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Friday, March 6, 2009

Keeping cash on hand

Well the FDIC has said that it may go belly up in 2010. For those that don't know, the FDIC guarantees our money in the bank should the bank go belly up.

Picture this.... XYZ Bank goes bankrupt or whatever the appropriate term for a bank is. People start to worry and go to XYZ Bank to take out all their money. The bank of course runs out of money because banks don't keep our money physically there. They use it for investments and loans. So now we have a bunch of people with money in their accounts that want it back and cannot get it back. Normally the FDIC would guarantee these amounts so that people would get their money back up to a certain dollar value. But, if the FDIC goes belly up, how do we get our money back? We don't.

How much actual cash do you have on hand right now? How many of us use our credit cards month to month and then pay them at the end of the month? How many of us use our debit cards or checks instead of keeping cash on hand? So, now you can't pay your credit card bill when it arrives and your debit card or checks are worthless. Where's the cash? You should keep at least a month's worth of cash on hand in case you need it. Two months would be better if you can handle it.

Even worse, what happens if the company you work for has an account at that bank? Where does your paycheck come from? Does the company have any cash on hand to meet its obligations? Does the company go bankrupt now? Do you loose your job? In this economy can you find another one quickly? How do you live while you're looking?

If you can, try to have an alternate income source. Can you mow lawns? Babysit? Weld? Take a job 2 nights a week flipping burgers? Deliver newspapers in the morning? At least that way, you'd have some type of income coming in if you needed it. Right now I work several part time jobs. Even if one disappears, I have several more to fall back on if I need to.

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