photo: Sverrir Thor
After the devastating earthquakes in Chile and Haiti, we hardly needed another reminder of our helplessness before nature’s wrath. But there it is: a volcanic eruption in Iceland, whose massive cloud of black ash has grounded thousands of flights, stranded millions of travelers and wreaked havoc on the travel industry.
The volcano’s effect on the economy is, to put it mildly, crushing: airlines alone have lost at least $1 billion in revenue so far due to the closing of European air space. That a volcanic eruption in the fairly isolated country of Iceland can affect millions around the globe reveals a major truth that we often ignore: the systems that we depend on are fragile and, even though we’ve come to take them for granted, are not guaranteed to always be available.
In 2008, we were told that the financial system was on the brink of utter collapse. As a result, millions worried that they would not be able to withdraw money from their bank accounts and even questioned whether their hard-earned money still existed. In 2005, when Hurricane Katrina pummeled New Orleans, we saw that societal chaos is not confined to only third-world countries. On 9/11, well, if feels like everything changed. It seems that we’ve been repeatedly reminded during the past decade that major emergencies are a fact of life, yet most of us do little to prepare for them. In light of yet another major global event, it is wise to consider specific actions we can take now to better prepare ourselves future calamities.
Expand Your Emergency Fund
An emergency fund should be the staple of your personal finance planning. The idea is to have enough cash stashed away to cover unexpected circumstances, like a major medical expense or loss of income. The problem is, in a real emergency the funds in your bank account may or may not be accessible.
The solution: in addition to having a rainy-day fund sitting in a bank account, it makes sense to have some cash in your possession at all times for use during an emergency. Depending on your circumstances, it might mean a few hundred dollars or a few thousand. Either way, it’s a good idea to have at least enough to pay for your basic essentials for 30 days. Be sure to keep it in a secure and hidden location to reduce risk of loss or theft.
Stock Up On Emergency Essentials
Emergency supplies aren’t just for survivalists and those who read 2012 prophecies. The Federal Emergency Management Agency (FEMA) http://www.fema.gov recommends that everyone have basic emergency supplies, including a three-day supply of non-perishable food and clean water for each person in your home. Other essentials you might consider stocking up on are batteries, flash lights, candles, and first aid kits.
Chances are, most Americans do not have a three-day supply of drinking water stored in their home. We simply don’t believe that disruptions will occur to our day-to-day existence. You might tell yourself that you can just go buy the necessary items as an emergency approaches – but, as many saw during the fierce snow storms that hit many American cities this winter, grocery stores often get cleaned out in a matter of minutes. The wise thing to do is to prepare ahead of time.
Having extra supplies of food, water and other items will also help you during times that might not be classified as an emergency, but still tough economically. For example, if you’re short on cash for some reason and have no ways to cover all your bills, you may simply reach into your pantry for food instead of going grocery shopping for the week. (Just be sure to restock when as soon as your financial situation allows.)
Lay Out a Communications Plan
Do your closest family and friends know how to get in touch with you should disaster hit? What if mobile phones are cut off? I encourage you to take a few moments out of your evening and come up with a plan.
You may not live near a volcano and you might not be near a fault line, but the basic steps outlined here are simple and do not require much money. If we’ve learned anything over the last decade, it’s that we should expect the unexpected.
You can read more of Kevin’s writings at personal finance blog 20smoney.com