Living in South Florida, I know year after year how important it is to prepare for natural disasters. No matter where you live, every part of the county has its own unique natural disasters that you need to prepare for, from earthquakes to blizzards.
But, if there is one thing that the COVID-19 crisis has taught us, it is that in addition to water, flashlights, and other emergency supplies, we also have to have our personal finances prepared for a natural disaster or crisis like the pandemic.
FEMA and The Federal Trade Commission offer the following tips to help you prepare your finances for a natural disaster.
First, make a list of your possessions and documents by taking pictures or videos of them. Your household inventory could help you with insurance claims later.
You’ll also want to take advantage of the technology tools at your disposal. You can use online bill pay, virtual safe deposit boxes, and cloud storage options. This could make it easier to recover your records and update them.
If you have some documents that you cannot store virtually, consider purchasing a lockable, fireproof file box to keep them secure.
You can also rent a safe deposit box at your local bank. Some banks may offer virtual safe deposit boxes to store your photos, videos, and documents, including your household inventory.
Finally, remember to update the list of your possessions and personal information at least once a year.
Also, be sure to have some cash on hand. In the aftermath of a hurricane or other natural disaster, power may be out for a while. You may not be able to count on ATMs or being able to use your credit cards at stores. Also, as part of your short-term financial disaster preparedness plan, be sure to always have your picture ID, credit cards, and medical insurance cards with you in your wallet or purse or are kept in a routine place where you can grab them quickly.
If you have a passport, know where it is so you can grab that quickly as well, and it’s a good idea to also keep a copy of your passport in your Go Bag.
Other Tips for Financial Disaster Preparedness
Setting up your major monthly obligations, mortgage, rent, insurance, utilities, etc., for auto-payments is not only convenient; it is a great way to ensure that payments continue to be made in the event of an emergency. Some creditors will forgive debts in the time of a crisis, but you should not count on that to be the case.
The second phase of assessing and planning for a long-term personal or a wide-scale economic crisis is a bit more complex.
It does not take an Earthquake to wipe the place you work off of the map for you to suddenly find yourself out of a job. The best way you can prepare for a personnel, and sudden financial crisis such as job loss is to avoid debt and build savings. Financial advisors recommend the following ways to have financial reserves in preparation for disaster.
Spending less money than you make is essential to your financial security. Avoid debt, with the exception of buying a modest home or paying for education or other vital needs. There is nothing that will cause greater tensions in life than grinding debt, which will make the debtor a slave to creditors. A specific goal, careful planning, and determined self-discipline are required to accomplish this. If you are in debt, pay it off as quickly as possible. Some useful tools in becoming debt-free are a debt elimination calendar and a family budget worksheet.
Distinguish Between Needs and Wants
We must learn to distinguish between wants and needs. You should be modest in your wants. It takes self-discipline to avoid the “buy now, pay later” philosophy and to adopt the “save now and buy later” practice.
Use a Budget
Keep a record of your expenditures. Record and review monthly income and expenses. Determine how to reduce what you spend for nonessentials. Use this information to establish a family budget. Plan how much you will save and what you will spend for food, housing, utilities, transportation, clothing, insurance, and so on. Discipline yourself to stay within your budget plan. A budget worksheet is a useful tool to help you with your plan.
Build a Reserve
Gradually build a financial reserve, and use it for emergencies only. If you save a little money regularly, you will be surprised how much accumulates over time.
Teach Your Family
Teach family members the principles of financial management. Involve them in creating a budget and setting family financial goals. Teach the principles of hard work, frugality, and saving. Stress the importance of obtaining as much education as possible.