Nov. 8, 2017
These past few months have been a doozy. Hurricanes, wildfires, mass shootings, political chaos, international uncertainty (aka North Korea getting feisty and who knows what the heck is up with Russia). Do you feel like you’re just waiting for the next shoe to drop?
Or maybe your life has been shaken up on a personal level. Are you going through a divorce, a death of a family member or another major upheaval that has serious repercussions? As individuals living our day-to-day lives, we usually have little or no control over these kinds of disasters. It’s sobering, really. And honestly, it can be quite discouraging and upsetting too.
Hopefully when you think of me, Greg Brown, you think of the words, “control what you can.” While it might seem like our world is falling apart, you can grab the reins of your financial life. Here’s your guide to getting your finances organized so if disaster hits you are prepared.
1. Stress = Bad Decisions
Let’s get academic for a second. Research shows that people are more likely to ignore long-term consequences when making decisions under stress. In other words, don’t go selling your house or cashing out your investments and hiding them under your bed. Take your time to work through the fears or worries that are causing you to think irrationally. Before your emotions go nuts, train yourself to lean towards the conservative side when it comes to decision making.
2. Create a Safety Net
Why do you need an emergency fund? For emergencies. Thanks, Greg. That was insightful. But really, we all know what an emergency fund is, but how many of us actually have one? A ridiculous 35% of Americans only have a couple hundred dollars accessible for a worst-case scenario. If you have to evacuate or pay for funeral expenses, two or three hundred dollars isn’t going to get you far.
Peace of mind is hard to find these days, especially if you stay on top of current events. But at the very least, you can give your finances a leg up so the money is there if you need it and it’s one less thing to worry about in a disaster situation. How much should you save? There are many differing opinions on this, and it will largely depend on where you live, how many mouths you have to feed and your debt load. That said, six months to one year of basic living expenses should give you some breathing room if disaster strikes.
3. Debt No More
If you are paying off loads of debt, you won’t be able to put much aside for your emergency fund. It may not be fun, but change your lifestyle so you can abolish that debt once and for all. That alone will bring more freedom and peace to your life. Do you really want to be worrying about making your next payment if "it" hits the fan?
4. Insure Yourself
Remember the golden rule: If anyone depends on you financially, you need insurance. It’s that simple. Do you know the nitty gritty details of what your insurance covers? Do you have the right amount of coverage for life insurance and disability insurance? Yeah, I didn’t think so. I get insurance questions from friends and family, usually after a death or near death of a close friend or family member in their circle.
Most people purchased an insurance policy years ago when their life was much different or their family was smaller. But what happens if your home floods and you find out your homeowner’s insurance doesn’t cover flooding? You’re screwed. Revisit your policies (home, auto, life, etc.) to make sure a disaster won’t kill your finances.
5. Document Everything
This is all about making organization a priority. Create a master list of what you own and include photos or video. If anything needs to be replaced, this will make dealing with the insurance company much smoother.
Have important contact numbers, account information and personal information accessible and in a protected place, whether that’s in a safe or a fire and waterproof filing cabinet. If you need to make decisions or move without much notice, you’ll want to be able to grab passports and insurance information quickly.
Speaking of getting organized, it’s a good idea to have all your accounts (bank accounts, investment accounts, 401(k) accounts, 529 college savings plans, even mortgage balances) all in one place, updated daily. This helps you to know where you stand at any moment, in a disaster or just to keep tabs on your wealth.