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Could Your Finances Survive a Natural Disaster?

The earthquake and tsunami in Japan should be wake-up calls for all of us regarding disaster preparedness. No matter where you live, you're subject to the risk of a disastrous earthquake, hurricane, tornado, fire, flood, or terrorist act. There's lots of information out there about how you can protect yourself and your family. It's well worth your time learning how to be prepared, and then acting on this information. But don't stop there -- learn how to protect your financial assets as well.

First, it's helpful to do some scenario planning, where you think about the steps you should take to be prepared in the event of a few extreme possibilities. For instance, imagine what you would do if you had just a few minutes warning before your house was completely destroyed by a natural disaster. Or, for something a little less extreme, determine what you would do if your house remained intact, but you were without power, phones, or transportation for several days following a natural disaster. Imagine that you've survived such an event and figure out now just which items and information you would want.

A common emergency preparedness step is to have a small suitcase or bag packed and ready to go so that you can quickly grab it on your way out the door, if you need to flee quickly. There are many items you'd want to pack that would help protect your physical health and provide some comfort, including a first aid kit, a water supply, flashlights, battery-operated radio, protective clothing, and so on.

But most people never think about the items to take that help protect your financial assets. Here are a few to add to your grab bag or remember to take with it on your way out the door:

  • Your wallet or purse that contains your picture ID, cash, credit cards, and medical insurance cards. Have a routine place where these items are stored so you can grab them quickly and go. If you have a passport, know where it is so you can grab that quickly as well.
  • A stash of cash. Put this in your grab bag, and don't touch it for day-to-day spending. The reason: The amount of cash you normally carry probably gets low now and then, and you can't count on being able to get to an ATM, and, even if you could, it might not work if the power is down.
  • Your cell phone, smart phone, and tablet device, such as an iPad. Include the charger, but it's also smart to have a hand-cranked or solar powered battery charger. As a matter of routine, I always plug these devices into their chargers before going to bed at night, so they're always fully charged in the morning.
  • A list of account numbers and contact information for all your insurance policies, such as homeowners, automobile, earthquake, health, disability and life insurance. I'd put this information on both a physical piece of paper and in an electronic device such as a smart phone. The reason to have it on a piece of paper? It's quite possible that you might not have power for several days, and your cell phone battery could get used up.
  • A list of account numbers and contact information for all regular payment obligations that you have, including your mortgage, rent, car, insurance, and utilities. Ideally you'd want payments to continue during the emergency, and automatic payments from your checking account are a big help. In many cases, you might get forgiveness during an emergency, but you probably shouldn't count on it.
  • A list of account numbers and contact information for all of your bank accounts, retirement savings, and investments. You need to be careful here -- you don't want this information to fall into the wrong hands, where somebody could draw out your money. Be particularly careful with passwords to accounts that are linked to the Internet. If your list is on an electronic device, protect it with a password. If it's on a piece of paper, scramble the account numbers in a manner that you can remember.
  • Contact information for your work. At the very least, you'll want to contact the appropriate person to let them know of your safety and whereabouts, and ask about reporting in to work. Many employers have formal emergency preparedness programs -- make sure you have the appropriate contact information.
  • The key to your safe deposit box, if you have one. Make sure you know where the key is and can grab it quickly when you leave.
  • Copies of medical directives and your power of attorney.
Here are a few, other, non-grab bag steps to take:
  • Make sure all important documents, such as your will, deeds, insurance policies, etc., are stored in a safe place, such as a water-proof and fire-proof box or a safe deposit box.
  • Now might be a good time to review your insurance policies. Determine exactly what your coverage would be in the event of possible disasters, and make changes if you find that the coverage falls short.
  • Be aware of whether your income would stop during a disaster. This might not be a problem for many people who rely on a salary, pension, annuity, or Social Security benefits. But many other people are self-employed or are paid by the hour, and income could come to a halt. Make sure you have an adequate emergency cash fund that could cover your obligations if your income was stopped for a few months.
  • Keep "buffers" on your credit cards -- don't ever charge them to their maximum limit, so you'll have funds available should you need them.
  • Similarly, make it a habit to always have at least a quarter tank of gas in your car -- and preferably more. Think about what would happen if you couldn't fill up your car for several days.
Putting this all together may sound like a pain, and I have to admit that until now, my wife and I haven't taken all the above steps. But we received our wake-up call -- literally. We live in a low-lying area near the beach in Ventura County, California, and we received phone calls early Friday morning warning us of a possible tsunami. We ran around scared for several minutes until we learned that we weren't in immediate danger.

So now we're working to finish these steps with a sense of urgency, and it makes us feel good that we're making quick progress. I sincerely hope you'll never need to use these precautions. But won't you feel better knowing you're prepared, just in case?

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