Many Americans choose where they live for the beautiful landscape or mild climate, and yet, these areas can also be dangerous. Natural disasters like wildfires, tornadoes, hurricanes and floods can ravage a family’s financial health. Based on my experience helping people work through natural disasters, here are the top four financial strategies to safeguard your financial security during and after a natural disaster.
- Set aside 3-6 months of living expenses. If you must leave your home and everything inside due to a natural disaster, you will need money to restart your life. Disaster insurance will help, but it may take a while for the insurance companies to send you a check. You will need money immediately for all the expenses, big and large, that modern life requires. With an emergency fund to cover three months or more of expenses in a checking or savings account, you can buy time to figure out your new plans.
- Get an insurance audit. Home and auto insurance are key to rebuilding your life after a natural disaster strikes. Infamously, the wildfires that ravaged Colorado over New Year’s Day 2022 exposed a terrible risk. Many people did not have enough insurance to rebuild their homes! Ask an insurance expert to review your plans. Also, consider getting a second opinion from another agent to make sure you are safe.
- Back up your data in the cloud. A friend of mine learned this lesson the hard way: Make a backup of your data and store it offsite! Unfortunately, a fire destroyed my friend’s computers, obliterating all her digital information and her financial records. Since she lost her home in a natural disaster, she could make a claim with the federal government, but she needed her tax returns. She lost all previously filed tax returns, and the IRS could not find them. A cloud backup is cheap, or free, and a top priority.
- Prepare your family financial album. This three-ring binder — or manila folder, or other document set — is the one thing you would grab if you had to grab anything in a natural disaster. In here, you’ll want to keep a record of what insurance policies you have and who to contact. You want your life insurance information, home and auto information, and more. Include your bank information, your investment information and contact information for any other financial institutions (such as your mortgage lender). Importantly, you do not need to include your passwords, and you do not need to keep the original documents. Instead, you want to be able to grab your family financial album and know where to go to start again. If you create this document with care and keep it up to date, your survivors could do this without you — just in case!
Natural disasters can happen to anyone. Whether you live in Colorado and could face a surprising wildfire or in Florida and are looking at making it through a lifetime of hurricane seasons, a little preparation goes a long way. Follow these financial planning strategies in the short term, and you will be ready for long-term success. Just in case of lightning strikes — or worse!
For more help with preparing financially for the unknown, work with a CFP® professional. Find your CFP® professional today.
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