Typical Prepping

Financial Disaster Planning

January 12, 2021 Keith Thomas Season 1 Episode 3
Typical Prepping
Financial Disaster Planning
Show Notes Transcript Chapter Markers

On This Episode:

Usually, when we think about disasters we think of tornadoes, floods, fires, or hurricanes. However, the most common disasters are usually financial in nature. Sudden loss of employment, unforeseen medical expenses, or disasters like floods and fires all have severe Financial consequences.

In today’s episode, I'll give you some tips on gaining control of your finances and we’ll discuss the 4 steps to creating a financial disaster preparedness plan.

Key Topics:

  • Start an emergency savings account
  • Pay off debt -Using the snowball method
  • Insurance Coverage
  • 4 - steps to create a financial disaster plan

1.Assess and Compile- Gather your important financial documents and contacts.

2.Review- Review your insurance policies and financial paperwork to be sure that they are still accurate and current.

3. Safeguard- Store paper and electronic copies of all files in safe locations.

4. Update-   Revisit and update your Financial Disaster Plan regularly. Updates are especially important when significant changes in your life occur.             

●Free Financial Planning Forms Forms
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Usually when we think about disasters, we think of tornadoes, floods, fires or hurricanes. However, the most common disasters are usually financial in nature. sudden loss of employment, unforeseen medical expenses, or disasters like floods and fires, I'll have severe financial consequences. On today's episode, I'll give you some tips on gaining control of your finances. And we'll discuss the four steps to creating a financial disaster preparedness plan. Welcome to typical prepping the podcast dedicated to everyday readiness and disaster preparedness. We're here to help those folks who seek to start their own disaster preparedness plan, or those who have gotten started, but are not quite sure where or how to take the next steps. Each week, I'll present a disaster preparedness topic with actionable tips and strategies that you can implement to start or grow your personal disaster preparations. Thanks for stopping by to listen today. Hi, I'm Keith and welcome to typical prepping. Today's episode is part two in our series on building an emergency preparedness plan for your family. In the last episode, we covered the family emergency communication plan. Today we'll discuss planning for financial disaster. And we'll wrap up the series next week with how to build your disaster emergency kit. Today, I'll provide you with some tips for preparing and safeguarding your family financially, as well as gathering information needed to create a financial disaster plan. So let's get into it. You need to plan what you would do if you had your own personal economic disaster. To truly prepare yourself. You must think of this not as a matter of pessimistically expecting the worse, but rather as well thought out preparedness. Ask yourself, what would happen if you lost your job? Whether you're single or have a family to provide for? What if you and your spouse were to lose your jobs at the same time? Given your current situation? How many months? Could you continue paying bills with no monthly income? You can apply for unemployment benefits. But what if your ex employer contests your claim and your application is rejected? What if you don't qualify for unemployment because you haven't worked at the job long enough? Or what if your employer goes out of business, And be mindful that during the recent covid 19 outbreak, that in many states, the state's unemployment office computers became so overwhelmed, Many people were delayed in applying for unemployment benefits. You must consider how many months of rent and utilities you would be able to cover with your savings. What bills would you continue to pay? Obviously rent or mortgage would be the first priority because you need a roof over your head. Food and utilities would come next, along with car payments for at least your main car, which you'll need to get around and find a new job. Other expenses such as cable TV dining out and entertainment could be slashed or eliminated, short term until you find a new full time job. Working a combination of part time jobs may also be an option. You should consider discussing lower monthly payments with your creditors. If your savings were to run out, you could try to negotiate with your mortgage holder or landlord to stretch your payments out. You may even have to move in with family members for a short time until you get back on your feet. Would you be willing to move to another state of jobs were scarce an area where you live? Well, these are just a few considerations to work through when preparing your financial disaster plan. Having this plan in place, will give you peace of mind and at the same time help you pinpoint your vulnerabilities. Before we get into actually creating a financial emergency plan. Allow me to make these suggestions. Starting an emergency savings account. Start saving money so you have at least Three to six months of living expenses. You should have enough savings to cover your rent or mortgage and basic utilities such as electricity, water, food, and transportation. If you set up an emergency savings account with your bank, make sure that this is a separate account from your normal savings account. The money in this savings account should be "earmarked" ONLY for emergencies, and pay yourself first. before paying your bills going out on the weekend or anything else set aside some money for your emergency savings account. Even if you can only afford $10 per week. You can save the money in a hidden jar at first. Once you have $50 or more start a savings account with your local bank or credit union. Make sure this is a free account and there are no fees involved. Once your savings account is set up, you can then set up a direct deposit from your checking account to your savings, you should set up the direct deposit to transfer a minimum of $25 to the savings account. This way you won't miss the money. Another good way to generate money for your savings is to declutter your home and sell unwanted items. These items can be sold in garage sales sold on eBay or Craigslist. Then set aside the money you make for your emergency savings account. Lower your bills, take a look at each of your monthly bills and evaluate whether you can eliminate or reduce any of them. Can you switch to a lower cable or internet or cell phone plan? In my personal experience, I've found that most cable internet and cell phone carriers will negotiate a lower monthly rate, especially if they believe you'll switch to a different carrier. A smart tactic to use is that once you successfully lower these expenses, immediately send the difference to your emergency savings account. Pay off your debt. If you have credit card debt, stop using your credit cards now. Put away your credit cards in a safe place and start living on a cash only basis. Make a plan to pay off all your consumer debt using the"Snowball Method". First, list all the amounts that you owe and the minimum payments for each. Apply any extra money you have toward the lowest balanced card, pay the minimum to the rest. As you pay off one card, add the amount you were paying on it to the payment you're making on the next card. Paying off the low balance card first will give you the immediate gratification of paying off debt quickly, and you will feel encouraged by the sense of progress. You may also want to try calling your credit card company to see if you can