our version of a homeowners, their version of a homeowners association. But there had been a strong storm that had destroyed part of the house. He didn't have the money to fix it. But because he fixed it, then after a period of time, this didn't happen immediately, but because he didn't fix it and he couldn't fix it, he didn't have the money, after a period of time, then his property was lined up to be confiscated by the local government because it was not safe to live in.

Just crazy. Same thing that we face here when a homeowners association says to you that you can't park your work truck here, you can't let your grass grow, and then they start to foreclose on you and they can kick you out. Exactly the same thing, except different standards. It wasn't the grass was too long, it was that the back part of the house had been damaged in a windstorm and he hadn't been able to fix it yet.

And it wasn't just a homeowners association, it was the official city government. So my point in sharing these examples is to say these are personal examples. All of those events have occurred, not all of those events have occurred in the last year, but all of those events have occurred within the last decade.

I'm intentionally being a little bit vague on details to protect my friends. It's not the stuff of paranoia, it's the stuff of reality that a lot of people all around the world face. In all three of those stories, all three of those examples, those people had emergencies and they needed funds to get them out of the emergencies.

And all three of them, the answer was the same, plane ticket, boat ticket, et cetera, out of the problem. So when you're planning your emergency, you need to think carefully about what's likely to affect you. I don't personally spend a whole lot of time worrying about needing to flee South Florida because the local government is going to take my house.

And in most of these situations, there is time. There's time that you can get the cash together if that's what you need to do. There's time when the storm happens and you know you're starting to have confrontation with the local government, et cetera. You get the point, there's time.

But when you come up with a scenario for which you might need quick access to money, you need to think about the speed of access. How quickly can you get access to large amounts of money? And in what form can you get access? Practically speaking, hurricane planning. We're just coming off the back end of Hurricane Irma here in Florida.

During hurricanes, a few things usually happen. Number one, you usually need to purchase some level of supplies and preparation for a storm. And most of the time, everything is fine before the storm. You can do that all with digital money. But after the storm is where things change. Things have gotten better where more stores are prepared to do business electronically.

But not all stores are, after a storm I mean. Not everybody has power. In an absence of power, or in the absence of an internet connection, many stores cannot run their digital transactions. So last week, we were across the state with my family, coming on personal reasons, came back across the state, and as I was passing through central Florida, stopped to get gas, pulled into the gas station, cash only.

I asked why. Well, their internet connection was down. 'Cause the internet connection was down, none of the credit card pumps worked, none of the credit card authorizations inside worked, and they were only accepting cash. That happens after every single hurricane, again and again and again. Happens after a blackout, et cetera, again and again and again.

So if a hurricane is predicted for your area, and you're looking around and saying, "Okay, I should probably have some cash on hand." Then what do you do? You go to the ATM, put your card in there, and you say, "I'm gonna get some cash out." Well, that's good.

But you quickly hit your ATM and bank limits, which for most of us are about 500 bucks. You may be able to get a couple transactions, but I don't know if you've ever tried to get $5,000 out of an ATM in one day, but unless you've made special provisions to do that, it usually doesn't work.

Your bank will shut you down. If you are leading a family of multiple people, multiple children, $500 doesn't go very far after an emergency situation. Doesn't buy a whole lot of nights in a hotel room when they can't run your credit card. It's probably enough to get you out of the acute area.

But what if you're on a Caribbean island, and you're a tourist on St. Martin, when Hurricane Irma roars through, and you can't get off the island before the storm, and so you wind up going through the storm, and now 70% of your infrastructure is destroyed. Now how do you get off the island?

Now how do you get food? Are you prepared for that as a refugee in Hurricane Irma? Just look in the news, and you see this happening every single day. So you should think seriously about access, speed of access, and how quickly you can get access to appropriate amounts or even large amounts of cash.

Number two, though, of ask access, you need to think about how to restrict access so that your money is not spent. I believe there's a useful and valid principle that can be applied and should be applied to money, at least for me. I've learned that it's probably often a good idea to keep a little bit of distance and a little bit of friction between me and my money.

I don't want too much distance and too much friction, 'cause obviously I need to have access, but a little bit of distance and a little bit of friction is probably a good idea. Now, this was more important for me when I was younger, and I was more prone to emotional decisions rather than more thoughtful decisions, but it's changed as I've gotten older, but still probably a good idea to have a little distance between you and your money.

Practically speaking, a little distance would involve keeping it at a separate account. Millions of people all over the world are affected by identity theft each and every day. This can come down to your checking account being raided. I've experienced it, you probably have. According to the data breach this last week, which I will try to do a show on, angers me deeply, where Equifax has released the data of, I think it's almost 150 million people, saying like 143 million customers.

Absolutely horrifying, but absolutely predictable thing in the world that we live in. If you're part of the 143 million Equifax clients and there's no way to opt out, the system works where you're just opted in whether you want to or not, you better take care of that. Guess what was a part of that breach?

Your personal data. Say obviously, but your personal data with an extreme amount of granularity. It's my understanding, and I'm speaking without having fully done the research due to restricted access and hurricane preparation for myself here in South Florida this last week, so we'll do this one, I can confirm these.

If this turns out to be wrong, let me know. But it's my understanding from the news reports that, let's go with this one. If you were an Equifax customer and you bought Equifax's credit monitoring service, your banking information was released to the hackers. The information that you used to buy credit monitoring protection from Equifax is now in the hands of criminals and could possibly be used against you.

Well, let's say that you ran that from your checking account using your debit card, which you ran as a credit card with Equifax online. Now a thief has access to your credit card and they can start initiating fraudulent transactions against your account. You can drain an account real quick.

One time I had my luggage stolen when I was traveling. I was traveling in Central America and our rental car was broken into, my backpack was in the trunk of the car. In that backpack, we were at the beach, in that backpack, my passport was stolen, as was some of my credit cards and information.

You would not believe how quickly a thief can run hundreds of dollars of gas transactions. That's what all the transactions were, it was all at gas stations. Hundreds and hundreds and hundreds of dollars across multiple cards. At local gasoline stations. You wouldn't believe how quickly that can be done.

That's done on your primary checking account, that wipes you out. So if you kept all of your emergency fund in your checking account, and your checking account was drained while you're in Costa Rica, guess I just gave up the country there, I was going to say Central America. While you're in Central America and your checking account is drained and your credit cards are drained, and you're trying to figure out how do I, with no passport and no money, if it was all in the bag, how do I get in contact with my bank and figure out how to get money so that I can get these things stopped and how do I figure out how I can pay for a hotel and how do I figure out how to work all these situations out.

If all the money was in your checking account, you had a problem with access. You need to have some restriction on access. And I'm kind of conflating both access, restricting access for you personally, and also safety, which is the next thing. So let's talk about safety. You need to think about safety.

