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(Note: This is a re-post of an article I wrote a couple of years ago regarding how to be financially prepared for disasters like earthquakes, which I thought appropriate to given the recent events in Haiti and Chile. Though written a while ago, its content remains up-to-date and relevant especially to those of us who live in the Bay Area, Los Angeles, or any large metropolitan area in the US prone to wide-scale disasters. You can call it common sense but not common practice, and worth a read.)
This past weekend, San Mateo County held a Disaster Preparedness Day, which I attended. We live in a pretty seismic area, but I was still impressed that the county went so far as to create such an opportunity for a cheap weekend (free parking, free admission, free hotdog and softdrink, and a free first aid kit for virtually all attendees), thereby encouraging families to attend and learn.
A local bank held a 30-minute seminar on a topic I hadn’t considered at all but then realized was an important aspect of preparing for a disaster: how should you best prepare for a disaster financially? And no, this isn’t about buying the right insurance policy but something far more basic. I don’t mean to write a Chicken Little post here, but I suppose after Katrina, plenty of metropolitan areas have reevaluated and updated their disaster preparedness plans.
So much so that if you’re like me, you haven’t given much thought to preparing for a time when there might not be any electricity, ATMs, etc. I learned a lot from the seminar, so I thought I’d pass on the information. Most of it is taken from the bank’s presentation.
Preparing before a disaster strikes
It’s worth emphasizing over and over again that we now live in what’s essentially become a cashless society. But when disaster strikes, the conveniences and things we take for granted might not be around. What should you do?
Keep an emergency fund. The current recommendation is to keep enough money to live off of for a minimum of 3 months. You can put this in a regular savings or money market fund.
Keep some cash in a safe, accessible place. In a major disaster, if electrical service is not available, your ATM/Debit card may not work. While some businesses may accept checks, others may only accept cash. The speaker recommended a minimum of $50 per individual in 1s, 5s, and 10s. Consider keeping a combination of cash, checks, and perhaps the best solution, traveler’s checks, in smaller denominations in a safe place in case of emergency.
Keep some change and coins in the same place as your emergency cash. Cell phone networks might not be available, so it’s back to good ol’ (if increasingly uncommon) pay phones. The speaker recommended filling up a film canister with quarters and loose change. I think a roll or two of $10 quarters would probably also do the trick.
Keep important account numbers and phone numbers, and the name of banker (if you have one) in a safe place and available to family members. If you need to cancel your credit cards or reach your bank, be sure you have this information handy. It might also be a good idea for family members to have access to this information if, for whatever reason, you can’t be reached.
Have a credit card, ATM or Debit card handy. If electricity is available, you might be able to use these for purchases or to get cash.
Financial records should be in at least 2 of the following places: safety deposit box, home safe, a “grab & go” box, or a backed-up computing device (hard disk, server, CD, disks, etc.). I plan on writing more about safety deposit boxes in a separate post tomorrow, because there are plenty of things to consider about them that most people probably haven’t realized. A home safe should be large enough that it can’t be carried away (1.5 cu. ft. or larger). A “grab & go” bag or box is something that contains financial and personal documents that you might need to grab before you evacuate. The risk here of course is that you need to keep an eye on it 24/7 once you’re on your way. A backed-up computing device is explained next.
Create backup files. Paper transactions are increasingly being replaced by electronic transactions. Should you conduct much of your buying or bill paying online, you should make backup files of your transactions on external disks. If your computer is damaged, having data backed up can be extremely important.
What to do after a disaster
Check for any missing credit or debit cards. If you think you’re missing any, call up the vendor and have them cancel and reissue new cards.
Be careful with money and spending. All the personal finance bloggers advocate being frugal, but in a time of crisis, that advice goes triple. During and after a disaster, you may be living off constrained resources for some time, and the infrastructure we’re accustomed to may not be there. Your local bank may be damaged, insurance companies might be swamped; you get the idea.
Save all receipts for reconciliation. When disaster strikes, things can get chaotic. You could lose your credit cards, and transactions run the risk of not being recorded properly if networks are down. (Remember back before there were swipe machines and credit card transactions were written down by hand on carbon paper, with your credit card number imprinted on the page?)
Communicate with vendors. Don’t assume that just because your area got hit by a disaster that vendors outside your area are aware of the situation and are automatically granting extensions. For example, if you have a mortgage payment due, be sure to call your vendor to get an extension if you need it.
Don’t borrow if you don’t need it. In times of disaster, people are prone to be shocked by how much they imagine they’ll have to rebuild and might take as many offers of loans as they can before actually assessing the damage. If so, you run the risk of getting into debt that you realize you didn’t need once things have calmed down.
It’s important to keep a “buffer” on credit cards and in your bank account. In a disaster, your paycheck might not be ready, might not be automatically deposited, or if you still receive your checks through the mail, it may not be delivered when it should be. Similarly, if you max out your credit cards, you might not be able to use them when you need them the most.
Don’t wait until your gas tank is on empty to gas up your car. I’m completely guilty of doing this and will now have to change my ways. If you have to evacuate, you don’t want to be waiting hours in line for gas, paying in cash, before being able to leave town. Keep that gas tank full enough so that you can leave if you need to.
Whew. That’s quite a list, but take it for what it’s worth. Looks like I have plenty of preparation to do!
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