negotiate a lower interest rate, especially if you have good credit and receiving offers to transfer your balance. Also, if any of your cards carry annual fees lessening those extra charges by reducing the number of cards you have may save more than cutting the interest insurance coverage. Make sure you have health or medical insurance coverage for everyone in your family in case of any emergencies. Be sure you have life insurance coverage for yourself and your spouse, especially if you have young children who depend on you. If you own your home, make sure you have homeowners insurance. Be sure your homeowner's policy covers liability for accidents on the premises, damage to the home, loss or theft of its contents, and additional living expenses if it becomes uninhabitable. Most homeowners insurance policies exclude flood damage. So you want supplemental insurance to cover the possibility of flooding. Depending on your area and your insurance company, the same may also be true for other natural disasters such as fires, earthquakes wind, and tornadoes. If you're a renter, consider rental insurance for your house or apartment. If a disaster happens, insurance is essential to help you recover. We'll discuss more about insurance needs. As we get into compiling the information you need to create your financial emergency plan. Following the four steps I'm about to give you, you should be well on your way to creating your own personal financial emergency plan. I've tried to take some of the burden off you by offering free PDF files of the checklist and forms that we'll talk about. And you'll be able to find these PDF files through the link in the show notes. You can use these checklists and forms while gathering your financial information. So let's start with the four steps to creating a financial disaster plan. Step number one is to assess and compile in this will gather your important financial documents and contacts. Use the checklist to understand the documentation that you should collect. If you do not have an original version of a document, contact the appropriate company or agency to obtain a copy. If you've received paper checks for any federal benefits, consider enrolling in automatic benefits. If you've received paper checks from your employer, consider requesting direct deposit or prepaid debit cards. Print or download statements of any bills that you pay automatically, such as rent or mortgage payments, utilities, loan payments, and membership fees. Download any banking or Bill Pay mobile applications to your smartphone or other device for any bills that you pay online. This will allow you to consider these costs without the need to refer to or sort through paper statements. Take photographs, or record a video of rooms in your home and any valuable belongings as well as the important documents listed in your financial emergency plan. Include copies of these records with either your paper or electronic version of the financial emergency plan. Keep some cash in the same safe location as your financial emergency plan to pay for emergency purchases, in the event that ATMs are not functioning, or banks are closed. The amount of cash should be based on the basic needs of your family, including food, gas, and other things you use on a day to day basis. And know your FICO score, which is a type of credit score that lenders use to determine the risk of offering credit to a borrower. Knowing your FICO score will allow you to take action if it needs to be improved in order to prepare for emergency borrowing. And let's move on to step two which is review. In this step, you're going to review your insurance policies and financial paperwork to be sure that they are still accurate and current. If you own a home or a car, ensure that your homeowners and auto insurance coverage is enough to support you in an emergency. If you rent, ensure that your lease reflects your current rent and verify that your renter's insurance is up to date. The financial emergency plan PDF file will help you to identify any important personal documents or types of insurance, such as a will, living will life insurance policy or health insurance plan that you do not currently have and consider taking the steps to set up these items. Step three is to safeguard and to safeguard we're going to store our paper and electronic copies of all our files in safe locations. Considered consider storing paper copies of important documents at home in a fireproof or waterproof box or safe in a bank safe deposit box, or with a trusted friend or relative. If you're using a safe deposit box, you may want to ask your bank or check state laws to confirm who can and cannot access the safe deposit box if the owner dies or cannot access it themselves due to illness. For electronic copies of important documents, store them in a password protected format on a removable flash or external hard drive in your fireproof or waterproof box or safe. You can also consider using a secure offsite storage service. If you bank or pay your bills electronically, we recommend printing your account records to include with your financial emergency plan or download your bank's banking app to keep track of the statements every few months. Be sure to file living wills and advanced directives with hospitals and primary care doctors. And if you have a lawyer, financial advisor or trusted family member or friend, you may want to provide them with a paper copy of your financial emergency plan. In a sealed envelope. provide instructions that they should only open the envelope with your approval or the approval of someone you have chosen in the event you cannot make decisions on your own. These trusted people can be your next of kin over someone you have allowed to act on your behalf. This also known as a power of attorney. And step four, is to update, revisit and update your financial emergency plan regularly. updates are especially important when significant changes in your life occur. Suggested times when you should review your financial emergency plan are; during tax preparation time, at the start or end of daylight savings time, around your birthday, or at the start of a new year. Times when you will need to change your financial emergency plan as soon as possible, Are; when you change your insurance provider, when there is a change in residence, when you purchase a home or rent an apartment, when you open or close bank accounts, when you have a change in marital status, when you have a child, when your child changes schools, during retirement planning, and when there's a death within the household. Once again, if you'll download the free PDF files and use them alongside these four steps, you should be well on your way to creating your own personal financial emergency plan. Well, that's it for this week. Thanks for listening. Join me on next week's episode where I'll be discussing the disaster emergency kit. If you enjoyed this podcast, please share it with your friends and family. leave us a review on Apple podcasts. This really helps the show and gets our message out to others looking to start or improve their Prepping skills. If you found value in this content, feel free to leave me a donation at buy me a coffee.com/typicalprepping. Your donation helps with the production cost of the show so I can continue to bring you more amazing content. Also follow us on Facebook, Twitter, Instagram and Pinterest. Until next time, stay safe and be prepared.

Start An Emergency Savings Account
Lower Your Bills
Pay Off Debt using the "Snowball Method"
Insurance Coverage
The 4 Steps to creating a Financial Disaster Plan
Step 1- Assess and Compile
Step 2 - Review
Step 3 - Safeguard
Step 4 - Update