Safety in multiple formats. Number one would be safety from thieves. How do you keep your money safe from thieves? The theft can be something like I just described. If you have a big wad of cash and you put it all on a backpack and leave it in a rental car on the beaches of Central America, you're inviting a problem with your emergency funds.

But what if you are in a contentious situation with creditors? I've done some crisis financial counseling with people from time to time who are facing severe problems, woefully behind on their debt. And I want to be clear, this is the word theft. I don't want to paint with a broad stroke.

The thief in the situation of somebody who has unpaid debts is the person who hasn't paid their debts. They've stolen from the creditor. But what often happens is as that person is seeking to make restitution and pay back the creditor, sometimes the creditor can come and invade the person's accounts without permission.

And so this arrangement is one in which there is no legal or moral theft being committed. You can't go before a judge and say, judge, I owe this creditor a lot of money and they came into my account and they took back what was theirs. Judge says, well, you owe them the money.

You were the thief, you're the debtor. You're the person who stole from your creditor because you became behind on your bills and you didn't make the payments as agreed. But in the context, I should have chosen a different example, but in this context, I'm just simply referring to the fact that you've got to figure out how to keep your money safe.

If you're in that situation, you're fighting your way out of debt, you're fighting your way out with all of these creditors, you can't have a bunch of money stuck in a place where the creditors can get access to it. The problem this faces for the person who's going through, and if you're doing counseling with somebody in this situation, somebody who's going back, they're paying off their debts, they're making restitution, is oftentimes the daily existence is so hand to mouth, the money is so tight that if any dollar is unaccounted for, wrecks the whole thing.

What I have people do in that situations is to establish entirely different accounts. Ideally, to fix it, usually, I'd encourage the person to go to an all cash lifestyle, where every bill is paid in cash, and all budgeting is done in cash, because usually the reason why somebody is behind, especially if they have lots of credit cards, lots of creditors like that, usually it's due to chronic overspending and lack of discipline and lack of a plan with their finances.

This is different if you're maybe doing counseling for somebody who has experienced a large business loss, and they had a business to turn around, and they got a huge debt, but it's one or two huge debts, that's a very different circumstance. But your neighbor who is struggling, who's facing severe crisis because they overspent on their credit cards, and now they're trying to figure out their way out, the answer is they need to go to cash.

And any bills that need to be paid, just pay them with a money order. It's worth the 60 cents you pay to buy a postal money order in order to send the money off and not have to deal with the checking account. Keep the checking account secure. Maybe only use it to pay the mortgage company.

But you have to think about how do you protect the emergency funds? So that's one aspect of safety. The obvious examples would be thieves, things like that. I would not keep $100,000 in my spare bedroom, especially given my own personal risk profiles. Being a public figure, talking about money, I have to take a very different approach to financial safety and security than you do.

You have a different risk profile. But what about the stability of the money? Stability is another aspect of safety. You have to think about the safety of your funds with regard to the stability of the bank. FDIC insurance in the United States is very important. You want to protect yourself and make sure that you are effectively using the FDIC limits.

If you keep more than $250,000 as part of your emergency fund portfolio, diversify that account into multiple account titling so that you can maintain FDIC insurance. And you can take this discussion of stability far beyond. Obviously, you should think carefully about the stability of the type of savings that you have.

And here, you always have moving targets. You could just simply keep US dollars. US dollar, probably the safest currency in the world, very, very stable, the world's reserve currency at present. That's one thing. But what do you do if you are banking in a different currency? Or if you're concerned about the stability and safety of your US dollars?

Your US dollars can quickly be eroded by inflation risk. If the Federal Reserve is unable to curb inflation and there starts to be a time of significant overall mass inflation or hyperinflation, very rare in Western economies, but it does happen. It's happening in Venezuela right now. All of a sudden, the money that you thought was safe in the bank, protected from thieves, is now experiencing a different risk.

So think about the different risks that it can impact your money. You should also think about protecting yourself against things like sovereign risk. What do you do if you are living and working in the United States and earning money, saving within the US financial system, et cetera? And all of a sudden, the US government declares that you are unwelcome because you don't have a stamp on a piece of paper that says that you have the permission to be in this physical geographic location and to do work.

Well, if you face such a circumstance, that can dramatically impact your banking life. That can dramatically impact just about every aspect of your life. You might need to put in place a better strategy with your money to make sure that you have a fallback plan, if that were to ever happen.

Bring in some diversification. Well, same thing happens in all kinds of other areas. Back to our caller, US citizen. So he doesn't have to worry about the US government putting a little stamp on a piece of paper that says he's allowed to be in a certain place and to do a certain kind of work.

But now he's moving abroad and he has to think, well, what do I do with my money and how do I protect myself from my risk in this country? Briefly in that call, that was where I encouraged him. And I said, if I were in Asia, I'd make sure to set up a financial life and put in place financial planning strategies in Hong Kong or Singapore, whatever's most convenient, where he can get to least inexpensively.

Appropriate measures of diversification apply across all of this, but you have to consider, what are the risks that I face? What are the most likely risks? None of these things are likely if you have $3,000. Nobody cares about $3,000 from, you know, the government of so-and-so doesn't care about that.

But the local drug dealer that knows you keep $3,000 in your right front pocket does. So that's safety. Number one was access. Number two is safety. Number three is rate of return. Rate of return matters. But remember what we're talking about here, an emergency fund. And in an emergency, it's the return of your money or the access to your money that matters more than the rate of return on your money.

We're not talking about an investment. We're talking about an emergency fund. So I will, me personally, I will give up potential rate of return if I can gain greater access and greater safety. Now, if I can get more, if I get rate of return and diversification and, sorry, rate of return and access and safety, that might be good.

But I, you know, I kind of think that these are one of those old choose two. You can have this good, cheap, or fast. You pick any two you want. I kind of feel like, in this circumstance, I feel like that's what this is. I don't know any way to get all three of these in any one particular financial product or any one particular financial decision or financial choice.

I think it's a matter of what's the proper emphasis. And in the places where you're probably going to get more return, you're giving up something else. You might be giving up safety or you might be giving up access. Let's go with some examples to demonstrate the point. Number one would be a savings account.

Well, right now, savings accounts pay you about 0.0 in terms of rate of return, or at least your local bank or your local credit union is paying you that. But sometimes, by setting up a banking relationship with a different bank, perhaps an online bank, you could get a higher rate of return.

The problem is this. If you don't regularly bank with that online bank that's offering the higher rate of return, you might get a little bit more in interest, but you give up access. If you have two separate banking institutions, you can't do simultaneous same-day transfers of money. And I have, in my lifetime, often found that to be a very valuable feature.

