Most businesses have a disaster plan in place should their company have to close or recover quickly from an unexpected weather emergency or natural disaster. While individuals often consider financial planning options to help them through an illness or death in the family, many don’t have a financial disaster plan in place to “weather a storm” that can strike without warning. It’s always a good idea to plan ahead and cover all of your bases.
Four key components that a good financial disaster plan should include:
1. Insurance. Start with your homeowners’ coverage. Be sure to take an inventory of everything inside your home such as electronics, appliances, furniture, clothing, and specialty items of value (like jewelry and artwork) and include these items, as well as your residential structure, in your insurance coverage. Keep your insurance policy as well as a list of everything you’re covering together and be sure to update your inventory list every year, increasing or decreasing your coverage, as appropriate. Taking photos of these items is also a good idea. Have your valuables appraised and keep the appraisals with these items. Make sure your policy covers flood, wind, wildfire, earthquake, hurricane, and other damage that may be expected in your region and that its dollar amount is adequate to cover replacement costs. Also review your life, disability, and auto insurance.
2. Asset documentation. Create a list of your bank accounts, titles, deeds, mortgages, loans, investments, and tax records. Inventory physical assets not only in writing (including brand names and model and serial numbers), but also by photographing or videotaping them.
3. Document storage. Keep copies of the above insurance and asset documentation, as well as other financial and personal documents in a safe, easy-to-access location outside of your home. You can make use of a safe deposit box or consider “cloud computing” — storing digital files with a secure Web-based provider. Aside from the items mentioned above, you may also want to include documents like trusts, wills, social security cards, birth certificates, death certificates, wedding certificates, divorce papers, the last two years’ tax returns, stock and bond certificates, power of attorney, medical records, health care proxies, credit card numbers, a backup of computer files, and beneficiary papers in this location. Another great item to include is a list of contact names and numbers for those who can help you access your documents such as bankers, attorneys, accountants, financial planners, insurance companies, and brokers.
4. Cash. You may not receive insurance money right away so a good rule of thumb is to set aside three to six months’ worth of living expenses in a savings or money market account. You can also maintain a cash reserve in your home in a durable, fireproof safe.
Because there are many items to consider when putting together your financial disaster plan and those items may vary from person to person, this list is not exhaustive. To review what should be included in your personal plan, contact your Untracht Early advisor.