Financial Security For Dummies. Eric Tyson
if you live in the United States, you’re likely at risk for one (or more) of these where you live. And even if you live in an area deemed at low risk for these types of natural disasters, unusual events that rarely happen may be your unfortunate fortune. Consider the good folks living in the normally warm southern states like Texas that got clobbered in early 2021 with harsh winter conditions complete with multiple snowstorms, below freezing temperatures for a full week, power outages, and more.
It had been decades since such extreme winter conditions hit the area and combined with the power outages, led to broken pipes and displaced homeowners and renters. Coming in the aftermath of the COVID-19 pandemic, it also hurt some small businesses.
During natural disasters, I’ve seen some people’s lives turned upside down for many months or longer. Without adequate insurance (such as business interruption insurance), the financial consequences can be devastating. Even with insurance, folks can lose big financially, especially if the disaster disrupts or devastates their small business. Supply chain issues or customers unable to buy may bring some small businesses to a halt, and many small-business owners lack contingent business interruption insurance that may cover such problems.
If you’re dealing with the aftermath of a natural disaster, of course, it’s too late then to do anything about the insurance you didn’t have, but there are many things you can do to deal with your situation:
Ensure your personal safety first. Frontline safety responders will tell you that it’s often the case that there are more fatalities in the aftermath of some natural disasters than from the disaster itself. With hurricanes, for example, numerous victims die in the flooding that follows the storm. Long power outages lead to spikes in carbon monoxide deaths as people make mistakes in rigging up generators near their home or in their garage. Downed power lines have led to some folks being electrocuted. So, please be careful in the aftermath of a natural disaster and don’t rush out to do things that can wait or take unnecessary risks like trying to drive through a water-covered roadway.
Think outside the box if your small business is in trouble. To survive and thrive as a small-business owner, you need to be resilient and flexible. Conditions change, and a disruption from a natural disaster can be upsetting. So, get creative about how to find and serve your customers when the landscape changes. Maybe if your customers can’t come to you, you can go to them. Perhaps you can serve them through video calls/conferencing. We’re all creatures of habit, and it can be hard to change the way we are accustomed to and prefer doing things.
Take a hard look at your expenses. If you’re suddenly facing a period of reduced income due to natural disaster, take a fresh look at your spending and cut non-necessities as needed. You can always restart them, and you may well find that some providers will offer you better pricing if you’re set to cancel due to short-term affordability issues. Don’t cut needed catastrophic insurance coverage.Scrutinize your small-business expenses in a similar fashion. Just be careful to not cut expenditures that could cut into sales, compromise the quality of your products or services, or leave you exposed insurance-wise.
If you have insurance claims, be sure to document everything and be ready to negotiate and fight for what you’re due. Some insurance companies do the right thing, but too often, they will view your claim as a business expense and do what they can to minimize your payments.
Success Plans for Personal Crises and Life Changes
I apologize for spending so much time on negative events and crises in this chapter. I hope that your life will have far more positive events and surprises than the negative things discussed here. But I can tell you that good things come out of bad events.
Following I offer some discussion points that pertain to all types of life events — not just the negative ones discussed earlier in this chapter.
Keeping your big picture in mind
First, here are some general tips that apply to all types of life changes:
Stay in financial shape. An athlete is best able to withstand physical adversities during competition by prior training and eating well. Likewise, the sounder your finances are to begin with, the better you’ll be able to deal with life changes. See Part 4 for all about getting and keeping your personal finances in tip-top shape!
Remember that changes require change. Even if your financial house is in order, a major life change — starting a family, buying a home, starting a business, divorcing, retiring — should prompt you to review your personal financial strategies. Life changes affect your income, spending, insurance needs, and ability to take financial risk.
Don’t procrastinate. With a major life change on the horizon, procrastination can be costly. You (and your family) may overspend and accumulate high-cost debts, lack proper insurance coverage, or take other unnecessary risks. Early preparation can save you from these pitfalls.
Manage stress and your emotions. Life changes often are accompanied by stress and other emotional upheavals. Don’t make snap decisions during these changes. Take the time to become fully informed and recognize and acknowledge your feelings. Educating yourself is key. You may want to hire experts to help but don’t abdicate decisions and responsibilities to advisors — the advisors may not have your best interests at heart or fully appreciate your needs.
Considering a comprehensive checklist
I close this chapter with a checklist of important items to keep in mind as you’re navigating a personal crisis that is impacting your finances. We’ve covered all of these in one way or another in this chapter, but I provide you with this final, overall list so you can use it to remind yourself of key things to do and consider when you’ve encountered tough times.
Be prepared for tough times. This preparation can include having an emergency reserve and flexible spending so that you can more easily reduce your spending. Try to minimize the amount of spending that you engage in that is locked in, for example, through contracts for an extended period of time.
When trouble hits, set aside time to consider and discuss the situation with family or someone you can trust. Spend time brainstorming on your topics of concern, including ways to reduce your spending.
Make note of benefits you lose through an employer and develop a plan to replace needed catastrophic insurance. You always need health insurance, and until you’re financially independent, disability insurance. If others are dependent upon your employment income, you should also have term life insurance.
Be flexible and keep an open mind. A crisis can lead to opportunities for change and may include things like moving or simply changing your approach to certain aspects of your life and finances.
Be prepared to negotiate and advocate for yourself and situation. This can include things like your housing and being able to meet the terms of your mortgage repayment or rental payments for a lease or dealing with an insurance company claim. If you have a hard time doing these things, enlist the support of someone who is comfortable and adept at doing this.
Take time for your mental health and decision making. You should always do this, but it’s especially important for you to take a little time every day to do things that you enjoy and that help you to relax. For some folks, this can be exercising, reading a good book, listening to music, and so forth.
Understand and make use of your employee benefits. In my work as a financial counselor, I often discovered valuable employee benefits that my clients had overlooked or forgotten they had access to.
Understand the tax consequences. Many financial decisions involve tax considerations, so be sure you understand those issues and tax reduction opportunities associated with those decisions.
Find out about safety nets. When you’re facing a personal