Emergencies like power outages or bad weather can happen at any time and can be costly. Unplanned hotel stays, lost documents and damaged property are just some of the costly outcomes. But there are ways to prepare, including putting away cash and keeping essential documents in a safe place, as well as knowing how to protect your credit even when you have to miss a payment. Preparing for your next emergency today may be one of the smartest money moves you’ll make early in 2023, and you can make it doable by taking small steps each week.
When a blackout knocked out power in a multistate region in 2003, Gabriella Barthlov, a financial coach in the Detroit area, was prepared. She had enough money on hand to buy food for herself and her two young children, as well as put gas in the car in case they had to leave the house.
“I was so happy to have that money,” she recalls. Now, Barthlow encourages his clients to be similarly prepared for the unexpected. Power outages, weather outages and other disasters can wreak havoc and take a financial toll – often with little warning – but preparation can help minimize the damage.
Here are steps you can take to make sure you’re prepared for your next emergency.
PUT THE PHYSICAL CASH AWAY
As Barthlow discovered, cash can be crucial when facing an extended power outage because machines that accept debit and credit cards may not work. Bernie Carr, author of “The Prepper’s Pocket Guide” and founder of apartmentprepper.com, says you want to have enough cash on hand to cover fuel and food for a few days and carry at least some of it with you.
“I like to keep $40 in cash in my car or purse so I know at least I can always get home in case the registers don’t work,” Carr says.
That money is in addition to an emergency savings fund, which is kept in a savings account to help you get through a period of unexpected hardship or loss of income. Financial experts often recommend putting three to six months’ worth of expenses into that account, but even much smaller amounts will help stabilize your finances.
GATHER STOCKS SLOWLY
Carr suggests buying supplies over time that could help you survive temporary interruptions in electricity, water and other utilities, such as can happen during natural disasters.
“The next time you go grocery shopping, set aside $10 and pick up bottled water or your favorite canned food or instant oatmeal,” she suggests. On your next visit, put together a first aid kit with things like bandages and antibacterial wipes, or flashlights and extra batteries. Other types of equipment such as a water filter, camping stove and solar lights can also be helpful.
“A lot of emergency gear is also camping gear, so there are a lot of sales right before and right after summer,” Carr says.
COLLECT IMPORTANT DOCUMENTS
Barthlov suggests collecting your basic documents — contact numbers; insurance information; recent bank statements; identity cards; all marriage, birth and divorce certificates — and put them in a waterproof, fireproof box, as well as scan and store them online in a password-protected account or on a flash drive.
“I also ask people to declutter their lives, because if you save a lot of paper, then you can’t find the things you need,” Bartlow says.
With this streamlined approach, she says, “I could walk out of my house in an hour or less and know where all the key documents are.”
January can be an ideal time to take on that challenge, says Paul Golden, a spokesman for the National Endowment for Financial Education, a nonprofit that promotes financial education and wellness. “The New Year can be a good time to do preparatory work. It’s that time of year when people take stock, clean up documents and resolve to be better in every way.”
PROTECT YOUR CREDIT
In an emergency, it can be easy to miss a bill or credit card payment, which can hurt your credit, Golden warns.
“If you foresee a disruption in making payments on time with your creditors, contact each one of them and inform them of your situation.” Maybe you’re asking for an extension,” he suggests.
In cases of widespread disruption, such as the COVID-19 pandemic or power outages, companies may offer customized payment plans to those affected, but you may have to request or opt-in.
Scammers also often target victims of natural disasters, so be on the lookout. “Be vigilant about the emails or phone calls you receive, and check who you’re talking to before sharing any account information,” says Golden.
If you receive a phone call from someone claiming to be your insurance company or financial institution, they suggest you hang up and call customer service to confirm you’re actually talking to them.
START THE RECOVERY PROCESS
Once the emergency is over, it’s time to pick up the pieces: file any insurance claims, rebuild depleted emergency savings, and replace depleted supplies. Golden suggests taking detailed notes of all customer service interactions to make tracking and tracking refunds easier. The website DisasterAssistance.gov provides information about local recovery efforts, and 211.org can connect you with community resources such as food banks.
Surviving an emergency can inspire you to prepare for the next one. Experiencing Hurricane Ike in 2008 motivated Carr, who was living in Houston at the time, to focus more on preparedness.
Carr says everyone should review their emergency supplies at least once a year. “It should be a regular part of life, like car insurance. An emergency will inevitably happen, and most people are unprepared because they haven’t thought about it.”
Kimberly Palmer is a personal finance expert at NerdWallet and author of Smart Mom, Rich Mom. Email: kpalmer@nerdvallet.com. Twitter: @KimberlyPalmer.
