If a Government Shutdown Causes an Economic Crisis, Will You be Ready?

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Money Saving Tips

Happy Thursday, friends!  This whole government shutdown fiasco and impending economic crisis has me thinking a bit more seriously about the financial situation of most Americans.  Political leanings aside, a long-term shutdown could cause real and present financial danger for the average American. Several things could happen, should we spiral into an economic crisis, that could change daily life for most citizens.  Let’s say, for example, that the government doesn’t “put on their big boy pants ” as Grayson over at Debt Roundup so eloquently put it, anytime soon.  What does this mean for Americans, and more importantly, how can we be prepared for any economic crisis that might hit should the shutdown be a long-term one?  Here are some thoughts:

Have Cash on Hand

When Black Tuesday struck during the Great Depression, the first thing people did was head to their local bank to retrieve their cash.  The problem with that plan in today’s America is that the cash you have at the bank isn’t really at the bank, but instead, scores of Americans have used your money (with your bank’s eager permission) to buy new cars and big fancy houses.  Banks have a finite amount of cash on hand (when I was a teller supervisor years ago, we kept roughly $250k on hand at the very most), and depending on the severity of a bank run, you may or may not be able to get your hands on your hard-earned cash during an economic crisis if it’s stored in the bank.  I’m not against banks in general, but it’s a good idea to have at least some cash on hand for food, gassing up the car and paying bills, just in case financial disaster does hit.

Have a Supply of Extra Food Stocked up When an Economic Crisis Hits

First, you don’t want to be among the crowds of crazy people raiding Walmart for canned beans and toilet paper should things really hit the fan and everyone starts to panic.  Granted, this is not likely to happen, but we’ve seen it during natural disasters like Hurricane Katrina, so we know that it can happen during an economic crisis.  Two, if a government shutdown goes long-term, there’s a large likelihood of sharply rising food prices, due to job furloughs and possible limited supply and increased demand.  Again, this probably won’t happen, but it could.  I don’t know about you, but if it does, the last thing I want to be worrying about is how I’m going to feed my kids.  Having a little stockpile of extra food is always a good practice, whether it be to cover you during an economic crisis, a natural disaster, or simply a short-on-money month.

Take Steps Right now to Get Your Financial House in Order

It’s well-known that when an economic crisis hits the U.S., the higher up you are on the “financially secure” scale, the less it’s likely going to affect you.  Consider this quote from an elderly man who lived through the Great Depression:

Because we never took on debt, we only had to worry about buying food and other basic needs.  Because my dad had set aside some money, the Depression was an opportunity for him instead of a curse.  He was able to buy houses, land and other equipment that people needed to sell, for pennies on the dollar.  We came out of the Depression better financially than we had gone in, but only because my dad had practiced good money-management skills in the years before the Depression hit.

This is just one reason it’s so very important to work toward paying off debt and building up a solid savings account.  It’s likely that everything will remain just fine in the U.S., financially and otherwise.  But the financial security that comes with taking these three steps will help ensure that you’ve got three less things to worry about during an economic crisis or other crisis where you live.


What are your tips for survival during an economic crisis or other unforeseen malady?


Photo courtesy of: Tax Credits

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Laurie is a wife, mother to 4, and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom, and to a simpler, more peaceful life.


  • Great post Laurie! I think quite a lot of people have gotten so used to seeing things come close to the brink in recent years, that it seems highly unlikely that one of these situations might actually escalate beyond control. Really though it only takes a few stubborn people or a few wrong moves to trigger a full blown crisis so it’s best to be prepared for every eventuality. At very best it doesn’t half worry me that the US government seems to need to raise it’s debt ceiling every few months at the moment, doesn’t exactly inspire confidence.

    • Excellent point, Adam. Yeah, the constant raising of the debt ceiling is a concern for me too. It feels like they’re the shopping addict, constantly raising their credit card limit. Somewhere down the line, there will be a breaking point if that continues. Thanks, Adam!

  • Well, I certainly hope it doesn’t come to an economic crisis, but there are many things that can be done in preparation for a crisis (many of which I have not done!). Last year I read a whole book on how to prepare for crisis and honestly the information was a bit overwhelming. There are small things, like having extra food and water on hand, that I think everyone should consider doing in some capacity. One easy thing to do is just buy a bunch of bottled water and keep it on hand in case you need it. Not the most frugal thing, but definitely could help you if hard times hit.