There've been times I see something, it's a good deal. I bought cars this way. I bought all kinds of stuff this way. Hey, this is a good deal. I need money. I don't have this much money in my checking account. I want to write a check. I may not have the cash.

Boom, transfer the money from savings to checking, go to the ATM, get a bunch of cash out. If I keep my emergent, that's an opportunity really, but if I'm keeping my emergency fund in an account that's different from my primary bank, I might have higher return, but I'm giving up access.

That's important. Another example, buying a CD. I think having a laddered CD portfolio is an excellent strategy for some of your emergency fund. When you buy CDs, certificates of deposit, you can often get a significant rate of return or a more significant rate of return than just simply using the money, having the money in a savings account or a money market account.

A CD, because it's a contractual agreement where you're going to leave the money in for a certain amount of time, is often willing to pay you more interest. And what you can do is you can set up a laddered portfolio. The idea of a laddered portfolio is you purchase investments, let's just go with you purchase CDs that have different rates of maturity so that they come mature at different times.

The longer amount of time that you purchase on a CD contract the higher the rate of return that you'll get. So if you buy a 12-month CD, you'll get a higher rate of return than a three-month CD. And so the idea of a laddered portfolio is let's say that you're going to keep $120,000 in an emergency fund.

No, let's use $10,000 in emergency fund for simpler math. We're gonna use $10,000 in emergency fund. And you think that in general, the emergency you're primarily concerned with is something like a job layoff, et cetera. But you know that if you face something like a job layoff, you wouldn't need our money all of a sudden, you would need the money over time.

And so what you may do is you take your $10,000 and you purchase a three-month CD, a six-month CD, a nine-month CD, and a 12-month CD. And you go ahead and purchase four individual CDs and you line them up so that each quarter one of those CDs is going to become mature.

Well, you're gonna get a higher rate of interest on the 12-month CD than you are on any of the others. Three months from now, when your $2,500 CD matures, you go ahead and at that point in time, you purchase a 12-month CD. And then from here on out, every single quarter, you purchase a new 12-month CD.

You've now built a laddered portfolio where every quarter you have a CD that's becoming mature, thus releasing the cash and the interest, and is earning you a higher rate of interest. And you've set it up so that every quarter you're gonna have access to that $2,500. That's what a laddered portfolio is.

I think that's an excellent strategy, an excellent strategy for some of your emergency funds. But what you're getting is restricted access. Yes, you can invade the principal when you need to. With most CD contracts, you can get the principal, you just give up the interest. So you do still have some access, but you don't get the instantaneous access that you get in the savings account.

You certainly don't get the instantaneous access that you get of having currency. You might keep $1,000 of currency, cash, physical greenback, green paper, in your pocket. And now you have the ability to have money that's ready at hand. You have tremendous access. It's right there. You can buy anything that you want with it, other than plane tickets.

But now you have to contend with safety of that money. Well, in a way it's safe because it's in your hands. So you don't have to worry about somebody else just simply taking it from your account. But now you have to figure out the safety from thieves that might rob you at gunpoint or steal your backpack out of your car.

And you've given up the rate of return that you might have by having the money invested. It's not that you shouldn't keep cash in your pocket. You should. But it's a balancing act among these three factors. So I believe that you should consider the rate of return as one part of your planning.

But think carefully and don't run the risk of not having access to your money when you need it because you were laser focused on rate of return as being the discriminating factor. I wanna close out today's show with some rapid fire discussion of just a number of different ideas on emergency funds and some very practical tips that I hope will help you and will serve you.

I don't claim that this list is exhaustive, but these are some practical tips, some things that will help you. The number one access to money that most people will employ when they face an emergency is in the form of credit. And I think that's perfectly fine. So here are some things that you should consider with regard to credit.

Most people, that means a credit card. And credit cards are tremendously useful because unless there's a physical emergency, unless a hurricane has just flown over St. Martin's while you're on the island, and you were there on vacation in St. Martin and Hurricane Irma came through, you couldn't get out, now your credit cards don't work because the whole infrastructure is destroyed.

That happens. You should be prepared. Hint, hint, when you travel, you should make sure. One rule I teach people, and I've encouraged lots of people, is whenever you travel, always make sure you have enough cash to get home. So when you are traveling close to home, you can often do that just simply with currency.

If you're traveling far from home, then you may be able to do that with currency, or you might need to do that with something like precious metals. In a moment, I'll talk about tangibles. But if let's say that you're on St. Martin and you need to get home, well, money speaks, cash speaks.

Problem is, how much cash do you need to get home? What if the airlines aren't going and you gotta book a trip on a boat to another Caribbean island? Because many of the larger countries of the world have diminished the large denomination of bills that are printed, the US government doesn't print anything bigger than a $100 bill.

Used to be you could use a 500 euro bill. It was a huge amount of money that was very compact, and you could carry enough cash in that form. But many of the governments have been rolling back printing larger denomination currencies. And so if I were going to St.

Martin, I'd wanna make sure that I had a couple of gold coins that I could take to a local coin shop and swap out. Wanna make sure that I had some currency in large denominations stashed away that could get me home. So always carry enough cash to get you home.

I got off track. Oh, credit. So the number of circumstances in which that could happen, sorry, those examples of when credit doesn't work are few and far between. You basically need a loss of infrastructure in order for digital money to not work or digital credit to not work. Credit cards are effective.

So think about your credit card strategy. Number one, make sure that you have access to a diversity of credit card issuers. If Visa's not taken, maybe MasterCard will be. If American Express isn't taken, maybe Discover will be. I face this a lot with traveling. Oftentimes there'll be one brand that's approved, but another one that's not.

And sometimes it'll be in the strangest places. You'll find an establishment that won't, they'll sell you stuff, but they won't sell you stuff if you're trying to use a MasterCard. So you can diversify your credit card holdings. Have a Visa, have a MasterCard, have an American Express, have a Discover.

You can diversify those credit cards and then have access to them when you need them. Of course, you need to make sure that you have significant balances available to you on those credit cards. The caveat here is if you don't have a spending problem. Significant balances can be a major problem and a major temptation if you have a spending problem.

It could be a major help if they're there for an emergency situation. Credit cards, however, are a great form of emergency cash for an emergency that's short-term in order to get you out of a problem. But you better only use them if you actually have the money to pay 'em off.

The best use of credit cards is travel. When you travel, you should carry with you a diversity of credit cards. And those credit cards should be placed in a diverse arrangement in your luggage and belongings. Credit cards are wonderful from a safety perspective because of the enhanced consumer protection in the case of fraud.

So you might have, of course, your normal card that is has, maybe you're doing foreign travel. You might have your normal card that has the most advantageous currency, no currency conversion charges and a good conversion rate. And that's the card that you keep in your wallet that you use while you're abroad.

