Are You Prepared for an Emergency?
I lived in the Bay Area when the Loma Prieta earthquake occurred in 1989. It was a massive event that took 67 lives and injured thousands. It caused more than $5 billion in damage. The magnitude 6.9 earthquake occurred just prior to the start of the third game of the World Series between the Oakland A’s and the San Francisco Giants. The earthquake lasted 15 seconds and did significant damage throughout the Bay Area. The Marina District in the city saw building collapses and fires. A roadway collapsed in Oakland trapping many while killing 42 people. The Bay Bridge saw part of the upper span crash into the lower span.
I was scheduled to attend an evening business class at a location across the Bay Bridge. Like many others, my commute would have had me on the bridge at the time of the earthquake. Fortuitously, I was ill and did not attend that evening. Since that time, I’ve always done some planning in case of emergencies. Although I enjoy The Walking Dead show, I’m not talking about a zombie apocalypse. I believe everyone should put some time and effort into an emergency plan. I recommend you review this resource for creating a plan: https://www.ready.gov
Of course, there are different kinds of emergencies. I will stick to opining on financial ones. The most frequent financial emergency is loss of income from job loss or disability. If you are fortunate, job loss may be mitigated by a severance package. Don’t assume you will get a package, unless it’s stipulated in a contract. Disability insurance is provided by most employers, but may not be sufficient for your situation.
What can you do to prepare for an emergency? Here are some ideas:
Do Not Carry Credit Card Balances: Although most people know this, it bears repeating: Don’t keep balances on credit cards! The national average interest rate is 16.15%. While credit cards afford some additional protections, especially when buying online, it is important you pay off the balance every month on time to avoid the interest charge. You’ll be better prepared if you are facing some unforeseen financial event.
Build a Cash Reserve: If you are the sole income provider for your family, you should consider a six-month cash reserve based on your monthly expenses. This should be in an interest-bearing account that is easily accessible. If there are two wage earners, a three-month reserve may be sufficient.
Review Disability Insurance: If your employer provides disability insurance, you should review the details and benefits. You may be able increase the amount with additional contributions if needed. If you do not have any coverage, you should review your needs. There are several online resources that can inform you: www.disabilityquotes.com and www.policygenius.com
Create a Plan: Have you planned for financial upheavals? Is it documented? Does your spouse know about it and understands it? Take the time now to ensure you are ready when needed.
A CERTIFIED FINANCIAL PLANNER™ professional can help you to develop a financial plan that includes planning for emergencies.
As always, feel free to share with others and make suggestions for future articles: firstname.lastname@example.org
Remember, it all starts with a plan.