In many areas of Canada, at this time of year, people are facing spring time flooding of historical proportions. This hits close to home for me as many people who live in Ontario cottage country are being directly affected. It had me thinking about how people should approach their finances when facing a natural disaster. Most probably don’t think about it or don’t think it will happen to them. One of those currently affected communities is Huntsville where we have an office. Some of our own clients are facing flood situations for their businesses, homes and cottage properties. In many cases, it is not for the first time.
Blame it on spring time winter snow runoffs or global warming. It doesn’t really matter. Natural disasters can cause significant financial hardship for affected people. No one likes to entertain thoughts of natural disasters, but no one is immune to disaster. While you should be prepared in terms of having a disaster plan and having items on hand that are beneficial after a disaster, you should also prepare financially.
If you take the time before disaster strikes to make a plan for accessing vital records and paying bills, you will be able to get back on your feet faster and avoid having financial problems compound the problems caused by a disaster. Having a plan and ensuring important documents are accessible and backed up are the first steps toward financially coping in a stressful time. Here’s more information about how to manage finances when natural disaster strikes.
What to do before a natural disaster
Learn what natural disasters are most likely in your area and pay special attention to planning for those possibilities. Your local emergency management agency can help you learn which natural disasters are most probable based on history. If, for example, floods are statistically the most likely natural disaster where you live, you should educate yourself about flood insurance, which is often not included in homeowner insurance plans.
After identifying the most likely natural disaster where you live, you should learn about warning systems for your workplace, your neighbourhood, and your children’s schools. Creating a disaster supply kit can help you be ready for the immediate aftermath of a disaster. Include in your kit information on how to contact your financial institutions as a starting point for you to manage finances after disaster strikes.
Assess where you are financially when a natural disaster hits
Your first step toward being able to effectively manage finances is to assess your financial situation. Your financial situation may be significantly different after a disaster than before, and may continue to change as you navigate the recovery period. The more you know about your current financial situation, the easier time you’ll have identifying how to manage finances going forward. Once you are safe and have access to a phone or the internet, you should:
•Calculate pre- and post-disaster monthly income and expenses
•Calculate your net worth. mint.com has excellent tools for doing this.
•Assess whether you can afford your monthly payments (e.g. mortgage or car)
•Review your credit report
Immediate financial steps after a natural disaster
Take these financial steps once you’ve reached safety after a disaster:
•Notify insurers: homeowners, flood, renter’s, automobile, and personal disability
•Refrain from signing anything from an insurer indicating a final interaction or payment, because disaster damages can surface over a period of weeks or months.
•Contact your employer to inform them how best to contact you and whether you need to take time off work to deal with the disaster.
•If your employer was also a victim of the disaster, contact your area’s employment insurance office and inquire about your eligibility for employment benefits.
•Determine whether any of your regular services (e.g. cable TV or home internet) should be cancelled for a period of time since you won’t be using them if you’re displaced.
•If you’re temporarily relocated, provide change of address information to the post office so you won’t miss any important mail.
•Notify your mortgage company of the disaster and provide them with your contact information if it has changed.
•If you won’t be able to manage finances during the immediate aftermath, call creditors and explain that you were involved in a natural disaster. Inquire if you can modify your payments until you’re back on your feet financially.
•Save all receipts for expenses incurred due to the disaster. This is important for insurance, taxes, and assistance programs.
Strategies for financial recovery after a natural disaster
If you are displaced by disaster, identify a local communication contact for information about disaster recovery and assistance. If possible, attend all disaster recovery update meetings in your community to learn about programs and resources that can help you manage finances.
Apply for disaster assistance as soon as it is available. If possible, enlist the help of a case manager from a nonprofit agency like the Canadian Red Cross. Case managers can keep you informed, advocate for you as you go through the recovery process, and should have up-to-date information on resources available to you.
Working with a Certified Financial Planner can help you manage finances by assessing financial strategies and options. Finally, you should realize that disasters often bring scam artists out of the woodwork. Beware of people or “programs” that offer buyback options, lease-to-own options, or that offers quick or easy fixes.
Prepare for a disaster, know your immediate strategy following a disaster, and accept qualified help in recovering, and you will be able to manage finances effectively as quickly as possible after a natural disaster strikes. This is one element of financial life planning that should be considered even if you feel that you will never be affected by a natural disaster. What do the Boy Scouts say? Be prepared. That is Keeping Life Current.