Are Your Finances Prepared to Weather an Unexpected Storm?

Hurricane Katrina taught some important lessons three years ago. Most importantly, preparedness when it comes to health and safety are necessary issues on which to spend time and energy. However, when faced with an unexpected situation, people should also spend time on a financial preparedness plan.

Wide-scale emergencies are not topics people want to necessarily think about. But take for instance, natural disasters as a result of hurricane, tornados, or floods have increased awareness on a national and worldwide level as to the crucial component of having a plan in place if and when adversity does strike. Following are basic steps anyone can take now to help offset financial difficulties later.

Emergencies need not be evening-news material. It may be as simple as flooding or fire. Circumstances can of course vary widely depending on the nature of the incident. One very easy way to protect oneself from any unfortunate circumstance is to take important documents such as a statement from bank accounts, credit cards, insurance policies, deeds, and other like materials and place them in a fireproof security box. No matter what happens, these protected papers will be needed afterward and will increase peace of mind.

It used to be folks kept large amounts of money stashed in the freezer, safe, or even under the mattress in case of calamity. While this may not be advisable, it is a good idea to budget perhaps $30 per family member to have on hand in an emergency. A portion of money should also be kept in liquid form so it can be accessed quickly if needed.

In the case of a dire situation, many banks, especially the larger ones, have a disaster preparedness plan in effect. Most people can count on being able to still write checks, use a debit or credit card, and use online banking. A proactive approach to the situation may be necessary at this point. Contact your bank or visit their website to learn any information they may have for their clients. They will explain what has happened, how the bank is responding, and what customers should do in light of this.

Another effective way to prepare is having both online and brick-and-mortar bank accounts. Linking the money to an Automated Clearing House (ACH) allows account holders to transfer money between accounts. If one bank has been hit hard by some sort of unexpected situation, account holders can move money from those accounts to accounts with a bank that has not been affected. It's also typically easier to obtain needed funds from an account with a more established bank.

Following an unexpected situation, contact anyone who may be expecting your money. Explain what has happened. This is especially important if a mortgage comes out of a bank account automatically. The mortgage company should be aware of any potential hold-ups as soon as possible. If there is going to be trouble making a mortgage payment following a disaster there are some options available. For a temporary period, the federal government removes the threat of foreclosure. Properties within regions that have been declared disaster areas by the president cannot be foreclosed upon for 90 days. Also, there are agencies that can provide mortgage assistance to homeowners who are the victims of catastrophic natural disasters. Most importantly, keep the lender updated on your current situation and intention to pay the mortgage.

Following a disaster, many people receive an insurance settlement check for repairs and replacement costs. If repair work still needs to be completed, keep that money separate from other accounts. While it may be tempting to combine that money with personal funds, it's not a good idea. It's vital to keep that money set aside to cover the costs of home repairs.

No one wants to imagine the worse-case-scenario but recent history has taught us that preparedness is a part of contemporary life. It doesn't have to completely undo the years of hard work and savings. A little bit of early protection goes an awfully long way.