Natural disasters have a way of disrupting more than the forecast.
Here on the central coast, wildfire, heavy rain, flooding, fallen trees, road closures, and power outages can quickly affect where we live, how we get to work, and our expenses.
We have seen just how quickly that can happen. You cannot control the weather, but you can give yourself a little more financial breathing room when it takes an unexpected turn.
Before the next major storm or fire threat arrives, add these four financial tasks to your preparation.
1. Know what an emergency could cost you
Insurance can provide important protection, but it is still worth understanding what you may be responsible for paying out of pocket.
Start by reviewing your homeowners or renters insurance. Look at your deductible coverage limits, and whether your policy includes help with temporary living expenses if you cannot stay in your home after a covered event.
Pay particular attention to what is not covered.
For example, standard homeowners insurance generally does not cover flooding. Flood insurance is typically purchased separately, so it’s important to understand your risk and coverage options before a major storm arrives.
The goal is not to become an insurance expert. It is to avoid finding out after an emergency that your deductible is higher than expected or that a certain type of damage is not covered.
Once you understand your coverage, ask yourself another financial question: If you had to pay your deductible tomorrow, could you?
Knowing that number can help you set a more realistic savings goal and prepare for costs that insurance may not cover.
2. Protect your financial paperwork
Imagine having only a few minutes to leave your home.
Your insurance information, account records, and tax documents are probably not the first things on your mind.
That is why it is worth preparing a checklist ahead of time.
Make secure digital copies of important financial and personal records, including:
- Insurance policies and contact informationÂ
- IdentificationÂ
- Bank and credit union account informationÂ
- Loan and mortgage informationÂ
- Tax recordsÂ
- Property and vehicle documentsÂ
- Pay stubs and employment benefit informationÂ
Store the copies securely somewhere you can access, even if you cannot return home. Important originals can also be kept in a waterproof and fire-resistant container.
Help protect your possessions in the event of a disaster, too. Grab your phone and take photos or videos of the rooms in your home and document major purchases and valuable belongings. Keep receipts or serial numbers when you have them.
You do not need a perfect home inventory. Having some record of what you own can be much more helpful than trying to recreate a list from memory after a loss.
3. Have a plan if your paycheck is interrupted
Not every financial impact of a disaster comes from property damage.
A closed workplace, evacuation order, damaged road, school closure, or power outage could affect your ability to work even when your own home is untouched.
Think about what your household would do if one paycheck were smaller than expected or did not arrive on time.
Start by identifying the bills that need to be paid first. Housing, food, utilities, transportation, and insurance will likely be high on the list. Then identify expenses you could temporarily reduce or postpone if necessary.
It is also helpful to know whom to contact if you have trouble making a payment.
If an emergency puts pressure on your budget, contact your financial institution, lender, or service provider as early as possible. Waiting until after a payment is missed can limit your options. Depending on the circumstances, assistance or alternative payment arrangements may be available.
Another good idea is to keep your employer’s contact information and details about direct deposit, paid leave, and other benefits with your important financial records.
4. Build a little financial breathing room
An emergency fund can help cover the expenses that do not always make it onto a disaster checklist.
If you have to evacuate, lose power for several days, or cannot get to work because of a road closure, you could suddenly be paying for gas, meals, lodging, replacement groceries, pet care, or other unexpected costs.
If you do not already have emergency savings, do not let a large goal stop you from getting started. Even putting aside a small amount at a time can help build a cushion.
Consider setting up an automatic transfer into a separate high-yield savings or money market account each payday. These can help your emergency savings earn more while keeping the funds accessible when you need them.
Already have emergency savings? Fire and storm season is a good time to check the balance and ask yourself how far it would go if your household had to cover several days of additional expenses.
The goal is not necessarily to have enough money for every possible emergency. It is to keep building a financial cushion that is accessible and ready when an unexpected expense shows up.
Prepare for the financial curveballs
Most of us know the basics of emergency preparation. Keep water on hand. Charge the flashlights. Have an evacuation plan. Trim vegetation before fire season and clear the gutters before heavy rain.
Your finances deserve a place on that checklist, too.
Understanding what an emergency could cost, protecting your financial records, planning for an interruption to your income, and building emergency savings can help you recover more quickly when the unexpected happens.
You may not be able to predict the next central coast curveball, but a little financial preparation today can help you feel more ready when it arrives.
About Bay Federal Credit Union
Bay Federal Credit Union is a full-service, not-for-profit financial institution that serves over 97,000 members, including 3,100 local businesses and nonprofit organizations throughout Santa Cruz, San Benito, and Monterey counties. With more than $1.8 billion in assets, Bay Federal is the largest member-owned financial institution in the region. The organization has been proudly serving its members and the community since 1957. Bay Federal is a certified Community Development Financial Institution, with a primary mission of promoting community development alongside their financial activities. Bay Federal has an award-winning employee volunteer program in which employees have given their own money and volunteered for numerous local schools, nonprofit organizations, and community events each year.
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