And that's the card that would be your primary situation, your primary card to refer to in a situation where you need to buy something. You need to buy a plane ticket home because you just found out that your daughter is sick and you gotta get home. Well, you whip out that card and that's the one that you use.

But of course, you should have a second one. I'm gonna speak generally here, stuck in your shoe. And you put it under your shoe so that if your credit, if your wallet is lifted, it's pickpocketed, then you still have enough of a way to book a, buy a collect call or get yourself to the, get yourself home, buy a train ticket, whatever you need to do.

Had my wallet stolen, been there, done that, learned the hard way. So when you travel, you should have, and you should have a Visa and a MasterCard and an American Express all able to come to hand easily in case you're in a place where you need that money. But you can, you should stash your cards in a diversity of ways.

So you're enhancing your safety because you're protecting yourself so that you have emergency funds so you can get home if necessary. You have emergency funds that are stable, they're safe from thieves. If the card is stolen, you won't be liable. You're not risking your personal checking account information in a foreign location where that information could be problematic if it were disclosed.

And you have backup, so if your luggage is stolen, you have the credit card in your pocket. If your wallet is stolen, you have the credit card that you stashed in your luggage, et cetera. The point of all this is that you can apply, as you're thinking about your personal emergency planning, you can apply a thoughtful approach to the credit cards that you have to make sure that they are diverse, that they're safe, and that they're useful to you in a time of emergency.

Other applications of credit would be something like a home equity line of credit. Many people have significant home equity, and there could be circumstances in which you need to have access to that money for an emergency. Best to line that up in advance. Best not to go and try to be applying for a home equity line of credit and getting the appraisal done with the bank at the time of the acute crisis.

Maybe you had emergency surgery, or you've had an emergency C-section, your wife has had an emergency C-section, and now all of a sudden you need to have $30,000 to pay the hospital bill. That's not the time to go and try to figure out how to make the home equity line of credit appear.

Do it in advance. Get it laid aside. Another example of credit would be something like a 401(k) loan. A 401(k) loan can be a very reasonable and serviceable way for you to have access to money. As part of your emergency plan. There are risks to a 401(k) loan. If you're losing your job and you have a 401(k) loan, that's a problem, 'cause now you gotta figure out how to get that thing paid back, and it's gotta be paid back pretty quickly.

But there are benefits to a 401(k) loan. A 401(k) loan can often be gotten very quickly without any questions asked as far as the purpose of the money. And often when you need money, you kinda need money without needing to tell anybody, or defend it to anybody. So perhaps you might prepare for that by reading about your accounts and reading what has to happen in order for a 401(k) loan to happen at your local, in your personal plan.

So that'd just be examples of credit. Another example of credit would just be the personal credit that you have with family and friends. Are you the kind of person who is reliable? Are you the kind of person who does what you say and who will make sure that if you need money, you borrow it, you borrow it and you pay it back?

What often happens is the people who are the most desperate for money find it the hardest to get because nobody has any confidence in them that they would ever pay it back. I'm sure you know somebody who is just always looking for money, always looking for a source of money, and they'll often find that no matter what door they knock on, it's closed.

But if you're a person of your word, you can find that many doors will open to you. And it's important not to be so fixated on the mainstream approach to money that you miss out on the traditional approach to money. What happens is the stupid Equifaxes of the world and the Experian and the TransUnion have us all trained like little monkeys that jump for a credit score.

Well, a credit score is one way of measuring risk. And it's certainly a very valid way of measuring risk, but it measures risk across financial transactions and accounts that are mainstream. It measures risk and it's a risk mitigating factor for somebody who has an impersonal relationship with you. It's a wonderful invention.

The modern credit system is a wonderful invention because it allows there to be a level of trust between people who have no historic experience together of trust, it's wonderful. Little annoyed, I just said stupid Equifax because there's some things I hate about it and I hate it, the stupid data breach, but little offended by that.

And I'm a little bit annoyed because it's inevitable, but anyway, point is it's a wonderful system, but it's not the only system. If you needed money today, if you needed to be bailed out of jail, would you have to go to the bail bondsman? Or could you make a phone call to somebody that you think would have the money and they would come down and bail you out, knowing that you're good for it?

If you're doing a deal, you're doing a business deal, and you are running a little bit short, are you the kind of person who can say to somebody, "Listen, I might need some money, can you write me a check "and I'm good for it?" This happened to me one time, I was doing a deal, I had enough money, I thought I was good, but then I started to get nervous.

And I went to somebody and I said, "Listen, I don't think I'll need it, "but if I do, I'd like to have access to it." They wrote me a five-figure check, I had it available if I needed to cash it, wound up, my planning was good, I didn't need their money, took it back and shredded the thing and was good to go.

But that's how all kinds of stuff happens every day. This happens all the time. Happens in the context of buying and selling houses. Most people buy in houses and they wind up and all of a sudden they need money. So don't ignore your personal creditworthiness. You don't have to go on some dramatic way to say, "Let me work together my financial statements." Although there's a place for that, if you're in business and you're expanding your business, just putting together some financial statements so that your creditors can be confident in doing business with you has a place.

But for most of us, it's just called being a person of your word, saying what you're going to do and doing what you say. The credit is certainly the number one aspect, thing that most people will tap in an emergency. So don't ignore it. What about cash? Well, of course, here you got cash in your wallet.

I think that's really wise to always make sure that you have cash in your wallet. My generation seems to have a disease where they just don't want to deal with cash and it's to our detriment. I see nothing good that comes from it. People talk all the time about safety.

Well, I just feel unsafe walking around with money in my wallet. Well, I've lost wallets, I've been robbed, but I've never been robbed because I was walking around with money in my wallet and somebody came and stuck a gun in my ribs. So the idea of you're walking around with money in your wallet is really not all that dangerous.

It's absurd. But having cash in your wallet is important. Having cash stashed in a place that you can get to quickly is important. There might be an amount of cash that you want to have at home and consider diversifying where you have that. Consider hiding it carefully, securing it carefully.

All of this needs to be amount appropriate. Don't buy a vault that costs you $1,000 just to stash $1,000. But if you're going to have $100,000 at home, better make sure it's protected. I probably, and sometime I probably will do a class on this. I have a bunch of ideas on home security and kind of not all cheap, but inexpensive, but effective tools of home security.

So I've done a lot of research on the subject. And just a little tip for you. If you ever need a safe, you ever need a home safe, the safest kind of safe for money or for valuable items. This doesn't work for guns, things like that, except handguns, you need a gun, you know, a long gun safe.

If you're going to have, try to do that, which many people, those are the easiest ones to find everyone. You can find those everywhere. But if you just want a safe to protect your valuables, safe to protect cash, the safest approach is a floor safe. And a floor safe can be more effectively hidden than almost any other safe.

