How to prepare your finances for a natural disaster
Keeping records, paperwork and other resources at the ready offers peace of mind
By Andrew Housser
September is Emergency Preparedness Month. The month of preparation is especially timely this year, when fires, floods and hurricanes have struck all corners of the country. In addition to preparing an emergency kit for your family, it is important to make an emergency plan for your finances.
Some aspects of household planning – such as keeping yourselves safe and protecting vehicles – also affect your finances. Others, like having access to funds, are strictly financial. These 10 steps will help you establish a financial foundation to prepare for an emergency.
Protect vital records. Build a financial emergency kit that you keep in an easy-to-access location – perhaps a locking file box or banker’s box – so you can grab it and go in an emergency. On a flash drive, keep copies of important financial documents and identification documents, such as birth certificates, photo IDs, property titles and Social Security cards. As added security, send a copy of the flash drive to a trusted relative who lives in another city. (You can do the same with copies of important photos.) Keep the original documents in a secure place, such as a bank’s safe deposit box.
Build an emergency fund. Work to save enough money to cover at least six to nine months of living expenses. Keep these savings in a safe account where you will not access and use them too easily, but can reach in an emergency. Contribute to this account little by little, even if you are still working to repay credit card or other debt.
Have cash on hand. In an emergency, credit cards, debit cards and ATMs might not work for a few days. Keep some cash in your financial emergency kit, in small bills. You may need to use this cash to purchase food or water, or pay for help with some urgent clean-up tasks.
Insure and document your belongings. Auto, home and health insurance provides an important cushion to help recover from a disaster. Additionally, people who live in or near a possible flood zone may need to purchase flood insurance from the National Flood Insurance Program. (Most homeowners’ policies do not cover flood damage.) Check your policies each year to make sure they provide adequate coverage. To make the replacement process move faster, document what you own. Create a room-by-room home inventory, and take photos or video. Keep this, along with insurance agent information, policy numbers and emergency financial paperwork, in a safe place.
Switch to direct deposit. A disaster of any kind can disrupt postal service for days or weeks. If you rely on mail delivery for paychecks, Social Security checks or other income, you could be left hanging in an emergency. Instead, arrange electronic delivery so that funds arrive directly in your account.
Periodically check your credit profile and credit score. Each year, request your credit reports from www.annualcreditreport.com. (Requesting one report per year from each of the three main credit reporting agencies is free.) Check reports carefully. If you find an error, follow the directions on the agency’s website to request a correction. Make sure your spouse checks his or her report. If you have children, especially teens, check their reports, too. Having an accurate record of your credit can help you to rebuild after a disaster.
Store your account numbers, passwords and contact information. Keep a list of account numbers and passwords where you will be able to access it in an emergency. A cloud-based password service can keep information accessible, yet safe from identity theft – a wise idea even without an emergency. After immediate danger from the disaster has passed, contact lenders. Many will offer a grace period to people affected by a natural disaster or other emergency.
Make an evacuation plan and build a kit. Homeowners and renters alike are wise to have an evacuation kit – especially those who live in fire, flood or hurricane areas. Keep copies of important financial paperwork in this kit. The Federal Emergency Management Agency (FEMA) provides a disaster kit checklist. Store items in durable plastic bins. Keep a box of plastic zip-lock bags handy to store papers, medications or cash dry and dust-free.
Try to keep vehicles dry. If you are evacuating from a hurricane, flooding or other foreseeable disaster, you might leave town in one car, but have another vehicle you leave behind. A comprehensive insurance policy will cover flood damage to your car, but you will save the cost of a deductible – and inconvenience – if you can avoid flooding. If possible, park the vehicle on an upper level of a parking garage to stay out of heavy rain or rising water. If a hurricane is the danger, look for a spot on high ground, away from trees and buildings. Do not drive any vehicle through moving water.
Focus on getting out of debt. For people struggling with debt, building an emergency fund or even setting aside cash in an evacuation kit can feel like doing the impossible. That provides all the more reason to work to eliminate debt, especially credit card debt. Talking with a reputable debt relief firm about ways to pay off your debt can help you take steps to regain your financial freedom.
For more information about how to prepare for a financial emergency, Ready.gov’s Financial Preparedness page offers a downloadable emergency toolkit. Being ready for the unexpected is a smart way to find peace of mind.
|Andrew Housser is co-founder and CEO of Freedom Financial Network. The family of companies, providing innovative solutions that empower people to live healthier financial lives, includes Freedom Debt Relief and Bills.com. Housser holds a Master of Business Administration degree from Stanford University’s Graduate School of Business, and a Bachelor of Arts degree from Dartmouth College.|