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Recent articles by Liz Pulliam Weston: • Many flood victims aren't covered -- are you?, 9/1/2005 • Bank fees are more outrageous than ever, 8/31/2005 • What really matters in retirement, 8/31/2005 More... |
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| The Basics | ||||
| Coping financially when youve lost everything | ||||
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A disaster can leave you without a checkbook, ID, credit cards or a job. Heres how to prepare for the worst -- and recover after it happens. By Liz Pulliam Weston If you've been through an electrical outage, you've probably experienced this: You walk into a darkened room, flip the nearest light switch -- and stand there momentarily dumbfounded before you realize: Oh, yeah. No juice. Disaster victims experience a similar disconnect, on a much larger and longer-lasting scale, when trying to deal with their finances. The way they're used to doing things simply no longer works. Their homes, records, checkbooks, even identification may be destroyed or at least inaccessible. They may have no fixed address for days, weeks or even longer. Phones, ATMs and Internet connections may not work. They may be unable to get to their jobs -- if they still have jobs.
Steps to tackling an overwhelming job Getting cash, paying bills, contacting creditors and figuring out what to do next can be simply overwhelming. Emergency-response experts suggest taking the following steps: Take inventory. This will serve as a to-do list as you determine your next moves. Get a pen and paper and compile lists of:
Related news and commentary on MSN Money The Federal Emergency Management Agency, or FEMA, offers $5,000 grants for emergency home repairs, for example. The Small Business Administration offers low-interest loans of up to $200,000 to rebuild homes. You may be able to borrow against your 401(k) balance or cash-value life insurance. If you're insured for the disaster, call your insurer to see if you can get any money upfront for living expenses and other necessities. Talk to your employer -- if possible. You need to know if you'll still be getting a paycheck. Some employers continued to pay workers after hurricane Katrina, while others didn't. The amount of help varied considerably. Wal-Mart said it would pay displaced workers for three days; Harrah's, which operates several casinos in the affected area, said it would pay its affected workers for 90 days. If the business is shutting down or if you're unable to get to work, try to find out if you can get access to accrued vacation or sick pay and how long you'll be covered by health insurance and other benefits. If you're out of a job and the disaster is widespread, FEMA typically will set up walk-in disaster recovery centers where you can apply for unemployment insurance, or call (800) 621-FEMA. Establish an address. If you can't go home, ask a trusted, accessible friend if you can use her address and landline phone number as a contact point for financial institutions. Banks typically won't issue replacement credit or debit cards to a P.O. Box, mail drop or hotel, and they may be suspicious if the number you give is a cell phone that they can't match to an address. Again, in big disasters, those policies may be loosened to help victims. A VISA spokeswoman said the credit network's member banks would err on the side of displaced Katrina victims wherever possible, even if it meant temporarily setting aside their fraud protocols. "We're always concerned about fraud," said VISA spokeswoman Rhonda Bentz, "but we're more concerned about getting cardholders what they need." Talk to your lenders. In the wake of Hurricane Katrina, regulators strongly encouraged banks and mortgage lenders to waive late fees and allow borrowers to reduce or skip payments without negative consequences to their credit histories. Bank of America, for example, announced it would not assess late charges on mortgages and home-equity lines of credit in the affected areas for 90 days and would allow borrowers to skip payments for 90 days without reporting the missed payments to the credit bureaus. People with vehicle loans would be allowed to skip two payments. Those with Bank of America credit cards could contact the bank to get late and over-limit fees waived and obtain emergency increases in their lines of credit.
How much leeway borrowers are being given, though, is being determined by individual banks. And in less widespread disasters, there typically isn't the same institutional leniency. You may have to plead your case for more time to pay your bills. In any case, you need to let banks and creditors know your situation and find out what help they can offer. Monitor your accounts and credit reports. Fraud can spike after a disaster. Someone rummaging through the remains of your house could find enough information to commit identity theft, or you could be victimized by someone -- including a friend or relative -- who knows enough about you to take advantage of banks' more lenient identification procedures in the wake of a disaster. "Unfortunately, people who know one another will be defrauding each other," said Ted Crooks, a fraud expert for Fair Isaac Corp. Getting online access to your accounts as soon as feasible can help you monitor your finances remotely and limit losses. Pulling your credit reports once or twice in the months after a disaster may help you contain the damage of new-account theft. (You're now entitled to one free report annually from each of the three bureaus.) For more on protecting yourself from identity theft, read, "8 signs you may know an identity thief." Assess your future. Can you continue to make mortgage payments on a home that's no longer there? Can you pay your credit card bills if you have no job? Do you have the resources to rebuild and move on -- or would bankruptcy be a better option? Filing for bankruptcy should never be a first resort, but folks who are on the financial edge before a disaster are often pushed over the brink by the resultant job losses, medical bills and recovery costs. If that's where you're headed, conserving your cash can make more sense than continuing to struggle with unpayable debts, but consult a bankruptcy attorney first. Better yet, be prepared If you haven't experienced a disaster yet and want to minimize the financial disruption afterward, consider the following precautions: A few hundred dollars can tide you over if electricity and ATMs are unavailable for a few days. Several thousand dollars in an emergency fund can help you withstand the trials that may follow. Ready access to your home's value can help you survive an extended job loss or rebuild your home -- or both. Don't assume you'll be able to get at your equity after the disaster, since your home may be in pieces and you may not have any income to convince the bank to make the loan. For this to work, you have to restrain the urge to waste your equity on frivolous spending: the point is to keep the line of credit unused so it's available in an emergency. A disaster that affects your home could also affect a nearby safe-deposit box or other seemingly safe repository. That's why disaster experts often recommend storing copies of your data online or with friends who live far away. For more details, see Disaster preparedness for your finances. The more of your bills and accounts you can access online, the better you'll be able to manage your finances if you can't get home for an extended period. Email delivery of your bills, online bill-paying systems and direct deposit of your paycheck can dramatically reduce your potential hassles. For more details, see Go paperless for safer banking. Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board. | ||||
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