So go with, if you need a place, if you're the kind of person who you're going to keep $100,000 of cash in your house, go with a floor safe and then make sure that you've stashed it in a place that's not in your master bedroom. It needs to be protected and it needs to be hidden.

A hidden floor safe is very secure from the invasion of a thief. Most thieves, if it's effectively hidden, hidden under carpet, under furniture, et cetera, most thieves are probably not going to find it unless you've disclosed its location and the thief is a personal acquaintance. So that's effective protection against that, which is a big one.

It's effective protection against many of the physical dangers that exist. A tornado will blow your house off of it, but the safe will still be there in the floor. A fire will have less heat down low on the floor and your items will be more protected from heat than in an above ground safe.

And your major risk that you face with a floor safe is flooding. So of course it's below, if your house is flooded, your items will be flooded. So waterproof your items that you have in the floor safe. But it's very reasonable for you to do that. You could do it yourself.

Run a jackhammer and knock a hole in the floor and fill it up, put a safe in and fill it up with cement. YouTube is your friend. Of course, you can stash your cash in a local safety deposit box. Wonderful scenario. Gives you a great amount of protection from many risks.

Not perfect protection from all things, but a great amount of protection from many risks. And then of course you can stash your cash abroad or some other place in the next town over. If you stash some cash in a safe deposit box in the next town over, you have the benefit of quick access when you need it, but a little bit of distance where it's hard to get to.

You got to really think about it on the way there. If you are concerned about having money outside at your sovereign risk, my friend in, or my caller in, my friend caller in on the Friday show, if I were in a discontented country in Asia, I would set up cash in a safe deposit box in Hong Kong.

For those of you who are US citizens, the United States government requires you to report any financial relationships that you have and any money that you have anywhere in the world. So if you are opening a Hong Kong bank account and you're a US citizen, you need to report that account to the US government.

However, currency that is held in a foreign country, as long as it's not held with a banking institution, a strong box with currency in it is not reportable to the best of my understanding at present. So if you read the law, obviously it's one thing to be concerned about the US government.

It's another thing to be concerned about the local terrorists who stick an AK-47 in your ribs and say, "We're going to take all the money in your house." If I'm living in the Southern Philippines, I'm not keeping a floor safe in my house. I'm keeping a box, a secure box in Hong Kong.

Or I did the story where I talked about, a few weeks ago I talked about Mexico City and some of the Mexican drug cartels that pay off people or just simply extort the people in the local bank, the employees of the bank to disclose how much money people have in their accounts.

In that situation, if I live in Mexico City, I'm going to take different actions. So you got to think about your situation and be practical, but think carefully about your situation and consider carefully where you stash your cash. There are lots of options. Choose and develop a plan that gives you the safety, sorry, the access, the safety and the rate of return that's appropriate for you.

Let's talk about banking. If you're in the United States, focus on making sure that your bank accounts are protected by the FDIC. If you are abroad, make sure that your bank accounts are protected by whatever the local version of deposit insurance is. Very, very important. Very, very valuable. United States FDIC protection is up to $250,000 per account, but it's based upon account titling.

So if you need to stash more cash and you are in excess of that number, just diversify the way that your accounts are titled. You may have an account for, I may have an account for me, I may have an account that has exclusively my wife's name on it, and we may have a joint account.

Well, under the way that the US law is written, you could put $250,000 in each of those accounts, and that amount of money is protected by FDIC insurance. Banks go belly up. You need to protect yourself. The credit union, what's it called, the credit deposit guarantee. Credit unions, there's a credit union version of the FDIC, which is just as good as the FDIC, and credit unions are better in that context than in many contexts.

They're very good. Think about FDIC. Think about the diversity of your banking relationships. There is value to banking with a large national or international bank. Tremendous amount of value in it. If you have an account with a Bank of America, anywhere in the United States, there's a local branch.

That can be very helpful. If you have an account with HSBC, practically anywhere in the world, you can find HSBC offices, especially in Asia, as an example, and pick the regional version. So there may be benefit for you of banking with a regional or international or national bank, especially one that has brick and mortar locations.

On the flip side, there are advantages to banking with a bank that does not have brick and mortar locations, that has a purely digital footprint. That can get you higher rates of return, lower costs. There are benefits there. There are benefits in banking with banking institutions that are brick and mortar, but that are exclusively local.

If you're looking for private money, don't go to Bank of America. Lots of reasons you shouldn't go to Bank of America, but if you're looking for private money, there's not reason to go there. But you might be able to find a little out-of-the-way bank with a few branches in some little out-of-the-way corner of the world that is perfectly safe, but would allow you to stash your cash in their bank.

Buys you a much more private banking relationship than other opportunities. Now, you give up some of that access. Might be hard for you to bank with that little out-of-the-way bank in a little rural part of the world, but it does buy you more safety, buys you more privacy. And in some kind of emergencies, that privacy and that safety is significant.

Or perhaps the same thing applies to you with cross-border banking. You live in Mexico, but you bank in the United States, or you live in the United States, or you bank in Canada, or you live in Canada and you bank in somewhere. You get the point. There are benefits to having things set up across the border.

Again, just think about that story that I heard from the people down there in Mexico. I would be very careful banking with a Mexican bank in that circumstance. Obviously, there's gonna be a certain level of requirement of you gotta pay your bills, and there's gotta be drawn on a local bank.

But in terms of keeping large amounts of funds there, sorry, but that's a risk that would be too high for me. So obviously, credit, cash, and banking relationships are going to be wonderful solutions for you and good places for you to keep your emergency fund. What else? Well, securities.

Certain types of securities can be tremendous places for you to keep your emergency funds. Your securities could be treasuries, T-bills, or bonds or notes, depending on your duration. But just having a T-bill account directly with the federal government, have you ever thought about the problem of, if you had $10 million and you needed to keep it in cash, where would you keep it?

The answer is obvious, it's T-bills. That's what you do. It's safe, it's guaranteed, it's secure. You get reasonable interest, market rate of interest, and you get reasonable access. So that might be appropriate for you. And there are other types of securities as well that may be helpful for you.

You might have some bonds or some stable bond funds that are part of your emergency funds. You don't need to have 400, I mean, depending on the scale. Most normal people don't need to have $200,000 available to them for an emergency. You don't need $200,000 in your home safe.

For most people, that would be silly in the scale that most of us are living at. Too much opportunity cost on the money and what kind of $200,000 emergency would be faced where you'd have to have the cash? I'm not involved in that world, and I doubt you are either.

But on the flip side, maybe you're a landlord and you have a significant number of properties and you're choosing to self-insure and carry high deductibles and carry significant personal risk on some of your insurance contracts. Well, it wouldn't be unreasonable in that situation for you as a landlord to need to have access to $200,000.