    • So true, DC. Even little steps help, and I agree with you about the entire “preparation package” seeming a bit overwhelming. As far as keeping down expense, those gallons of water at the store are cheaper to buy than the bottles, so we go that route. Thanks for your thoughts, DC!

  • At the moment we’re in a pretty good financial position, not too much debt left (we’re trying to pay down our mortgage by May 2014) and a bit of cash to invest. As long as its just hysteria then a short dip in the market could be a great buying opportunity.

  • Banks worked that way in the 20s/30s, too. That’s why not everyone got their money and old people don’t trust banks. How do you see the FDIC playing into this? I don’t know if they’re effected by government shutdowns, but that’s the major difference I see between then and now. Always good to be prepared, though.

    • Exactly! I personally don’t have much faith in the FDIC. From what I’ve read, not only do they not have the money to insure everyone’s deposits, but their “backup plan” similar to what happened in Cyprus, is to ensure the protection of the system as a whole, which includes confiscating deposits if needed. May be just a bunch of baloney that I’m reading, but it just wouldn’t surprise me.

  • I have cash on hand and extra food. Other than that, we haven’t done much prepping. I just hope that things work themselves our sooner rather than later.

    • Holly, I think you’ve got a great start with just those two things alone. I agree: hoping things work themselves out soon – this is not fun, especially, I’m sure, for the thousands of furloughed workers. 🙁

  • Cindi says:

    Your advice, though interesting, is marred. If the government shuts down, how would that affect the water running out of your faucet? Unless some govt agency is responsible for the water running in your home, what good does buying bottled water have to do with anything? Also, if the govt does shut down, what point would it do to have a stock of paper money on hand? The paper money would be deemed worthless since there will be no govt to back up its worth. During the Civil War, what value did confederate paper money have?
    In a real crisis, you need things to barter with. Plus, if you needed to purchase gas, and since paper money is now worthless, gold or silver coins (or something to barter with) would be more valuable in order to make a purchase. Other bartering items: blankets, clothes, shoes…..think about it? When a system collapses, what do YOU think YOU would need? When you come up with an answer, that’s what you need to stock up on. Paper money and the cash you think you have in a bank, is a joke.
    What sort of things can be used for barter, now that paper money is worthless? Think about this. Boxes of cigarettes, bottles of liquor, cans of food, meats and poultry will have more value than the paper money you stocked away in preparation for a crisis.

    • Thanks, Cindi, for your comment. You’ve got awesome points for a crisis on the level of the Sarajevo War or something similar, but I was thinking, and probably should have clarified, about something not quite as catastrophic. If the govt shutdown were to run long-term, what would happen first would be food shortages, possible bank closures, energy rationing, etc. These were the types of possible events I was referring to. I guess in my all too optimistic mind, I’m hoping that things wouldn’t get to that bad of level as you referred to in your comment. Wishful thinking, maybe.

      • Cindi says:

        laurie, I was not talking about a Sarajevo War. We are talking about America’s government shutting down. Why are you so naive and think it would not be catastrophic? If there is even the slightest hint that the USA can not back up it’s paper money (read the front of any paper bill…it’s based on ‘good faith’) then it’s worthless.
        Also, another thing to keep on hand in case of an emergency is soap. Not having the ability to wash ones hands spreads diseases quickly. Same with antibiotics. Meds must be kept in a first aid kit.
        Based on your own answers to your own question, you are NOT ready if the govt shuts down. Stop being so optomistic. Thoughts like that might get you in harms way should the sh** ever hits the fan.

        • John says:

          Respectfully Cindi, I believe you and Laurie are talking about two completely separate issues here. Laurie is bringing up the important point of being prepared, yes if things go south but also generally speaking. What it appears you’re talking about is absolute calamity. If that’s the case, then they’re two separate issues.

  • Being in a rural area, I think we are not as affected to what’s going in in Washington. Yes, the national park is closed and some people are on furlough, but lots of people here are farmers and ranchers and would be OK because they are used to boom and bust cycles. I’m not sure how we would fare. I should probably have more of a food supply on hand because you never know.

