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Protecting Your Finances From Emergencies

Even beyond the swath of destruction left by Hurricane Sandy, the storm was a reminder of how the unexpected can completely wipe away homes and possessions. Managing finances is one of the key challenges people face in the aftermath of such a disaster.

Handling the financial aspects of an emergency starts with preparation, and continues with a few common sense steps to be taken as soon as possible after the crisis.

Emergency financial preparations

Here are some steps to take before a disaster strikes:
  1. Prepare an emergency fund. Have a savings or money market account set up to cover the potential for unexpected expenses and/or loss of income during an emergency. A good savings target to shoot for is six month's worth of your ordinary expenses.
  2. Set up automatic payments where possible. One benefit of automatic bill payments is that they can help keep you up-to-date on your financial obligations even when your normal routine has been completely disrupted.
  3. Make copies of key records. A fireproof safe is a good place to keep photocopies of your credit cards, driver's license and automobile titles, as well as records of savings accounts, checking accounts and other deposits or investments you own. If you can keep an extra set of records off site, it can be a good idea as long as the location is secure -- remember, this is highly sensitive information you don't want falling into the wrong hands. Cloud computing raises other storage possibilities, as long as you can work through the security concerns.
  4. Keep insurance contact information numbers on your person. People often keep car insurance information handy, but you should make sure you have access to home insurance information if your house becomes inaccessible. Also, it's good to have contact info for both your local agent and a national claims number. After all, in the event of a natural disaster, your local agent's office may be in as much of a mess as your home.

When a disaster strikes

Once a disaster occurs, here are some steps to take:
  1. Contact your insurance company promptly. Claims take time to process, so you want to get the clock started as soon as possible.
  2. Get your mail forwarded. You need to make sure you have a means of receiving important financial information that may be coming in the mail.
  3. Manage your payments. Some of those automatic payments may not be relevant if you are deprived of your home for a while. Conserve your resources by changing your instructions at the bank to make only the payments you are still obligated to make.
  4. Contact your creditors if necessary. If you are unable to pay some bills, contact those creditors immediately with an explanation of the situation. This can earn you more latitude than simply defaulting on your obligations.

After things settle down a little, you need to go back to the start of the list -- that is, starting to save for another emergency. Even in the wake of a disaster, you never know what will happen next.

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