Hurricane Irene: Virginia CPAs Offer Tips to Prepare Financially for Disaster
According to the United States Geological Survey (USGS) Tuesday’s 5.8 magnitude earthquake was the first significant quake to rock Virginia since 1897. And Hurricane Isabel caused more than $600,000 worth of damage and claimed more than 20 lives in September 2003. Now as the Commonwealth prepares for Hurricane Irene, the Virginia Society of Certified Public Accountants (VSCPA) offers advice to protect you financially from a disaster.
While it’s unsettling to think a natural disaster could affect you, emergencies can and do occur. The good news is that, with a little planning, you can minimize the financial impact of an unexpected crisis.
Organize Your Financial Records
Organizing your financial and family records can save you time, money and trouble. Sort through the paperwork you’ve been collecting and move important permanent records, such as birth certificates, wills, property deeds and trust agreements, to a secure fireproof location off your premises. Other records can be organized in a file cabinet or using whatever system works for you.
Calculate Your Net Worth
Looking at your total financial picture is a simple way to know exactly where you stand. Take the time to prepare a net worth statement, which will give you a realistic sense of your assets (what you own) and your liabilities (what you owe).
Build an Emergency Fund
Most CPAs agree that it's a good idea to create an emergency fund equal to roughly six to nine months worth of living expenses. The right amount for you depends on your financial circumstances. It will take time and a few sacrifices to set aside that amount of money, but it's worth the peace of mind it provides in an emergency. Using an automatic savings plan to direct money to your emergency fund is a relatively painless way to save. Be sure to keep your emergency funds in an easily accessible account, such as a savings or money market account. While the interest rate may be low, bear in mind that liquidity is the goal for your emergency fund.
Be Adequately Insured
One of the best defenses against financial difficulties is a well-formulated plan for insuring yourself and your possessions. You should review your homeowner's insurance at the start of each year to determine whether or not your policy amounts are keeping pace with the increased value of your home. Also, review your car, life and medical insurance polices regularly to ensure sufficient coverage.
Identify Possible Credit Sources
If you own your home, a home equity line of credit can help you through a financial emergency. But it’s important to apply now, while you’re in good health and employed. Unlike a home equity loan, a line of credit is there if and whenever you need it.
Meet With a CPA
While it may be time-consuming, preparing financially for disasters could save you significant time and frustration in the event of an actual emergency. A CPA can work with you to review your plan and ensure that you are well-protected in the event of an emergency. For free disaster recovery advice take advantage of the VSCPA’s “Ask a CPA” Email Program on www.FinancialFitness.org or reference the Financial Preparedness Guide, prepared by the American Institute of CPAs in partnership with the Red Cross and National Endowment for Financial Education on www.redcross.org.