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Take time now to prepare for the worst

Watching the devastation caused by fires in California, Oregon and Washington state in recent weeks has been heartbreaking.

The nightly news shows us the anguished faces of people whose homes were destroyed.

In New Mexico we do not need to worry about hurricanes or tsunamis. However, fires, earthquakes, floods and tornadoes are all possible. I recently saw a TV news story that featured a woman who lives in California showing a notebook she keeps by her bed with handwritten notes detailing what she would take if she needs to evacuate with only a few moments’ notice.

This reminded me of my April 2020 article in the Journal. In it, I discussed creating a finance binder to store all of your important documents. The binder was intended to ease the burden on your spouse or children if you die, but it would also be extremely helpful in case of an emergency. The binder includes the following sections:

n Net worth statement (a list all of your assets and all of your debts) • Investment and bank statements (a recent statement for each account)

• Insurance statements (homeowner’s, auto, umbrella, health, long-term care)

• Legal documents (will, trust, power of attorney, health care directives)

• Important documents (passport, deeds, mortgage statements, and birth and marriage certificates)

• Cash flow and location (automatic deposits from Social Security, pensions or annuities; automatic payments from your checking account; and the locations of the safe deposit box and original legal documents)

• Home and technology (repair firms for plumbing, air conditioning; contact information for gardener, and instructions for lawn irrigation system, TV controls and passwords)

• Miscellaneous

Maintaining a finance binder is one way to prepare for an emergency. But I recently learned of another excellent resource created collaboratively by the Red Cross, the National Endowment for Financial Education, and the American Institute of CPAs. The 50-page guidebook, titled “Disasters and Financial Planning: A Guide for Preparedness and Recovery,” is full of helpful ideas, such as how to assemble a disaster supplies kit, what to include in a “letter of intent,” and what to do after a disaster.

The guidebook covers many important subjects.

Personal property: Many of us ignore these steps, but they are a vital part of emergency preparedness. The guidebook recommends the following: • Conduct a household inventory.

• Make a list of your possessions, and include model and serial numbers when available.

• Store your inventory list in a safe place away from your home, such as a safe deposit box at a bank located away from disaster-prone areas, or with a friend or family member.

• Update your inventory annually.

Create a photographic record. Photograph or video record your property’s interior and exterior, vehicles, large furniture, collectibles, and the contents of your garage, closets and attic.

Store this photographic record off-site in a safe deposit box or with family or friends who do not live near your home.

Save receipts for valuable items and get professional appraisals of jewelry, collectibles, and artwork.

Understand your homeowner’s insurance policy. Talk with your insurance agent about what your policy covers and what it does not. Does it include replacement cost coverage for your possessions and for rebuilding? How much is your deductible (the amount you pay before your policy pays). Do you have an umbrella/excess liability policy? Does it provide enough coverage? Are your vehicles properly insured?

A standard homeowner’s insurance policy rarely covers flood damage, so you need to consider whether you want to buy a separate flood insurance policy or earthquake policy. You may want to consider buying a rider (attached to your homeowner’s policy) that provides extra coverage for computer equipment, jewelry, artwork or other expensive items.

What documents should be kept in a home safe vs. a safe deposit box? Many home safes will not survive a fire. Many documents can be stored in a safe deposit box, but it is always recommended that you not keep the original of your will or trust in a safe deposit box. The box may be locked by the bank upon learning of your death, and it is important that you have originals and copies of your legal documents in your home, and with an attorney, friends or family members.

Like the woman who keeps a hand-written list near her bed, write down what you would take if you had to leave your home quickly. Of course, children and pets would be first. After that, your list may include your finance binder, special photos, a few items you treasure, and clothes for a few days.

We all hope we will never have to watch our home go up in flames, but being prepared for a crisis is always wise. With that in mind, I highly recommend you download “Disasters and Financial Planning: A Guide for Preparedness and Recovery” at https://www.redcross.org/content/dam/redcross/get-help/pdfs/disasters-and-financial-planning-guide.PDF.

If you would like a copy of my full article on creating a finance binder, please email me at dscygan@sagefuture.com.

Donna Skeels Cygan, CFP, MBA, is the author of “The Joy of Financial Security.” She has been a fee-only financial planner in Albuquerque for over 20 years, and is the branch manager for the Mercer Advisors office in New Mexico. Contact her at dscygan@sagefuture.com.

 

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