How to Financially Prepare for Natural Disasters: Essential Tips for Taxpayers
Introduction
National Preparedness Month is in September. It is essential that you develop emergency and disaster plans for yourself and all those under your care. People just like you may find themselves in your community in the centre of unexpected emergencies.
It is crucial that taxpayers prioritize financial preparedness for natural disasters in September by first establishing a substantial emergency fund. They should also create a thorough disaster plan, check and update their insurance coverage, store essential documents in a waterproof location, and consider measures to minimize property damage.
National Preparedness Month aims to highlight the importance of being ready for unexpected disasters and emergencies. This annual initiative is focused on aiding individuals, families, businesses, and communities to be prepared, respond and recover from emergencies.
Understand the Risks in Your Area
Tornado outbreaks, river floods, flash floods, historic earthquakes, tsunamis, water main breaks, and power outages have affected millions in US cities over time. Identifying local risks helps you anticipate potential dangers and make informed decisions. Using tools like the NFIP's flood risk calculator to better understand your flood risk or having a family emergency plan is crucial for quick response during disasters. Ensure arrangements are in place for children, elderly individuals, and those with disabilities.
Safeguard Important Documents
It's likely that you will need to show documentation after a disaster to get insurance claims processed, receive disaster aid, or receive your money and possessions back. Ensure to have duplicates, additional originals, or certified copies of crucial papers in a single, accessible place like a fireproof safe.
You should grab these documents (see below) before you leave your home and find a safe area while emergency teams respond to a natural disaster.
Keep electronic copies or scan or take photos of important documents. Store these files on:
an external hard drive — store this away from your home.
online cloud storage — to help make sure your documents are secure.
However, if you’re unable to return home and collect your belongings, you’ll want to make sure to protect important documents like:
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Passport
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Driver’s license
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Birth and marriage certificates
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Social Security cards
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Federal and state tax returns (at least three most recent returns)
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Health insurance card
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Home improvement records
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Inventory of your possessions
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Jewellery, collectibles, and other valuable items
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Retirement account records
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Recent checking, savings, and investment account statements
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Rental agreement/lease and/or mortgage documents
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List of emergency contacts, including doctors, financial advisers and family members
Make sure to carefully consider and prepare for how your family will respond during a crisis. This could involve where to obtain information, when to evacuate, and what to pack.
Create an Emergency Savings Fund
Having an emergency fund dedicated to natural disasters is vital as it offers easily available money to address necessities such as food, shelter, and healthcare right after a calamity, when conventional financial resources may be unavailable due to power cuts, destroyed infrastructure, or evacuation mandates, enabling you to handle urgent expenses without depending on credit or accumulating debt in a time of crisis. Setting up an account at a financial institution for your emergency savings could be beneficial for you. Should a disaster strike, you will need to use your emergency funds. In the event of a crisis, your savings could be lost if you have that in a jar at home. Moreover, storing your emergency savings in a reputable savings account could allow for potential interest accumulation, leading to an increase in your fund's value over time.
Saving money is crucial for financial management and ensuring the security of a family. Your emergency fund consists of two categories of savings.
Reserved savings: These are funds saved for expenses that occur irregularly throughout the year. Incorporate reserved funds into your monthly budget and store it in a specific savings account to use when necessary. Money could be needed for taking care of unforeseen odd jobs such as fixing of broken infrastructure or medical emergency of relatives.
Emergency savings: These are funds set aside to cover necessary expenses in the event of unemployment or a decrease in income. Having enough emergency savings to cover 3-6 months' worth of income allows you to recover and stabilize your financial situation. Such funds should include money for essentials including rent or mortgage, utilities, car loan, and car insurance. It can help prevent eviction, foreclosure, or car repossession.
Maintaining a regular savings routine is also crucial to ensure you have enough money for unexpected expenses.
Review Your Insurance Coverage
Insurance gives assurance for you, your family, and your possessions. Insurance companies provide assistance for unforeseen and recurring medical expenses or hospital stays, asset damage or injuries to others in a car accident, and damage to a home or theft of personal valuables. Your loved ones may get a one-time cash payout from an insurance policy in the event of your death. In cases of unforeseeable economic uncertainty, insurance might offer comfort. Since they offer specialised insurance policies which protect against a range of hazards, insurance companies play a critical role in lessening the effects of catastrophic disasters.
Understand Tax Relief Options in Case of Disasters
The Robert T. Stafford Act offers two kinds of disaster declarations. Emergency declarations and major disaster declarations. Both types of declarations allow the President to give extra federal disaster aid.
Emergency declarations
Supplement state and local government efforts in providing emergency services, such as the protection of lives, property, public health, and safety, or to lessen or avert the threat of a catastrophe in any part of the United States.
Major disaster declarations
Individual assistance declarations aid individuals and households. Public assistance declarations aid state, tribal and local governments and certain private nonprofit organizations for emergency work and the repair or replacement of disaster-damaged facilities.
Following a disaster, taxpayers may require specific documents to verify their damages. The better the estimate of the loss, the greater the possibility of accessing loan and grant funds. If the loss is due to a federally declared disaster, taxpayers are allowed to deduct casualty and theft losses from their home, personal belongings, and vehicles on their federal income tax return. The IRS's main goal is to reduce the federal tax liability for those impacted by federally declared disasters. To achieve this, the IRS works with various agencies to offer assistance and coordinate disaster relief efforts.
Develop a Communication Plan with Financial Institutions
During a natural disaster, when developing a communication plan with banks, creditors, and other financial institutions, pay particular attention to giving timely and clear updates, contacting them to discuss options for relief, maintaining a record of all correspondence, and following up to inquire about hardship programs or payment adjustments.
Conclusion
It's crucial to remember during National Preparedness Month having a solid financial plan can significantly mitigate the effects of natural disasters. Establishing a solid emergency fund, keeping up with insurance policy renewals, and preserving critical paperwork guarantees a stable foundation for handling the chaos that follows an emergency.
Creating a specific emergency plan that meets the needs of your family guarantees you can respond quickly and efficiently when needed. Moreover, being aware of disaster relief options and staying in touch with financial institutions can help enhance your recovery efforts.
This September, take proactive actions in securing your financial health and ensuring your future is protected. Preparation involves more than just planning for the worst; it also entails arming oneself to handle difficulties with assurance and perseverance.