Emergencies such as power outages or bad weather can happen at any time and can be costly. Unplanned hotel stays, lost documents and damaged belongings are just a few of the expensive consequences. But there are ways to prepare yourself, including keeping cash, storing essential documents in a safe place, and knowing how to protect your credit even when you have to miss a payment. Preparing for the next emergency today can be one of the smartest financial moves you can make as 2023 begins, and you can make it manageable by taking small steps each week.
When a power outage knocked out a multi-state area in 2003, Detroit-area financial coach Gabriella Barthlow was on hand. She had enough money to buy food for herself and her two young children, as well as put petrol in her car in case they needed to leave the house.
“I was so glad I got that money,” she recalls. Now, Barthlow encourages her clients to be similarly prepared for unexpected events. Power outages, weather outages, and other disasters can wreak havoc and cause financial loss—often without warning—but being prepared can help minimize the damage.
Here are steps you can take to make sure you are prepared for the next emergency.
Put aside physical cash
As Barthlow found, cash can be critical when you’re experiencing extended power outages because machines that accept debit and credit cards may not work. You want to keep enough cash on hand to cover gas and food for several days and carry at least some of it with you, says Bernie Carr, author of “The Prepper’s Pocket Guide” and founder of apartmentprepper.com.
“I like to keep $40 in cash in my car or purse so I know I can always come home at least when the records aren’t working,” Carr says.
This money is in addition to an emergency savings fund, stored in a savings account to help you get through a period of unexpected hardship or loss of income. Financial experts often recommend accruing three to six months’ worth of expenses in this account, but even much smaller amounts will help stabilize your finances.
Slow build up supplies
Carr suggests buying supplies over time that can help you survive temporary disruptions to power, water, and other utilities, as can happen during natural disasters.
“When you next go grocery shopping, put aside $10 and buy bottled water or a box of your favorite food or instant oatmeal,” she suggests. At the next visit, pack a first aid kit with items such as antibacterial bandages and wipes, or flashlights and extra batteries. Other types of equipment such as a water filter, camping stove, and solar lights can also be useful.
“A lot of emergency gear is also camping gear, so there are a lot of sales before and right after summer,” says Carr.
Gather your important documents
Barthlow suggests gathering your essential documents—contact numbers; insurance information; a recent bank statement; identity cards; Marriage, birth and divorce certificates – and put them in a waterproof and fireproof box, plus scan them and store them online in a password-protected account or on a flash drive.
“I also ask people to turn their lives around, because if you save a lot of paper, you can’t find the things you need,” says Barthlow.
With this streamlined approach, she says, “I can get out of my house in an hour or less and see where all my essential documents are.”
January may be the perfect time to take on this challenge, says Paul Golden, a spokesperson for the National Endowment for Financial Education, a nonprofit that promotes financial education and well-being. “The new year can be a good time to get the preparations done. It’s the time of year when people take stock, clean up documents, and resolve to be better at everything.”
Protect your credit
During emergencies, it can be easy to miss a bill or credit card payment, which can hurt your credit, Golden warns.
“If you anticipate a break in on-time payments with your creditors, call each of them and tell them where you stand. Perhaps ask for an extension,” he suggests.
In cases of widespread disruptions, such as the COVID-19 pandemic or a power outage, companies may offer modified payment plans to those affected, but you may have to roll it out or sign up.
Scammers often target victims of natural disasters, so beware. “Be very alert with emails sent to you or phone calls and check who you’re talking to before sharing any account information,” Golden says.
If you get a phone call from someone claiming to be your insurance company or financial institution, they suggest hanging up and calling customer service to make sure you’re actually talking to them.
Start the recovery process
Once the emergency has passed, it’s time to pick up the pieces: file any insurance claims, rebuild spent emergency savings and replace used supplies. Golden suggests taking detailed notes of all customer service interactions to make it easier to follow up and track payments. The DisasterAssistance.gov website provides information about local recovery efforts, and 211.org can connect you to community resources such as food banks.
Surviving an emergency situation can inspire you to prepare for the next situation. Suffering from Hurricane Ike in 2008 is what prompted Carr, who lived 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 normal part of life, like getting car insurance. An emergency situation 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@nerdwallet.com. Twitter: @KimberlyPalmer.