6 ways to mitigate the financial impact of disasters

March 5, 2019

Springtime in Oklahoma can be beautiful, but it can also be dangerous. Oklahoma’s unpredictable weather reminds us disasters can strike at any time. While your family’s health and security are the most important considerations, regaining order in your finances is essential for returning to a normal life. The Oklahoma Society of Certified Public Accountants (OSCPA) suggests proper planning and preparation beforehand. Here are five basic pre-disaster preparation tips:

  1. Keep records in order. In the wake of a disaster, documentation may be necessary. This includes personal identification, insurance papers and banking and investment information. CPAs advise keeping all of these important materials in a bank safe deposit box or a secure, fireproof home safe. Documents to store include birth, death and marriage certificates; divorce and custody agreements; passports; military records; copies of drivers’ licenses; deeds and contracts to property; as well as stock and bond certificates. You may also consider storing copies of some documents with a trusted relative or friend who lives in another location and in cloud storage. That’s added protection in case you are unable to gain access to a home safe or even your local bank after a disaster.
  2. Take pictures. Among the records, remember to store photos of your home and what’s inside it, including the contents of closets, garages, attics and basements. Photograph cars and any other belongings that could be damaged in a disaster. It’s also a good idea to make an inventory of all possessions, along with your best estimate of what each would cost to replace. The photos and inventory will come in handy when you make an insurance claim. 
  3. Have some cash on hand. How will you pay for food, a hotel or other needs if you are forced to leave your home? If the power goes out in your area, banks or ATMs may be unavailable. That’s why it’s a good idea to always have enough cash on hand to cover your family’s expenses for at least five days. Keep this money in a safe location where it can be easily accessed. Additionally, try to establish three to six months’ worth of living expenses for you to later access during disaster recovery.
  4. Take time for you. The weeks and months following a disaster can be confusing and difficult. In the wake of a disaster, take time to absorb what happened, seek advice and refrain from making immediate financial decisions. Additionally, if you've been injured and cannot work, you may be eligible for monthly disability insurance benefits. Apply as soon as possible to protect your income flow. 
  5. Consider tax implications. If your property has been damaged or destroyed as a result of a federally declared disaster and your loss meets IRS guidelines, you may be able to deduct the loss. Under certain circumstances, you can claim an increased standard deduction for any net qualified disaster loss. Rules changed after the Tax Cuts and Jobs Act, so it's best to consult your CPA for specific guidance.
  6. Ensure you're insured. Inevitably, disasters compel you to reconsider the role of insurance. Evaluate whether you have the right type and amount for property, health, disability and life insurance. Once you recover from a disaster, take steps to establish a financial cushion. Keep these funds in a safe, easily accessible account and use them only during an emergency. For many people, disasters demonstrate the importance of having a will. A will names your heirs and appoints a guardian if you have young children. If you die without a will, the state decides who gets your possessions, regardless of your personal wishes.

Find additional resources at www.ready.gov and www.usa.gov. To get personalized advice on family finances, visit your CPA. In Oklahoma, you can get a free CPA referral and free 30-minuted consultation from www.FindYourCPA.com. For more money tips, visit www.KnowWhatCounts.org, like Know What Counts on Facebook, and follow Know What Counts on Twitter.