Preparing for disaster in any form
Just for a moment, imagine you have ten minutes to evacuate your home due to an approaching fire, rising floodwaters or some other dire circumstances. What financial documents do you take? Do you even know where these things are? Do you have cash available for a least a week if ATMs are shut down? There are many things to consider.
No one wants to imagine such scenarios, but one way to get through financial emergencies is to plan well in advance. Emergencies can range from major car repairs for one family to an all-out natural disaster for another family. Let's imagine the unimaginable.
No homeowner living in the United States can fail to be aware of the kinds of natural disasters like hurricanes, tornadoes, floods or fire that can directly affect their lives. Two ways to make a potential financial disaster less severe are to plan for an emergency fund and develop an emergency budget. An emergency fund is money that you set aside specifically for the unexpected. It needs to be immediately available (perhaps in a money market account) and it needs to be able to last for three to six months. Even if you never experience a major natural disaster, simply paying for unplanned bills out of an emergency fund, instead of with a high interest credit card, is a smart way to go.
An emergency budget needs serious consideration. This would be a bare bones budget with enough to cover mortgage or rent payments, transportation, clothing, food and insurance premiums for as long as the crisis lasts. The reason six months is recommended is that it could take at least that long to recover from a major financial disaster.