Hurricane Irma wipes through Florida, damages a number of your properties, you've got big deductibles all around. What do you do? You don't need all of the money sitting in the bank. You might need some of the money sitting in the bank, but that's where you come in and you could be very safe and feel very confident about having some of that in some sort of stable bond fund.

Perfectly responsible thing to do. And by diversifying your approach, you can have access to the money from a diversity of sources. So there are lots of securities, obvious ones, treasuries, T-bills, but there are lots of securities that give you that stability and that safety. The other thing to remember on the subject of treasuries or bonds, even individual bonds, is assume for a moment that you've covered yourself from a diversification need.

So let's ignore corporate bonds and let's just focus on treasuries. You can set up for yourself a laddered portfolio of treasuries that would meet your needs in that example that I described as a landlord. You have a need to have significant amounts of cash on hand and you have a need to have amounts of cash available if you had some sort of significant problems.

Well, you could set that up with a laddered treasury portfolio and you purchase a series of laddered treasury notes. That portfolio can be established simply, inexpensively, and safely. And you can have treasury notes that are regularly coming mature. People often have a concern about treasuries that's related to interest rates.

We all can start from the fact or say, well, if interest rates go up, values go down, right? In bond investing, there's an inverse relationship between rates and values. If rates go down, bond values go up. But the key is for you in a situation like I've just described, there's no risk because you know, there's no risk of interest rates because you know what the overall value is and you're not investing in a fund.

In a bond fund, you have to deal with something called the duration of the portfolio, which is a measurement of when do these various bonds that are in the portfolio, when do they mature? And depending on the duration of the portfolio, you'll face more or less risk of prevailing interest rates.

So with a long-term duration portfolio, small changes of interest rates can have a significant effect on the value of the portfolio. That may or may not be appropriate for your personal emergency fund 'cause you might not want to have that amount of risk in terms of the fluctuating values.

The longer the term of the bond, the higher the fluctuation when interest rates change. But you could still set up and you could still use treasuries in a small treasury portfolio, even as an individual, you could still use that as a component of your emergency fund. Now, I don't know if that's worth doing for you, just an idea to say that don't ignore securities as being useful for you in your emergency fund and in your emergency fund needs.

Another example would be insurance contracts. I think insurance contracts, specifically cash value whole life insurance contracts, have a unique place and a unique value as part of an overall emergency fund approach. That is one of the things that I most like about the personal whole life insurance contracts that I own for me and my family members.

I view them as a significant aspect of my emergency plans. They have a few effective, useful things in the context of emergency funds that I particularly like. Number one is they have high stability. And here I'm talking about a traditional portfolio-based life insurance product, not a variable contract. When you have a traditional portfolio-based life insurance contract, you have a life insurance contract that has values that are very, very stable.

They are contractually guaranteed to go up, and then depending on the type of contract that you have, they'll go up at differing amounts, but they're contractually guaranteed to go up. I like that because it means I have a high stability of money. I give up return in exchange for safety, but I have much more return in a life insurance contract than I do in a local bank account.

I have less access in a life insurance account than my local bank account. But one of the unique factors of life insurance contracts is you have pretty good access. Now, there's two sides to this coin. Number one is you have to talk about the contractual access, the guaranteed access, depending on the company, and the practical access.

How is business actually done? The contractual access in many life insurance contracts with many companies is if you request a loan on your portfolio or to cash out a life insurance contract 'cause you need the money and cash it out entirely, the insurance company can often have a contractual protection where they don't need to send that for up to about six months.

So there's a difference between contractual and practical. In reality, if I need money, and I need money right away from my insurance contracts, I can have the money wired into my account in a day or two days from the time that I request the money. So I really like a whole life insurance contract as being a component of emergency funds.

And the money that I have in whole life contracts, I mentally categorize it as primarily emergency funds. Whole life contracts don't work well for short-term investment needs, in my opinion, in my experience, in my analysis. I don't even love them for retirement planning, although they have a place. I don't ever start with that.

But I love them for giving me some form of safe, stable money that I can have easy access to, but I have decent return. And I like the fact that with whole life contracts, my favorite thing is I get both of these things of access. So with access, I talked about speed of access and ready access to large amounts, but also restrictive access, kind of this double-edged sword, and I think both are valuable.

So number one, with life insurance contracts, I can have quick and speedy access to my money without anybody asking questions. So if I want to take out a policy loan, again, I can have the money wired directly into my account, or I can have a physical check FedExed to me in a day or two under all normal circumstances.

I don't even remember what the contractual limits are in the contracts that I own, but I can have practical access to the money very quickly. A day or two is very, very reasonable for emergencies. And so that allows me to have a significant amount of money that's locked away in something that's safe, that goes up, that's protected from the claims of creditors in my state, and also that I can have quick access to, and a decent rate of return, a pretty decent rate of return for a safe, stable asset.

But on the flip side, because it's a little bit of a hassle, I have a little bit of restriction on the access. And so I like that. It puts a little distance between me and my money. It makes me have to think twice. Do I really want to get this money out?

And that makes me happy. I like both of those things. I think life insurance contracts, whole life and portfolio-based whole life insurance contracts actually fit this particular application really well. I'm a big fan in this application. One of the nice thing about whole life insurance contracts is you can have quick access to the money with no questions asked.

And again, if you need quick financing for something, you can do it with no questions asked, which is helpful in certain circumstances. Shop carefully in the world of life insurance. Finally, we get to tangibles. That's my last aspect. I think you should always consider tangibles in the context of emergency funds and emergency fund planning.

Now, a simple example would be tangibles such as precious metals. Precious metals have a tremendous usefulness in the context of emergency funds and in emergency fund planning. If you want a compact store of wealth, I don't know of anything that's a more compact store of wealth than gold, gold coins.

You could put hundreds of thousands of dollars of gold coins in a coffee can. I mean, it's crazy, especially if you're measuring the value in terms of US dollars, it's crazy. And in terms of universal access to the money, there is no currency that is so broadly spoken on a global basis as gold coins.

US dollars will get you out of a pinch just about anywhere in the world. Frequently, I have found in traveling to little out of the way places that locals and places I would have no clue existed. Well, number one, I'll do a transaction with me in US dollars and we'll get great rates in US dollar exchanges.

There've been times in traveling, when you're traveling with a large group of people in a place that's not an ordinary, normal tourist place, and you can give a big old stack of US dollars to a local person and they'll come back with a nice stack of local currency. So US dollars are pretty ubiquitous all around the world.

But there are places in the world where US dollars don't speak and they don't work, either because they're barred, and it's considered to be a black market transaction to do things in dollars, i.e. Venezuela, or because they're just simply not accepted in the local economy. But I don't believe there's any place in the world that you can't take a gold coin to a local experienced merchant, or to a local pawn shop, or to a local banker, or to a local coin dealer.

