We had a tornado go through our town this week. Luckily no one was killed or even seriously injured, but there were a lot of trees knocked down and some damage to houses and cars, particularly where trees fell into houses. In some cases people will need to move out and rent for a while until their homes are repaired or even rebuilt. Seeing the damage and helping out with the clean-up is really sobering. It really makes you think about what it would be like if a tree fell into your home, or even if just a few of the big trees in your yard came down, leaving you with a big mess to clean up. Let alone if a more powerful tornado had come and destroyed homes entirely.
Even if it is just a big tree felled in a windstorm, you now suddenly have a big expense and a disruption to your normal life. Maybe you wouldn't be able to go to work for a few days while you cleaned up the damage. In the case where the work was beyond your ability, as it is when a huge tree comes down, or comes only part way down, leaving a dangerous situation, paying for a tree service to come and take care of the situation can be extremely expensive. Maybe insurance would pay for most of the cost, but you still might need to find a thousand dollars or more to pay for the deductible. Does your insurance even cover a tree fall that doesn't hit the house? Ever check?
It's really made me wonder about how ready we are for something like this happening. I think we're better off than many families because we don't live right up to the line with our income with nothing left over for unexpected expenses or brief interruptions in our income. Still, something that takes you suddenly out of your normal life and perhaps makes it difficult to get to the paperwork and information you rely upon can create a challenge even if you do have resources to help take care of the issues.
I won't go into emergency kits and what to do in an emergency - there are plenty of places to read about that - but what does it take to be ready, financially, for a crisis? Also, what would it take the have the information you need, ready at-hand? I think I have the number for the insurance agent in my wallet, but maybe I should also keep a copy at work, just in case I need to leave quickly and can't get to my wallet. Also, what about people who help with the immediate clean-up and protection of your home should it be damaged? People who help get the roof tarped and maybe pump out water?
Here are some things I'm thinking about. I'd love to hear some ideas that you use to be ready in the event of a disaster in your life.
- Cash for a hotel might be an issue, and maybe I won't be able to get to the room with my wallet, so maybe I should keep a credit card or debit card that I can also use at an ATM to withdraw cash with me at work. Maybe I should have some cash in the car, just in case.
- Having the number for my banks, broker, and other financial institutions handy would also be a good idea. If I needed to transfer money between accounts or sell some stocks to pay for things, it would be good to have these numbers ready.
- Having the number for tree services, flood clean-up businesses, and other emergency services handy. Sometimes you don't have time to wait and need to get things going right away.
- Having an emergency fund ready. I do this already to take care of things like unexpected car repairs, but seeing a storm and thinking about all of the money you might need to pay out immediately, long before the insurance comes in to pay you back, really drives the point home. I normally have enough to pay for expenses for about three months in cash and CDs at the bank. I make sure I have enough in cash to take care of things that are likely to happen, but have some extra in CDs that I can draw upon if needed, just losing a little interest, for the unlikely but possible things.
- Building up your house and car fund. I buy used cars (typically 4-5 years-old) for cash, and make all home upgrades with cash, which means I don't have payments to make or any interest to pay. Still, I don't just spend the money I would have been using for payments on other stuff. Instead, I am constantly putting away the money I save into investments since I'll eventually need money for the next car or home repair/upgrade. Usually I would have a little while before purchasing the next new car or home repair or upgrade to plan and think about it, but having an investment account I can draw on quickly should a tree fall on the car and we need a replacement now is definitely a good idea.
So what ideas do you have? Are you ready, financially, for an emergency?
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
