Financial Planning Guide Offers Tips for Disaster Preparedness

More than 45 serious natural disasters struck the United States in 2014, ranging from severe storms and flooding to tornadoes, earthquakes, mudslides and wildfires, according to Federal Emergency Management Agency. Two thirds of which occurred between May and December. A disaster can hit anytime, anywhere, which is why it is important to make sure you and your family have a preparedness plan in place.

To help people mitigate potential damages and lessen the financial blow of a disaster, the National Endowment for Financial Education (NEFE) has partnered with the American Red Cross and the American Institute of Certified Public Accountants (AICPA) to produce a new guide: Disasters and Financial Planning: A Guide for Preparedness and Recovery.

“Disasters obviously take an emotional toll, but the sudden shock to your financial system can be severe,” says Ted Beck, president and CEO of NEFE. “The most overlooked aspect of recovery in the chaotic aftermath of an unforeseen event is safeguarding one’s finances and conducting damage control to shorten the duration of financial disruption.”

Disasters and Financial Planning is a comprehensive, interactive guide developed to help people take proactive steps to minimize the potential impact of disasters on their lives and financial well-being. The guide is divided into six sections—with easy-to-follow checklists—covering topics such as making a disaster plan and protecting your property, income and records.

More than one-third of Americans (36 percent) still rely on credit card use above all else when faced with an unforeseen major expense (which affected 63 percent of respondents in 2014), according to a recent survey by NEFE. While many adults (32 percent) realize the benefit of an emergency savings account, nearly half of respondents (48 percent) report living paycheck to paycheck. Having a solid financial plan in place can help make facing unforeseen expenses, like those in the wake of a disaster, more manageable.

“Financial planning is beneficial for events from power outages to hurricanes,” says Richard Reed, senior vice president, Disaster Cycle Services for the American Red Cross. “Some households may not have the financial resources to have much of an emergency fund, but having a three-day supply of cash to help cover expenses if you and your household members have to evacuate is a good place to start.”

“It is important to plan not only for potential financial dangers in the midst of an event—such as the need to quickly access important financial documents and emergency cash in the event that ATMs and banks are inaccessible—but to mitigate the potential longer-term effects of unforeseen expenses through proper insurance and property protections,” adds Beck.

Disasters and Financial Planning was written and produced by the AICPA, the American Red Cross and NEFE and is offered as a free download. Although written for consumers, the guide also is a useful tool for CPAs and other advisors to counsel individuals on what steps to take to minimize the financial impact of a disaster. For more tips on financially preparing for and recovering from a disaster, visit www.smartaboutmoney.org.

Source: NEFE