  • I think that having some food piled up is always a good idea. Being prepared for whatever might come is, actually, a good idea. I would add something extremely important: pills. Make sure that you have some basic medicine ready to use and especially if you are on some pills, always have at least one extra bottle. In other words, make sure that whatever happens, you will survive it 🙂

  • Yeah. You really must be prepare when times like this comes. Having enough money and food are the necessities you need to address first. But I hope that, the government shutdown in the US won’t be that long, because it may have a bad effect in our country as well.

  • Thanks for mentioning my government rant Laurie. I appreciate it. I do think that the government shut down should push people to make sure that they have their financial life in order.

  • Such a smart post, Laurie; thanks for sharing. These are great tips, and even though I think we’d all agree that we need to do at least a few of these things to be prepared in a worst-case scenario type situation, it’s always good to have the reminder! I’ve made it a habit to grab one or two extra little things every time we go to the grocery store – one or two cans of beans or corn, for example, something that will last a while – and that’s proven to be an easy, budget-friendly way of creating a little food storage for us. Now I need to do the same thing when we’re out shopping for toiletries and household items because like you said, people DO panic even when they don’t need to.. and I don’t want to be one of those people out at the store panicking if something ever were to happen!

    • Great point, Kali! People do indeed panic when they don’t need to, and that’s a lot of the time when shortages occur. Like you mentioned, I love not being one of the people freaking out and rushing to the store – it’s so much less stressful if a crisis arises to know that you’ve done what you can do to weather it.

  • Wow Laurie, all great points. I might go get some cash out right now! It does amaze me how rarely people carry cash anymore. I know debit/credit cards are really easy to use, but I always like having a little paper money on me. Granted, I wouldn’t want to stash too much in my apartment unless it seemed like we were really heading for a Black Tuesday repeat. This has also been a great opportunity for please to recognize the importance of an e-fund.

  • I always laugh the day before a big snowstorm in Texarkana. Cars are lined around the block to get into the Walmart parking lot like it’s the end of the world.

    • LOL, here in MN it’s almost the opposite. People are like “Oh well, there’s three feet of snow coming. I’ll just stay home for now, and then drive like there’s no snow on the ground and endanger everyone around me if I need some milk during/after the storm.” It takes all kinds, I guess. 🙂

  • You know I have an emergency kit from the red cross in my apt in case of an earthquake, but I never thought about having cash on hand too, but it makes sense, especially if there is a major power loss. It’s just a good reminder in general to have somewhat of a plan for emergencies like that. You never know…

  • Maybe I’m naive but I think the little babies running our country to resolve their differences before next Thursday’s debt ceiling deadline. I definitely think having cash is a good idea. I love using credit cards for rewards and bonuses, but always make sure to have cash on me. I still remember when there was a blackout years back when stores couldn’t accept credit cards and the atm wasn’t working. You never know.

  • It’s always wise to prepare yourself for all possible situations – at least to some degree. I’ll admit, I’m guilty of not taking the time to make such preparations. It’ll probably come back to bite me sooner or later unless I straighten up. However, I don’t think this particular government shutdown will cause anything drastic to happen. I really like that quote on how the elderly man’s father capitalized during the Great Depression. While I do not necessarily want the country to go through another economic downturn, it’s inevitable that we will. I hope to be in a position to take advantage this next time around (because this past recession we were busy paying off debt).

    • You and I think a lot alike, Mr. Utopia. We too are hoping that during the next economic downturn we’ll be in a position to focus on obtaining assets at a great price. I would be surprised if the shutdown turned into something long-term, but I surely want to be prepared if it does.

  • Its certainly a very big “IF” this things happening, hopefully reason will rein in sooner before we embark on that journey to financial quagmire.
    I do agree with the points you raise. Some preparation for any eventuality is necessary if we are to weather the gloomy times and cash being “king” should feature among the top priorities of any emergency plan.

  • Good points Laurie. I think I’ll go buy 250 acres in Montana and start living off the land. It sure beats having to ponder these scenarios which seem like more realistic possibilities by the moment.

