Natural disasters can strike at any time. Always be prepared by having your financial house in order. The first and most important step is to create a financial disaster plan. Here are some helpful tips:
- Build an emergency fund—save three to six months of income in a liquid account and have a small amount of cash or traveler’s checks at home in case of emergency.
- These funds must be easily attainable—short-term bonds, short-term bank certificates or money market accounts are good. Contribute regularly and don’t use these funds unless it’s necessary.
- While organizing your finances, a good idea is to save the information on discs or through a secure online service.
- Don’t borrow from your 401k or other retirement accounts to supplement your emergency fund, since the tax penalties associated with borrowing would defeat the purpose of the accounts’ existence.
- Review your home insurance policy annually—making sure you know what is covered. As construction costs increase, some policies may not provide enough funds for home repairs.
- Take an inventory of your personal possessions using photography or video and store it securely outside your home. In addition, your insurance papers, birth certificates, passports and other important paper documents should be stored in a fireproof safe, a safe deposit box or bank vault.
- Visit a financial planner and review your family’s overall investment mix and financial records. A good suggestion is not to have all your money invested in a local company, local utility or your own state. Geographic diversification of investments will come in handy if a statewide disaster should occur.