I don't think there's anywhere in the world that you can't take a gold coin and come out with a stack of cash. And once you get outside of the US, it's hard to spend a gold coin in the United States. It's really hard. But there are a whole lot of markets in the world where you walk in with a gold or silver coin and you can work a very reasonable deal for a transaction that you need.

So when it comes down to something like emergency cash, it's hard to get better than a gold coin, or if you have the space, silver coins. The other aspect of tangibles and how they apply to your emergency and your emergency planning is oftentimes you need to have the tangibles in order to stave off the emergency.

Here in South Florida, we just passed through Hurricane Irma. I'm recording this on September 12, 2017. And the frenzy of Hurricane Irma was rather obvious to see, it just, I had a front row seat to it. And last week I recorded these shows on Hurricane Harvey. I talked about price fixing laws, aka anti-price gouging laws.

And then a week later, unexpectedly I had a fresh front row seat at a whole, watching the whole thing play out right here where I live in South Florida. What happens when there's an emergency, such as a hurricane, is the economy changes. So there are price fixing laws that make it illegal to charge higher prices for items.

And what actually happens in the face of the price fixing laws, that instead of changing prices, the companies and the merchants that sell the goods and services, they change the quantities. And so bottled water, two weeks before the hurricane, you could buy practically unlimited amounts of bottled water at my local Costco.

Best price on bottled water, Kirkland brand bottled water works great. You could buy practically unlimited quantities. You could load up a whole cart with a bunch of it. But then as soon as the emergency started and the forecast turned it straight to South Florida, so it's the day after Labor Day, immediately the Costco put up a five limit per person, per water rationing system.

So now you could only buy five cases of bottled water. Then that was quickly sold out. The next day I came back and it was two cases per person. And in later transactions, there was a friend of mine who I was helping with some things. And I actually wound up back at the Costco again, day or two before the, two days before the, a day before they closed for the hurricane, kind of just basically last minute.

And they were so strict on their rationing policy that they would not even literally even put four cases in my cart, even though I was shopping with my friend who was on a different aisle. Said, no, he has to be here with his own cart. Only two cases per member.

So what happens? Well, my point here is not to reiterate my comments on price fixing laws. My point is to focus on the fact that there are times when the money doesn't work. Now that was a very minor emergency. There was still plenty of bottled water. If you just went to another store and you could go to six stores and buy two cases at each store and come back, sort of.

Most of the stores, even the big ones that were very focused, they did sell out, but they usually were resupplied the next morning. Very impressed with the way the merchants hustled to resupply. Very impressive. But the money didn't work. Didn't matter how much money I had. I could buy thousands of cases of bottled water.

The bottled water wasn't available. So sometimes you need to think about the item that would be needed in an emergency and get the item first. Was on YouTube the other day. I was watching the Yankee Marshalls channel and he had done a video and the question that was written into him was, "What kind of gun can I buy for self-protection "for under $200?" And the scenario that was described to him in a letter by one of his viewers, the viewer was a 15-year-old younger brother of a young lady who was married to an abusive husband.

And there had been a long history of physical abuse and her husband had actually been convicted of abuse. He had been sent to prison and then he was getting out of prison and he had vowed to family and friends, getting out of prison early, and he had vowed to family and friends that he was going to go and he was going to kill her.

He was gonna go and kill his wife. Now this lady had thought she had more time to plan for her physical safety because his release date was supposed to be several months later, but he was being released early. And so now she was in a bind. She needed to get a gun for self-protection, but she only had about $200 saved.

And the question was, to the Yankee Marshall, you can go watch the video and it's on his channel, Yankee Marshall. The question to him was, what kind of gun should she get? When I viewed the video, I was just thinking about this show because I knew I was gonna do it.

And how vivid of an example to say that sometimes you face an emergency and what you need is not the money. What you need is the thing. Now in the case of this woman, thankfully she has enough time where she can go and she can get, she had been doing training.

I think she had gotten a permit, a carry permit, but she has the time where she can go and still and get the gun and she has enough time to do it. But what it faces, if she doesn't have a permit, in Florida they have mandatory waiting laws where you need to buy a gun and you can't get one.

You gotta wait. I can't remember how long it is. But there's a mandatory minimum amount of time. And so picture yourself as a woman and your abusive husband has sworn he's gonna come and kill you and you need a gun to protect yourself. You don't have anybody that you can do and the money doesn't work.

Money doesn't work in that situation. You can't get the gun 'cause there's a waiting law. And so you've gotta have already had the thing that you need. So if you anticipate different emergencies, you can think about this and you can consider what is the thing that I would need in the emergency?

And let me square that away first. To get out of the hurricane zone, I'm gonna need gasoline. And yes, I can save the money to buy the gasoline, but maybe what I should do is consider the fact that the gasoline's not gonna be available. And so let me grab a couple of five-gallon cans and put them out on my back porch or tuck them away in the back shed or the back garage so at least I can fill up my tank and get out of town if there's a hurricane coming.

Or let me go ahead and grab some cases of water now while it's abundant so at least I have some water and some batteries if there's a hurricane coming. Same thing with food. My wife and I have always tried to maintain a deep pantry, as deep as possible. Well, I've lived on a highly fluctuating variable income for practically all of my adult life.

And there were a lot of times where when my income was very small and it would be small for extended periods of time, where I'd find myself taking a great amount of comfort of the fact that we didn't have to go to the grocery store. We just had enough food in the pantry.

We didn't have to go to the grocery store. I've read all kinds of accounts of people who lost their job and the fact that they had food saved was what got them through. So the point is, don't ignore the tangibles that you would need in an emergency. Make sure that you have them.

And you may find them to be very, very helpful. It really just struck hard to me, watching, and it's still ongoing, just watching the aftermath of what's happening in some of the Caribbean islands in the aftermath of Hurricane Irma. There was a big article in the New York Times yesterday about St.

Martin, just the total devastation there. And it just reinforced again to me the importance of these comments that I'm making on thinking ahead about the tangibles and the things that you would need and preparing for them because you can't do everything with money. One thing I try to do when I travel is I always try to make sure that I have some water with me.

And because the Transportation Security Administration has decided that water is a very dangerous substance to passengers, they've decided that it's fine to bring a container, but you can't bring the container full of water. So whenever I travel, I always try to make sure that I have a container for water.

And this is partly because I'm offended at the idea of paying $5 for a bottle of water in an airport, my frugal, thrifty ways. And partly just because of having been in circumstances where you're sitting on a plane and you're sitting on the tarmac and all of a sudden you're there for a long time and they can't get up, the flight attendants can't get up and serve water, but you're stuck there with a two and a half hour delay.

