It pays to be ready, if and when disaster strikes.

Scientists believe that the H5N1 bird flu virus, or some other form of flu, will eventually mutate so that it can easily be passed from human to human and become a pandemic. Researchers announced last week that the H5N1 flu virus has mutated in a way to make it possible to infect people more easily by allowing it to grow in the upper respiratory tract of humans.

Realizing the threat, President Bush directed various government agencies to upgrade their planning for pandemic outbreaks in May of last year. In response, 2,700 financial institutions are taking part in a three-week long simulation that began Sept. 24 to test their response to a potential pandemic.

The financial institutions are running this scenario to be better prepared to deal with the situation if it actually happens and to think through steps they should implement to keep their business running. You should be making the same preparations on a personal finance level.

Here are a number of questions that you should be asking yourself and steps you should be taking:

Have you taken care of the basics? If you don't already have a financial emergency kit in place, preparing one is the first step you should take. While a pandemic is different from a natural disaster, both have areas of financial preparation which overlap and you might as well be prepared for all emergencies.

What do you need to be prepared? You should spend some time considering all the things that you're going to need if a pandemic breaks out. You should stock up on things that you can buy now that will likely become more scarce if a pandemic begins -- such as surgical masks to help keep you from breathing in germs -- while there is a large supply.

You'll also want to make a list of things that you will want to stock up on right away when it appears an outbreak is taking place. For example, ATMs may quickly run out of cash and with many workers calling in sick, may not be replenished.

Gas will also likely be hard to come by, as the people needed to refine and transport it to gas stations won't be available.

Also consider that you will need to change your habits during this time. You will not want to be in crowded places, meaning that you will want to keep shopping to a minimum.

You will need to make sure to thoroughly wash your hands several times a day -- which is a good habit to get into anyway. By preparing what you can well ahead of time and having a list of exactly what you will need, you will be in a much better position than most if a pandemic does occur.

What will you do with your children? If you have children, you need to come up with a plan on what to do with them. In the event of a pandemic, schools and day care centers are likely to shut down. Alternative day care will likely be difficult to find, meaning that unless you have created alternative plans ahead of time, you will likely find yourself staying home with them.

You may want to set up a plan with a couple of friends, where you take turns taking care of the kids. By thinking through and creating a plan ahead of time, you will have a solution to this issue while others are scrambling.

What will happen if you're out of work several weeks? If you have kids that get sick or you get sick yourself, it is likely that you will not be able to go into work for several weeks. You need to make sure that you have enough in your emergency fund if you are forced to stay home during this time. You may also want to talk to your boss to see if you will be able to telecommute during this time or make other arrangements if you can't come into work.

Are you prepared in case of death? While death isn't fun to think about, it's something for which you need to prepare. If the next pandemic is anything like the 1918-1919 influenza outbreak that killed tens of millions of people, many of them in the prime of their lives, you will be glad that you put your estate in order.

Many young families fail to prepare for death because they don't feel they need to. If you have been putting off this part of your financial plan, this is a good reason to tackle it right away. You should review your life insurance to make sure you have adequate coverage. In addition, you should make sure that your will, medical power-of-attorney documents and other estate documents are all up to date.

While you hopefully will never need to use any of these preparations, having gone through the process will make your finances stronger. And if the planning is needed in the future, you'll be patting yourself on the back for taking the initiative to prepare ahead of time.

Jeffrey Strain has been a freelance personal finance writer for the past 10 years helping people save money and get their finances in order. He currently owns and runs SavingAdvice.com.

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