Five ways to organise your finances to cope with disaster

No-one has a crystal ball, so it’s important to always be prepared.

Five ways to organise your finances to cope with disaster

We’ve experienced unprecedented bushfires, followed by a worldwide pandemic; it’s time to be ready for the unexpected.

Here are a few hints from the financial experts for coping with disaster.

1. Have an emergency plan
The pertinent saying here is JFK’s: “The time to repair the roof is when the sun is shining.”

The best way to be ready for disasters is to make realistic budgets the basis of an emergency plan.

Assess your household budget by listing all essential monthly expenses, including rent or mortgage, leisure spending and groceries.

Subtract all extra spending, such as entertainment. What’s left is the amount of money you need to survive.

The federal government’s moneysmart.gov.au site suggests the following:

  • make the emergency fund a “separate, high-interest savings account”. This means you’ll be less tempted to dip into it for less important expenses
  • set up an automatic transfer from your wages into your emergency fund
  • if you have a home loan with an offset account, use the offset account as your emergency fund.

2. Insurance
Identify the disasters that can occur in your region and how they could affect you. Use a detailed home insurance calculator to work out the cost of rebuilding your home. Regular home insurance may not be enough. Make sure you’ve examined the fine print of your policy, so you know if you're covered for flood or bushfire.

Your policy must cover all the costs of rebuilding your house and replacing its contents.

3. Documents
Unfortunately, disasters involve red tape. You may need documentation to access relief, insurance payments and your assets. And you’ll need medical and financial records to begin or start the recovery process. Make copies of all your important documents such as passports, birth certificates and contracts. Keep these in a fireproof safe or in a safe deposit box. Photograph documents and belongings, and save the images on an external hard drive or to the cloud. Thirty minutes spent listing household items can save you a lot of hassle if you’re dealing with insurance claims.

4. Cash
During an emergency, electronic forms of money may be unavailable. Maintain enough cash to pay for food and lodging, for at least three days, if the power is cut. Smaller bills and coins will be handy, if you need to use laundromats or businesses lack change.

Keep this money in a fireproof, waterproof bag. Remember, you could lack access to your bank account, or an income, if the disaster is extreme.

5. Change your lifestyle/reduce debt
If you’re financially extended, you’re more vulnerable in emergencies. Economist John Adams addressed this when tackling ‘How to prepare for ‘economic Armageddon’.

He advised the debt-ridden to embrace a simpler lifestyle, “improving personal cash flow and selling unneeded assets and possessions”. The resulting increase in savings attacks debt.

He suggests prioritising debts that incur higher interest rates and shorter duration periods.

Changes in lifestyle include “cutting back on unnecessary spending, making your home self-sustainable through renewable energy or water tanks, or finding cheaper substitutes to current activities, for example exercising in the local park as opposed to going to a gym”.

We can develop extra income sources by learning new skills to run ‘microbusinesses’.

His further suggestions are surprisingly touchy-feely for an economist.

Build ‘home skills’, such as growing food, repairing cars and brewing alcohol; strengthen personal relationships; get fit.
And embrace spirituality!

Are you prepared for disasters? Do you have an emergency fund? Do you have up-to-date records of all essential documents?

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    Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.





    COMMENTS

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    Milly
    7th Apr 2020
    10:29am
    The mistake most people make is when they start work they never pay themselves, they pay the butcher the baker the candlestick maker but fail to pay themselves, so what you should do open a savings account and put 10% of your weekly pay into this account. You will then find if later in life a major financial problem comes along you will have ready money to overcome the disaster that you now face, and if by chance you go through life without a disaster, on reaching retirement you will have a tidy amount to spend. How do I know because that is what I did and it really paid off BIG TIME. Forget living off a CREDIT CARD.
    Priscilla
    7th Apr 2020
    10:52am
    Excellent advice! Also, the use of most cards incurr fees which you do not have when you use cash. It is also scary to see how quickly your money disappears when using cash as against cards.
    Teacher
    7th Apr 2020
    12:11pm
    All the above is very helpful in certain circumstances but it is quite different for financial matters with COVID-19. I've heard of the experience of a person trying to buy petrol by using cash which was not being accepted at the petrol outlet because of the handling of notes. This person did not have e-banking so had to look elsewhere. Even at a KFC outlet this was the case. How many older people will be in this same situation? About coins - there's nothing hard about wiping them down with desensitizer.
    KFC are going to lose a lot of revenue from low income earners or are on benefits who frequent these places for their regular meals.
    Regarding food and the elderly who are told to stay at home and get someone younger to get their food, you can't ask someone younger, also risking their own health, to nitpick on bargains and savings in the supermarkets - also taking up too much time with number crunching staff.
    Then again, what if you run out of printer cartridges or paper to do copies of everything. And what shop is still open that sells fireproof safes etc?
    This is a whole new game now and takes different thinking, especially with the financial side of things where the government might be honing in on the opportunity to do away with 'legal tender' and make e-banking the mandatory - that is if you have a mobile phone or a computer and know how to use them. Not a good option for the elderly.
    Sundays
    7th Apr 2020
    1:05pm
    The small local shops in my area are only taking card at present. People on benefits have their money deposited into bank accounts. They all have debit cards to withdraw money and can also be used to pay for goods. Unfortunately, we must all adapt
    Anonymous
    7th Apr 2020
    3:47pm
    All most everyone has a debit card so it's time to use them.

    7th Apr 2020
    3:46pm
    I just cut my spending so I only buy the bare essentials. It is amazing what one can do without and make do with. Turn off my hot water about a month ago now. Using my BBQ for cooking now too. Car is staying in the shed. Got the garden growing well so get some fresh free food to eat.
    Lookfar
    8th Apr 2020
    10:28am
    Milly and Priscilla, please take into account that a total crash of the economy will obliterate your no doubt helpful thoughts on a micro level, - I am disappointed to see such ignorance of the current situation.