Financial Planning for Disasters
Try to Guard Against Money Problems After Storms, Quakes, Floods
Jun 12, 2008
The American Red Cross, the Federal Emergency Management Agency (FEMA), the American Institute of Certified Public Accountants (AICPA), the National Endowment for Financial Education (NEFE) and financial companies have all urged residents to make financial plans in case of disasters. However, frightened residents often neglect financial preparations amid the immediate concerns that come with hurricanes, tornadoes, flooding, earthquakes and similar upheavals.
Many disaster survivors have testified that money problems can severely strain resources and human stress levels long after the winds die down and the waters recede. The fiscal problems often test the strength of the family’s self-sufficiency and reflect on the quality of its planning.
To start with, disaster victims often have to prove who they are to gain access to their own resources and/or to seek recovery assistance after a disaster.
Numerous organizations, including the American Red Cross, the Federal Emergency Management Agency (FEMA), the American Institute of Certified Public Accountants (AICPA), the National Endowment for Financial Education (NEFE) and financial companies, have addressed the need to plan for such emergencies. Some of the organizations have been criticized for their inefficiency and motives, but their recommendations warrant consideration.
Eleventh Hour Basic Disaster Preparations
Emergency financial planning advice usually starts with such eleventh hour basics as carrying quarters for pay telephones, then extends into longer-term needs. Here are some of those recommendations:
- Keep ample cash handy for evacuations and temporary expenses away from home. Maintain a cash account in another area in case local banks are closed by the disaster.
- Make sure the family’s important financial and legal records, or at least copies, are secured, preferably away from the affected area and reachable when needed. Assemble such records in a portable file or briefcase that can be found and moved quickly. Don’t forget insurance policies, stock and bond certificates, birth and marriage certificates, wills, deeds and tax returns.
- Maintain access to a list of financial accounts, account numbers and passwords for use in emergencies. Assure that the list is secure and preferably encrypted or sufficiently abbreviated that it will not be usable by others.
- Do not leave blank checks, cash or credit cards behind during evacuations. Looting can be a secondary disaster.
- Pay off credit cards or at least keep them current in case they’re needed for emergency cash or purchases.
Long Term Disaster Planning
Some preparations require early, longer-term planning.
If possible, maintain key financial records on a laptop computer that can be carried during an evacuation. The computer can help access accounts from remote locations and help locate family members and associates.
Evaluate the family’s options in case of long-term disability or job loss.
Owners should have their houses checked for structural problems and improvements that might help protect them during a disaster.
Owners and renters should photograph and inventory household items in each room, making note of serial numbers, date of purchase, price, condition and any information needed to claim insurance and/or tax losses. Don’t forget jewelry, artwork and valuable collectibles.
Renters as well as home owners should review and update insurance coverage periodically. Remember, homeowners insurance does not cover floods and, since Katrina, some policies carry additional coverage exemptions.
Make sure family cell phone contracts are updated and the equipment is ready for use. Working cell phones can be valuable financial tools during and in the aftermath of disasters.
Have pictures of family members and pets available for identification.
AICPA, Red Cross and NEFE Provide Additional Information
Additional information is available in these two publications, which are available through AICPA, the American Red Cross and NEFE.
- "Disasters and Financial Planning: A Guide for Preparedness."
- "Disaster Recovery: A Guide to Financial Issues.".
References:
American Red Cross
American Institute of Certified Public Accountants
Federal Emergency Management Agency
National Endowment for Financial Education
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