Would you be ready in a Personal Financial Crisis?
Are you as riveted by the cave rescue mission in Thailand as I am?
It’s a truly remarkable and emotionally captivating story. As I write this, eight of the twelve boys have already made it out of the caves safely, with the rescue efforts resuming tomorrow and the world on edge praying for a happy ending for all.
With such a story so prominent in people’s minds, I thought it would be relevant to spend some time this week emphasizing the importance of emergency planning from a financial point of view. While the dense forests of South Asia seem far removed from one’s reality here, we still have our own life-threatening experiences that require careful preparation.
Here’s a quick reminder of things to review annually to make sure you are prepared in the event of an emergency:
EMERGENCY SAVINGS: As basic as it may be, I am still surprised by how many people still do not have adequate liquid savings, even those at higher income and net worth levels. You should have a minimum of three to six months of essential expenses set aside in a high-yield savings account, and closer to nine if you have unpredictable income or rely on one income.
INSURANCE: Unfortunately, insurance – whether it’s a life, disability, auto, or home policy – is one of those things that we tend to quickly check off our to-do list when we’re in our late 20s/early 30s, and then never looked at it again! But it’s essential that we review our policies and make sure they are still up-to-date and meet our needs as our circumstances change.
Importantly, remember the saying, “Insurance is rarely bought; it is SOLD.” In other words, buyer beware. Insurance salespeople are typically paid in commission so there’s an incentive to convince you that you need the most expensive policy. As a result, it falls on you as the buyer to make sure you do your own due diligence and research, or at least solicit another objective advisor as a second opinion.
In addition to making sure you are adequately covered, be sure to review your deductibles and premiums – generally speaking, the higher the deductible, the lower the premium so considering paying more out of pocket for otherwise smaller claims in order to save more money upfront.
Finally, make sure you also review what’s covered through your place of employment as well as through other policies you already own. Coordinate policies where possible to ensure you’re not under or over insured, filling in the liability gaps with an umbrella policy if needed. And don’t forget disability insurance, a policy that people tend to dismiss, even though it’s one of the most important as there is statistically a higher likelihood of a disability event that could put you out of work than there is of complete death.
DOCUMENTS/ORGANIZATION: While I find that most people have up-to-date wills and estate planning documents in place (and if you don’t, this should be your #1 priority!), what’s often lacking is a clear plan to communicate or deliver the information to a loved one, named executor, advisor/trustee, etc. in the event of an emergency. Have your documents in order and how to find essential information, accounts, list of loved ones to be contacted, etc. should something consequential happen.
And, in this day and age, with identify theft and fraud on the rise, you need an extra layer of protection that this information too does not get into the wrong hands.
Use a safe deposit box or encrypted online vault that only a named person can access in an emergency situation. Consider using a specialized company for this, such as EverPlans, which stores such information safely and also provides useful resources and checklists.
In praying for a safe outcome for the boys, coach and rescue team in Thailand, here’s also urging you to take a few moments this summer and make sure you’re prepared for any unexpected emergencies when it comes to your personal finances.