Many people are proactive when it comes to preparing for a natural or man-made disaster. For example, they stockpile an “emergency stash” of supplies, water and canned goods to last them a week or longer in case of a major storm or other disaster.
But one thing people often don’t consider in their preparation is how their finances could be impacted by a catastrophe. A disaster could wreak havoc on your household’s finances if you haven’t adequately prepared for the impact.
If a disaster strikes your home or community, you may have only a few minutes to react. During this time, your main focus will probably be on keeping your family safe. When you hear emergency sirens or urgent television reports, you don’t want to be worrying about whether your important financial records are secure or you have enough emergency cash on hand.
Gather and organize documents
The first step to take in your financial preparations for a disaster is to gather and organize all your important financial documents and records. These can be divided into four main categories:
Once these records are gathered, it’s a good time to review them for timeliness and accuracy. For example, is your homeowner’s insurance coverage still adequate? Does your last will and testament reflect recent changes in your family and financial situations? And are the phone numbers and email addresses of your financial contacts current?
Next, be sure to safeguard these records. Paper documents should be stored in a box or safe that’s both fireproof and waterproof — or better yet, kept in a bank safe deposit box. Electronic documents should be stored in a password-protected format on a flash drive or external hard drive that’s kept in your home safe or bank safe deposit box. Or, use a secure off-site storage service to file them in the cloud.
Here are two more often overlooked but critical steps to take as you make financial preparations for a disaster:
Take photographs or a video of your entire home and your possessions. This will make it easier to file insurance claims for property that’s damaged or destroyed.
Stash some cash in your fireproof, waterproof safe. It’s possible that ATMs won’t work and banks will be closed for a period of time after a disaster. Therefore, withdraw some cash you can use for emergency-spending purposes. Exactly how much cash you should stockpile depends on your family’s needs for such basics as food and lodging, gasoline, groceries and other necessities.
It could happen to you
It’s easy to assume that disasters will always happen somewhere else, but it’s dangerous to plan based on this premise. By implementing these cautionary steps, you can be better prepared for the possible financial ramifications.