Disasters, whether natural or man-made, can strike at any time and without warning. Economic disasters can cause widespread destruction and disrupt our lives in ways we never thought possible. In the aftermath of a crisis, many people find themselves struggling to rebuild their lives and their finances. It’s essential to be prepared financially to minimize the impact of such events.
Keeping track of your finances is an important step in protecting yourself from financial disasters. This includes regularly reviewing your bank statements, paystubs, and credit reports to make sure that there are no errors or fraudulent activity.
We discuss five actionable ways to reduce your financial risks before a disaster occurs. By following these tips, you can protect yourself and your loved ones from financial devastation.
Create an emergency fund:
Creating an emergency fund is an important step in financial preparedness. A significant risk during a disaster is the loss of income, whether it’s from being unable to work due to illness or injury, or from a job loss. Having an emergency fund can help you cover expenses when you’re unable to work, such as mortgage payments, groceries, and other bills.
It’s also important to consider other financial risks that may arise from working from home, such as setting up a modern office at home.
Experts recommend saving at least three to six months’ worth of living expenses in a liquid, easily accessible account. This way, if you find yourself in an emergency, you’ll have the funds you need to get through it.
It’s also important to have a plan for how you will use your emergency fund. For example, you may want to use it for unexpected medical expenses, home repairs, or to pay for a temporary place to live if you have to evacuate your home.
Have adequate insurance:
Insurance can provide a safety net for your assets and help cover the costs of rebuilding. Make sure you have enough insurance to cover your home, personal property, and personal liability.
It’s important to review your insurance policies regularly to make sure you have the coverage you need. It’s also a good idea to make a list of your valuables and their estimated value, so you can provide that information to your insurance company in case of a loss.
You might consider keeping essential documents like an insurance policy, ID, and other valuables in a safe place or digitizing them, so you can access them easily in case of an emergency.
Review your estate plan:
Reviewing your estate plan is an important step in protecting your assets and ensuring that your loved ones are taken care of in case something happens to you.
Your estate plan includes your will, trust, and other documents that outline your wishes for the distribution of your assets after you pass away. It’s important to review these documents regularly to make sure that they are up-to-date and still reflect your current wishes.
When reviewing your estate plan, consider the following:
- Who will be the executor of your will?
- Who will receive your assets?
- Are there any changes in your family situation (such as marriage, divorce, or the birth of a child) that you need to take into account?
- Are there any new assets (such as a new property or business) that you need to include in your estate plan?
- Are there any changes in the laws that may affect your estate plan?
Diversify your investments:
Diversifying your investments can help reduce your financial risks by spreading your investments across different sectors and types of assets. Instead of putting all your eggs in one basket, managing your expenses, and diversifying your investments can help spread the risk, and potentially increase your returns.
When diversifying your investments, consider the following:
- Investing in different sectors, such as real estate, stocks, and bonds.
- Investing in different types of assets, such as domestic and international stocks, and different types of bonds.
- Investing in different types of companies, such as small, medium, and large-cap companies.
- Investing in different types of funds, such as index funds, mutual funds, and exchange-traded funds (ETFs).
- It’s important to remember that diversifying your investments does not guarantee a profit or protect against loss. It’s also important to consult with a financial advisor to understand your risk tolerance and investment goals before making any investment decisions.
Be aware of fraud and scams:
Unfortunately, during a financial disaster or recession, fraud and scams often occur as individuals and organizations take advantage of vulnerable people. It’s important to be aware of potential fraud and scams and to take steps to protect yourself.
Be wary of unsolicited phone calls or emails asking for personal information or money. This can include requests for your social security number, bank account information, or credit card numbers. Legitimate organizations will not ask for this type of information over the phone or email.
Be suspicious of anyone claiming to be a government official or charity worker who is asking for donations or personal information.
Do not pay for services upfront, and don’t let anyone into your home unless you can verify their identity.
Be aware of the prices of goods and services before a crisis, so you can spot price gouging when it occurs.
Fraud and scams are unfortunately prevalent during a disaster, it’s important to be aware of potential fraud and scams and take steps to protect yourself. By being vigilant and taking the necessary precautions, you can help protect yourself and your assets during a disaster.
Final thoughts: Protecting Your Finances in Times of Crisis
As Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.” By taking the time to prepare financially for a disaster, you can reduce your risks and protect yourself and your loved ones from financial devastation. With a little bit of planning and preparation, you can feel confident that you’re ready for whatever the future holds.
