How to protect yourself in a financial emergency

If you’ve turned on the news lately, you’ve likely been hit with the recent bank fails, recession concerns, soaring inflation, and rising interest rates. It’s enough to convince you that the apocalypse is on its way! So how do you protect yourself and your family in a financial emergency? Let’s get our financial ducks in a row!

1. Have Adequate Insurance

When protecting you and your family from a financial emergency, adequate insurance is important. Do you have life insurance? If so, do you have enough life insurance to help your surviving family members pay to bury you, pay off any associated medical debts from your death, and live off for a time? If you’re divorced, or you depend upon someone to pay for child support, do you have life insurance on that person? What happens if they pass away and you no longer receive child support? If it would greatly hinder your family’s survival, you need to take out a life insurance policy for yourself and your ex. 

Do you have renters or homeowners insurance? Again, if so, is it enough? When we first bought our home, we didn’t realize that the insurance policy we first had on our home didn’t cover some important things. One, it only covered 1,600 SQFT, which, yes, is how much we live in, but that didn’t include our basement, my husband’s workshop, and our garage. Our total SQFT is 2,200, not 1,600. Not only that, it didn’t include things like if our septic tank backed up and flooded our home. Thankfully, we found these errors and got the right amount of coverage because our septic tank eventually flooded our home. 😬

2. Have an Emergency Fund

Hands down, one of the best ways to protect you and your family in a financial emergency is to have an Emergency Fund at the ready. Don’t get me wrong, saving up 3-6 months’ worth of living expenses is a bit overwhelming. But trust me. You’ll be so grateful when you have that cushion to land on with life sucker punches you. I also know that there’s a lot of debate about how much you should have in an Emergency Fund and if you should have 3-6 months worth. But here’s the thing. If you’re at all worried about a Recession – you should absolutely have a six-month Emergency Fund. Why? Because the scariest part of a Recession is not inflation or high-interest rates. It’s job loss. More than job loss, it’s a cold job market. That six-month Emergency Fund can make all the difference for your family in a time of need. 

3. Diversify

You’ve probably heard how you should diversify your investment portfolio. And you definitely should do that by keeping money in stocks, bonds, ETFs, mutual funds, etc. Instead of just keeping all your money in stocks alone. However, you should also diversify the banks you use to house your money. 

With the recent bank collapses that have happened, I know lots of folks are on edge that their money will too disappear. That’s why you must keep your liquid money (meaning your Emergency Fund, Sinking Funds, and checking accounts) in FDIC-insured accounts. But not only that, you need to spread your money out. Why? Well, if your bank fails and your money is in an FDIC-protected account, you will get your money eventually. First, they will freeze all that bank’s assets, including your money. You still need money to live on while waiting for the FDIC to do its thing and release your money. That’s why I’m a fan of having your money in a few different banks. My family personally uses three – Wells Fargo, Capital One, and CIT bank. This way, you’ll still have access to at least some of your liquid money if a bank you use fails. 

4. Have a Modest Food Stockpile

This one isn’t necessarily about money, but it’s important nonetheless. You should have a modest stockpile of non-perishable food and bottled water. This can be a lifesaver in the event of a natural disaster if you’re unable to get to a grocery store or have no power or water. You can at least still have something to survive on. This is also an important way of being able to stretch your budget even further if hard times hit like a job loss or the loss of a loved one. 

5. Keep Some Cash On Hand

This is another one to file to under things that are great to have, especially if you face a natural disaster. Keep some cash on hand at all times. When Hurricane Ida tore throw my town and knocked power out for days, we needed gas for our generator. The problem was that the gas stations had generators to run power, but one of the major AT&T power hubs was destroyed in the storm. This caused the internet to go down. The gas stations near us couldn’t run card payments due to no internet, and the ATMs didn’t work either. Thankfully we had $200 cash on hand, ready to go just for an event like this. I recommend keeping less than $500 cash – after all, this needs to be money that, if your home was robbed, you wouldn’t be put out. It would just be inconvenient instead of catastrophic. Also, this money – whatever amount you decide on – should be kept in small bills. Remember that these businesses may not be able to break a $50 or $100 bill in these circumstances. 

6. Store Your Information Somewhere Safe and Accessible

If something were to happen to you right now, would someone you trust (like your spouse, mom/dad, children, etc.) know how to access your information? Could your spouse figure out how to log into your investment portfolio without your help? Could you easily file a claim with your homeowner’s insurance if your home was destroyed? 

The best way to ensure you are financially prepared in an emergency is to have a safe place to store important information. For my family, we keep this information in a fireproof box and in the cloud. The fireproof box is easily accessible if we had to flee our home quickly and contains all the hard copies of important information and our passports. We use the cloud to keep electronic copies of these documents, and only one other member outside of me and my husband knows how to access that cloud if something were to happen to both of us. 

Items to keep stored safely:

• Passports or other Photo IDs.
• Cash (in small bills)
• A video walkthrough of your home and the contents in it (this will make submitting home and renters insurance claims easier because you’ll have proof of what you had).
• Marriage certificate or divorce decree
• Birth and death certificates (originals – not copies)
• Social Security Cards (you’ll need these to file for FEMA assistance, so it’s important to have them at the ready)
• Military service documents and dog tags, if applicable. 
• Housing documents (payment information, deed, etc.)
• Financial documents (where your accounts are located/account numbers/passwords/beneficiary information)
• Insurance policy documents.
• Important medical information for everyone in your household.
• Pet ID information (microchip info if they have one – remember to keep this updated on file with the specific company that their microchip is from).

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