Protecting Your Wealth: What to do before disaster hits
Hurricanes dominated the news in the latter part of 2005, but violent weather is not the only kind of disaster you may encounter in your life. If nothing else, Hurricane Katrina taught us that we must be prepared to function on our own in the event of a natural disaster. Because disasters can occur at any time and to anyone, it is vital that we look to ourselves as the first source of disaster relief and consider outside sources secondary. Here are eight steps that you can take to protect yourself and your family from the impact of a natural disaster or other upheaval.
Develop a disaster preparation plan. There is no substitute for planning! Your disaster preparation plan should include strategies for exiting the area, security, communication, property protection, pet protection and a plan to rebuild, if required. If you are a business owner, you will need to develop a separate plan to protect your business. This plan should be centered on rapid communication with clients, the preservation of client and company records and a specific procedure to get the business back up and running quickly.
Catalog your assets. Pictures are worth their weight in gold when it comes to disaster recovery. Keeping pictures of your assets helps speed the insurance-claims process (the reclamation of your personal valuables). Either you should keep the photographs away from your home—at the home of a friend or relative who lives in a different region of the country, say—or purchase a remote backup capability and store the pictures online. Take the time to develop and maintain a photo catalog today.
Annually review your insurance coverage. According to the American Geophysical Union, natural disasters generate approximately $1 billion in losses per week. If your insurance coverage is insufficient given your asset value, or if you do not have the appropriate coverage, you will not receive much sympathy from your insurance provider. It is imperative that you keep your insurance coverage up to date. For the small business owner, business interruption insurance is a key part of your cost of doing business. You should consider coverage for a minimum of six months of revenue. This insurance can provide emergency funding to assist you in restarting your business.
Maintain backup files of all important papers. Loss of key documents, such as birth certificates, passports, wills, real estate deeds and income tax filings, can cause tremendous damage to your financial state. Loss of material that is on your home computer can set you back years, particularly if you own a home-based business. Maintaining backup paper files away from your home, or backing up files onto a portable computer or purchasing a remote backup service, can help protect your most important information.
Keep emergency cash on hand. In a natural disaster, cash is king. Keep at least enough cash on hand to quickly move yourself and your family to safety via public transportation. It is important to have cash because access to money through ATMs, for example, may not be possible if those machines are destroyed in a disaster or there is no electric power to run them.
Keep an emergency credit card on hand. Access to credit is second only to cash-on-hand in an emergency. Once you arrive at a safe location, you will need to feed and house your family. Maintain a credit card that you use only in an emergency. It should be used only for housing, food and a few personal items. Purchases that some Katrina victims made, such as new computer equipment, TVs and wardrobes, should be strictly avoided to prevent you from going into massive debt as you prepare to retool.
Put in place home equity lines or unsecured lines of credit. The best time to prepare for a natural disaster is when there isn’t a cloud in the sky. Put in place all financial vehicles available to you while things are good. If you are a home owner, have home equity lines in place. If you are not a home owner, have an unsecured line of credit in place.
Prepare for the impact of job loss. What would you do if you were unemployed for six months because your company was destroyed in a natural disaster? This is exactly what many seasoned professionals faced in New Orleans. While a natural disaster may not be the only reason that you become unemployed, the strategies to navigate this situation are the same. Put in place the appropriate credit facilities outlined above and an expense-reduction strategy outlining those expenses that can be eliminated, deferred or reduced. As a general rule, you should be constantly networking and developing relationships with people in your industry. In the event of an unexpected job loss, these relationships will allow you to ask for and receive help.
David Hinson is the founder of
Wealth Management Network in
New York City. Call 646-375-2388,
or visit www.wmnllc.com. E-mail: