OTHER RISKS
An important part of assessing your risks and preparing for them comes with an understanding that not all the risks you and your family face are those involving physical damage or harm. Disaster planning also involves assessing your financial risks, and preparing accordingly.
You have no doubt heard the expression "save for a rainy day" - well what if that "rain" turns out to be a Hurricane, Tsunami, or major Blizzard? Are your personal finances set up to survive a natural disaster?
There are two aspects of financial preparedness. One is to simply make sure that you are prepared to get through a few days cut off from your normal financial infrastructure in the event of a natural disaster or crisis. The other involves more long-term risk planning in the event of a personal economic crisis, such as extended job loss, or a large-scale national or global economic meltdown.
Being prepared for the first part is easy. You need to make sure to have cash on hand and make sure it is part of your Disaster Go Bag. You will learn more about the specifics of the other contents of a Go Bag and Home Disaster Preparedness Kit in the next chapter. But as part of your financial risk assessment, assume that in the aftermath of a disaster you will not have access to banks or ATMs. Consequently, you need to be sure to stash some cash, probably at least $500.00 in your Go Bag, and do not dip into it -- forget it is even there.
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 keep them 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.
Set up your major monthly obligations. Mortgage, rent, insurance, utilities, etc. for auto-payments is not only convenient it is a great way to insure 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 and for you to suddenly find yourself out of a job. The best way you can prepare for a personal and sudden financial crisis such as job loss is to avoid debt and build savings.
There is sound advice for people of all faiths and belief systems concerning this issue from the faith-based organization, The Church of Jesus Christ of Latter Day Saints, (LDS.org). It recommends the following ways to have financial reserves in preparation of disaster:
Avoid Debt - 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.
Part of your short-term financial risk assessment, needs to also include an evaluation of your insurance needs. Insurance may be the only way to rebuild or get yourself back on your feet after a hurricane, flood, earthquake or other serious natural or man-made disaster.
The results of your Regional Risk Assessment will help clue you in to what coverage you should have. Be sure to check your policies. Often standard homeowners insurance does not include coverage for the disasters most likely to occur where you live. For example, if your home is on the beach in a hurricane zone, flooding and storm damage may be excluded from the policy. It is vital to purchase all extra coverage that may be required to protect your assets from natural disasters.
If you are the owner of property, be it residential or commercial, always insure the building and its contents at replacement-cost, to ensure that everything will be restored at today's prices. Insurance can also be purchased for long-term disability should you be injured during a natural disaster.
All of the above will help you deal with a personal financial crisis whether it is the result of a natural disaster, or a poor economy;; however that is with the assumption that things will eventually right themselves.
In today's unstable times there is a very real possibility that in your own lifetime you could face a global economic upheaval to rival or exceed that of the Great Depression. There are some very specific actions you can and should take to prepare for such an event.
These steps entail, but are not limited to:
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- Stockpiling cash.
- Preparing for currency collapse with gold and silver bullion.
- Asset protection.