Three Tips to Prepare for a Crisis
Summary
No one can predict when a crisis will occur, however ensuring you have a plan in place now to be financially prepared will provide peace of mind.
Preparing Yourself for a Crisis
“I am taking precautions.” “I am low risk.”
“I didn’t think it would happen to me.”
Whether a health crisis or a natural disaster, these are often the sentiments expressed by people who are suddenly affected by an emergency. A health crisis like COVID-19 or weather disasters—like wildfires and earthquakes in the West, floods and tornadoes in the Midwest, paralyzing snow and bitter cold from winter storms in the Northeast, and hurricanes in the South—can all be devasting but you can take action now to minimize the financial impact on you and your family.
So, what should you do to be ready?
- Open and maintain an emergency fund. When you’re dealing with an unexpected emergency, it can be a lifesaver to have liquid assets available in an easy-to-access account, like a savings or money market account. It’s likely that you will need to cover short-term expenses like unexpected job layoffs during the COVID-19 health crisis, or for things like an extended hotel stay, or living expenses if you are evacuated from your home. We recommend that all families have an emergency fund that covers 2-6 months of living expenses. (This amount should be higher for single-income families). Take a look at our My Spending Plan report to learn more.
- Conduct a review of your insurance policies and health care documents. While reviewing your insurance policies may not sound like the most fun, you don’t want to find out what your insurance policies cover when you have medical needs or after a natural disaster.For example, most health care coverage has been revised to include COVID-19 provisions, but you should know what your specific policy covers. If you are the caregiver for parents or special needs children, you need to understand what their health insurance policies cover in addition to ensuring you have the necessary health care power of attorney and HIPPAA medical records authorizations in place if you need to step in to make health care decisions. If you are managing health care needs at a distance, it is particularly important to have electronic copies of these documents available if you need to email these authorizations to remote health care providers. If your loved ones are involved in a natural disaster, like the recent tornadoes in the Southern U.S or the earthquake in Idaho this week, you may need to provide copies of insurance policy information or health care authorizations if the original document are not accessible due to the natural disaster.
- Keep your financial records safe and tell your loved one where they are stored:
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- Keep key financial records (bank statements and other financial accounts, estate plans, taxes, property, insurance and personal documents) in a waterproof and fireproof safe. A file drawer is not going to protect these records during a flood or fire.
- Electronic records should be copied onto an external hard drive or a thumb drive that is stored in the safe as well. You can also keep backups in a remote cloud storage. (Here are some ways you can keep your digital data and accounts safe.)
- Make sure your loved one or power of attorney know where your financial records are in case they have to access them
Knowing you are financially prepared for a health crisis or a natural disaster can help ease the burden of recovering from one when it does happen. Talk to your advisor about how we can help you organize your financial records and prepare for emergencies so that you feel confident in handling any potential emergencies that you or your loved ones may experience.
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