  • Romona @Monasez says:

    Great post Laurie. I don’t know what I would do during a financial crisis because I’m still in the process of paying off debt and building an emergency fun, so I guess I would just be s.o.l. I would love to see like a movie on a post financial crises America. That would be too cool to see played out on the big screen.

    • The way I view it, Romona, you’re at least doing something, and that’s the important part. We’re still in the paying off debt process too, but try and have extra food/water/toiletries on hand so that we have at least some preparedness supplies available. It will indeed be SO much nicer, though, when the debt is gone and our emergency fund is fully funded!

    • Cindi says:

      HI. Watch any news re-runs of Hurricane Sandy or any of the big hurricanes that hit New Orleans. You’ll learn mighty quickly how fast life can turn ugly.

  • I don’t think there will be a crisis, but if there is at least I have some savings to wait it out. Of course if money becomes worthless I may be in trouble as I am not a prepped.

  • Mackenzie says:

    Great points, Laurie! I hope our government figures a way out of this mess before it gets worse!

  • krantcents says:

    Shutdown or something a little more personal, you need to have savings to help you in a crisis. Having savings helped me buy my first home, invest in income property and achieve financial freedom. There have been a few financial crises in the last 45 years and I managed to avoid the pitfalls.

  • Not to paint too bleak, or extreme, a picture, but if the flag goes up, it’s going to take a lot more than money and food to weather the crisis. Frankly, the way most people live here in the US, there will only be four groups of people left in a worst case scenario – the military, the preppers, the farmers, and the Mormons. But I digress.

    Water is the big thing missing from your list. 3 minutes without air, 3 days without water, 3 weeks without food. Having a stockpile of food does you no good if an earthquake destroys the water mains.

    • I completely agree, Jack. Water is crucial; I automatically lump that in (in my mind) with food, and should’ve mentioned it specifically. I’m hoping though, that we won’t get to that extreme point, but if we do, our family is prepared. 🙂

  • dojo says:

    I don’t know if this will cause it or not, but I do expect something bad to happen pretty soon. In most countries (with few exceptions) the economy is still going bad and will probably get worse. And that’s after the recession few years ago. Imagine what will happen if anything goes wrong again (and it will probably).

    Cutting down spending, budgeting and trying to save money is what any family should do today. with no job security anymore, with bigger unemployment and all these issues with the fiscal system, overspending today is not an option. Having some money in your hands will prove to be a great idea.

    • I’m with you there, Dojo. I’m hoping for the best, but preparing for the worst. Thanks for sharing your thoughts. 🙂

      • I think you summed it up pretty well right there: Hope for the best; Prepare for the worst! Hopefully things will blow over and be fine, but if things do get crazy, I wan to be able to at least feed and take care of my family

        We are busy paying off law school debt as fast as possible, but we also have at least several months worth of food stored (rice, beans, wheat, powdered milk, etc), not to mention a huge garden.

  • Ironically I think food may be more important than cash. With all of the QE money sloshing around, the price of food may become more unaffordable than people realize. This is when things could get really interesting. If people can’t pay for basic needs, that’s when people really starting looking at government.

    • I completely agree, Chad. This is one of our fears as well, and why we’ll blow our grocery budget to stock up when a good sale comes along. Can you imagine the trouble we’d be in as a country if food prices doubled?

  • I never have a lot of cash on hand because of my fear of pick-pockets and home robbery but you really made me realize I probably should. Unfortunately for me, my USAA bank doesn’t allow me to take out more than $600 a day so I’m pretty much doomed to $1200 to hold me over if the poop really does hit the fan!

    I really hope this works out. I was talking to a friend of mine from Vancouver who like me was attending an out-of town wedding for our mutual friend and he was saying how bad this would be for Canada too if the US defaults. I really hope stubborn people don’t ruin this for everyone. I also know that even if they resolve it, it’ll only be temporary and we’ll have to go through this crap all over again in 6 months which is really ridiculous.

  • Yeah, the pickpocket thing makes sense, Tara – it seems to be way more prevalent there than it is here. And I SO agree with you about this mess – it would create huge problems for the world, not just us. I was just watching the news last night, and it seems as though they’re poised to kick the can down the road again instead of coming up with a real budget. How long can this continue?? Thanks for the comment. 🙂

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