By Megan Miller, CFP
Unfortunately, Mother Nature was particularly harsh in September and October both domestically and abroad. We saw three major hurricanes hit the southern United States, and several devastating wildfires whip through the West. As a state that has seen firsthand the power of floods and fires, we all know how quickly it can wipe away everything you’ve built. For the most part, the only thing people can do is be prepared, take steps to properly shift risk, and have a back-up plan ready. These steps fit perfectly with our view of financial planning and wealth management.
Being prepared to evacuate in the event of an emergency is essential in case you need to move quickly. Being prepared for market swings is also essential; this is especially true as our world becomes more tightly knit and intertwined. There are simply more factors affecting the markets than in past cycles. One of the best ways to be prepared is to build a diversified portfolio and stick to your laid out plan when the markets hit a speed bump. Being prepared also includes a fully funded emergency fund which can be used for unexpected expenses in a disaster, or to cover your cash flow needs for a period of months if the markets have a downturn. This will prevent you from being forced to sell your investments at an inopportune time which can have a significant impact on your financial independence.
Properly shifting risk in a disaster mainly refers to having adequate insurance in place to cover belongings, transportation and your home. If you can’t get flood or fire insurance in your area, and it is considered high risk, you need to have a plan in place to sustain the loss without financial devastation. Insurance is an extremely important aspect of financial planning, and should cover areas including disability, loss of business income or earning potential, liability and casualty.
Lastly, have a back-up plan in place. Create online back-ups or databases of everything you need to continue life as normally as possible. Make sure you are financially stable to sustain several days, or weeks of being displaced and have some idea where you would go. Creating a safety net financially will give you the flexibility you need to switch courses if any of these major disasters affect you.