And if you don't plan ahead and have your own water, you're sunk. Which incidentally, on the subject of carrying water, have you ever noticed that the great threat of water and the idea that water is a bomb, you know, it's a huge threat, of course. And so what we do is we take the most crowded, packed place in the airport where there are lots of people close together, standing still, and we use a secure fixed position 'cause the security gates don't move.

And then we say, well, let's drop all of these potential bombs into this container right here by these lines of people where, of course, they'll be the safest 'cause lines of, I digress, but you get my point. Such a stupid approach. The threat of your bottle of water, so let's keep that threat right here and just have you toss it in the trash can 'cause you can't take a swig and take it through the machine.

So let's toss it in the trash can right next to these 85 people lined up or 185 people lined up who are just perfect targets for us. Forgive me, I lose my self-control sometimes. So I try to take water with me. And it's good to have a container of water.

You travel enough in places where you can't drink the water from the tap. And one of the first things that you do when you get into such a place, you should set aside for yourself a little stash of water. Make sure that you have enough water so you don't go thirsty.

It's bad for your health. It's bad for your ability to absorb and assimilate the local food. Just make sure that you have water. And then a good backup consideration is make sure that you carry a water filter. There are all kinds of wonderful little portable water filters that you can travel with.

You can travel with their integrated in the bottle, et cetera. That stuff can save you from a bad case of the Katmandu quick step just simply by taking a few precautions. Or it can save your life. When there's a hurricane afoot and you're stuck on a Caribbean island, you can't get off.

And all of a sudden, Hurricane Irma roars over your head. So read the news, read the article in the New York Times yesterday, and pay attention to the fact that money doesn't buy you out of every emergency. Sometimes you got to make sure that you've made provisions other than money.

I want to close with two final comments. Number one is pay attention to your insurance contracts. I briefly mentioned insurance contracts a little while ago in the context of talking about whole life insurance as being an appropriate place for you to maintain some of your emergency funds. But pay attention to the fact that if you can have an emergency from something, you should seriously consider insuring yourself against the emergency.

You shouldn't always do it. There are tons of things that people buy insurance from that I don't think are a good solution, or at least not a good solution once you've accumulated some money. And one of the major benefits of accumulating emergency funds is you can forego insurance contracts that other people need to pay for.

If you have $10,000 in an emergency fund, you don't need insurance on your cell phone, you don't need insurance on your TV, and you probably don't need comprehensive insurance on your $2,000 car. You can self-insure for the cell phone, and if you can't get a different phone, although I have a soft spot for expensive phones because I realize they can be very productive.

You can self-insure against the TV. If you can't, you shouldn't have bought the TV. And you can self-insure against the loss of the car. It's more efficient for you when you're driving a cheap car to keep the money in cash and protect yourself and just maintain the ability to go buy another car.

But there are a lot of things that if you face an emergency, you need to calculate that risk. Go back to that real estate investor I described where you might need $200,000 saved up. Better make sure that's a comfortable number. If not, you need to adjust your insurance contracts.

So always pay attention to insurance. Do it thoughtfully, rationally, and logically, but don't depend always on emergency funds. It's a two-way street. Don't buy insurance for everything when you can self-insure and keep that risk yourself with your funds. And don't put everything on funds when you can insure a risk away.

Don't plan exclusively on your emergency fund when you can insure a risk away. Final comment I wanna make is simply this. I've heard it said, if money solves your problems, you don't really have a, what was it? I don't know how it was said. If money solves your problem, you don't have an emergency.

It sounds a little cold and a little cavalier sometimes. So especially it sounds cold and cavalier if somebody has lost their house, or they're out of money, or they ruined their car and all that stuff. But I really, although I don't, I can't, haven't thought of a poetic and elegant way to convey the words.

I really am increasingly convinced of the truth, that if you have a problem that can be solved with money, a lot of times it's not really all that big of a problem in the grand scheme of things. Now, let's not be stupid and ignorant of the fact that problems are caused, and they can be fixed by money.

And money problems are real problems. They affect people every day. I'm here to try to help solve some of your money problems. But when you're facing an emergency, just always recognize, your problem can be solved with money. In many ways, it's not as big of a problem as some other people's.

So do the planning now, do the preparation now. If you don't have an emergency fund, get saving. And if you are someone who is in part A, you don't have a thousand bucks stashed in your house and 10,000 bucks stashed in the bank that's at your savings account at your local bank, right next to your checking account.

If you don't have that, ignore all of part B here in an hour and 30 minutes of Joshua talking about the intricate ways of working out access and rate of return and safety and all these weird scenarios that I've come up with. Just go back and put in place part A.

Put a thousand bucks in your house, put 10,000 bucks in your bank account, and then come back and listen. And for those of you who have heard part B and thought about it, I just encourage you, consider your actual scenarios and consider actual emergencies. When I read the news, I always read with reading about the emergencies that someone else faces and I always think, okay, Joshua, how do you plan for this?

Feel that responsibility to help you plan for it, you, my listener, and I feel the responsibility to plan for it myself. So think it through. I think if you apply that thinking process, consistently thinking through and planning for things, I think you'll start to come up with an appropriate plan for yourself.

Please, there are two shows, and I don't have internet right now, so I can't look up the number because the easiest way is to look them up on my site. So I can't remember the name of them. But it is a show on insurance strategies. I think if you just search the website for insurance strategy, you can find it.

And you can find my discussion of the types of risk and what's the most sensible way to deal with certain risks. That's important. And the second show, I just blanked on this. Oh, the second show I want you to think about is the concept of scale. The show that I did on the concept of scale.

Remember, everything in financial planning is a matter of scale. That's what I'm expressing when I talk about part A and part B. If you don't have $1,000 of cash, don't go and try to figure out how do I buy gold coins. It's silly. If you don't have $10,000 of cash in the bank, don't figure out how do I go and buy gold coins.

Start with simple, normal, practical things. And then adjust according to scale. Pay attention to your situation and analyze the place that you are in your current scale. Thank you so much for listening to today's show. I'll get this out to you as soon as I can. I gotta go find a working internet connection to do it.

And then I gotta finish recovering and get back on track here from Irma. Appreciate all of you who have given us good well wishes. I released, hopefully concurrently with the show, I released to you an audio file with a report on that. We are well and everyone is well.

And I'll be back with you as soon as I can and try to get back here on the normal schedule as soon as I'm able to. Deal with our emergencies. Thank you all for listening and I'll be back with you very soon. If you'd like to support the show, if this was helpful to you, radicalpersonalfinance.com/patron.

Send some money my way if this was helpful, if I saved you some money and I gave you some clarity, radicalpersonalfinance.com/patron. Thank you. (upbeat music) - This show is part of the Radical Life Media network of podcasts and resources. Find out more at radicallifemedia.com. - Struggling with your electric bill?

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