Over the past 20 years, disasters like Katrina, Sandy and the attacks on 9/11 have motivated many families to be better prepared for the unexpected. Important precautions like arranging a rendezvous point and stocking up a few staples in the pantry are sensible and increasingly common. Just as important but more frequently overlooked is the requisite planning for restoring your financial house once a disaster has struck.
This month, the Federal Emergency Management Agency is highlighting this priority by declaring April National Financial Preparedness Month. The agency seeks to heighten awareness of the need to plan ahead for prompt restoration of your financial health after a natural disaster or emergency, and to minimize the disruption and recovery time in getting your fiscal life back together.
Few of us have actually taken the time to properly organize and safeguard our important records for expeditious reconstitution after an unfortunate event. It's a hassle and seems like a daunting task, but is an essential first step in preparing for the unknown.
Perhaps the best approach is to collect and store important documents in a secure location away from your home, like a safety deposit box. At the very least, secure those items in a rated fire safe to minimize the chances of destruction in a disaster. This cache of critical papers should include a current list of your user names and passwords as well.
Maintain copies at home for your reference, and review your document inventory once a year to incorporate any changes. Electronic cloud storage vaults like Dropbox and Box are also handy and can be accessed from any device connected to the Internet.
Once you have organized and safeguarded your papers, take a look at your insurance coverage. Do you have enough insurance, and is it the right kind? Are you paying for coverage you no longer need or covering items that you have discarded? Do you have sufficient liability protection to ensure that your financial assets are not at risk in a lawsuit?
Confer with your agent about a review of your policies and the possible need to inventory your important possessions. It may be helpful to photograph or video record evidence of ownership of valuable assets like artwork, antiques and Beanie Babies. Some items in your home may not be covered unless specific riders are added. Don't find out after the fact that you're out of luck.
Finally, stash some cash. Any good financial plan involves building an emergency fund, but setting aside some cold hard cash in small bills to have available for immediate expenses is not a bad idea. Remember the ATM will be kaput if the power is out.
The process of preparing for an unexpected emergency can be time-consuming and laborious. FEMA has produced an Emergency Financial First Aid Kit (which, like all governmental initiatives, lives by its acronym: EFFAK). The comprehensive worksheet provides a very handy guide to identifying, collecting and safeguarding all the important information and records you will need to quickly rebuild your financial house in the wake of a disaster.
The process carries the added bonus of providing a roadmap of your affairs for a surviving spouse or trustee in the event of your untimely demise. Unscrambling the family finances following the death of a loved one adds additional stress and pain, and is easily avoided with a little planning.
The kit is available for downloading at ready.gov/financialpreparedness or at operationhope.org. There is no time like the present to start planning for the unexpected.
Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett & Co. in Chattanooga.