At the beginning of the summer, we experienced a global Microsoft Windows outage, which took many businesses offline. This is a great reminder of how sensitive computing and cloud technology can be. You would think that something that prevented people from corresponding via email and incapacitated Delta Airlines for days would be a malicious virus. But that was not the case. This was simply a CrowdStrike software update containing an incorrect code. Something so simple did so much damage! One of my boys was with a friend at a soccer camp that weekend. He spent 17 hours in the airport with five airplane cancelations before getting on a Delta flight back home. It was a mess!
The Wisdom of Emergency Funds- My Advice- Keep at Least $1,000 - $3,000 of cash in your house.
I often speak with clients about the wisdom of creating a robust emergency fund. An emergency fund is an account that holds some amount of cash (or cash-like) savings. The idea is that if an unexpected event took place that required a significant cash outlay (new roof, medical bills, unemployment, etc...) you wouldn’t need to sell your investments to take care of yourself.
But after what happened last month, I believe it is also important to establish a “Cash Stash” – physical currency you keep at home that can be accessed at any time.
My “Cash Stash” looks like this and is locked up in a fireproof safe.
Fifty - $20 dollar bills = $1,000
Twenty- $50 dollar bills= $1,000
Ten- $100 dollar bills= $1,000
Let’s say something like this happened again – whether it was due to a faulty software update or a purposeful cyberattack. What if it affected electronic financial transactions (debit card, credit card, ATM)? Let’s say you could not access the money in your bank or investment accounts for 2 to 3 weeks because the electrical system is down. In that case, having a stash of $20 bills at home could be worth much more than $20. The grocery store or gas station may not be able to process a credit card transaction, but they may still be able to transact in cash.
Prudent financial planning is not about trying to control or guarantee outcomes – as much as we wish we could. It is about anticipating what could happen and taking action to ensure that if it were to happen, we would be okay.
In financial planning, we don’t hope negative things will happen. But if and when they do, at least we will be prepared for it and in a better place than if we had buried our head in the sand.
With the rise of Artificial Intelligence and more electronics everywhere around us in our daily lives, it begs the questions, “what happens if the technology does not work?” In this case, cash is king!
© The Behavioral Finance Network
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