Peak hurricane season for Virginia and the Mid-Atlantic States has arrived. While it’s unsettling to think a natural disaster could affect you, emergencies can and do occur.
The good news is that, with a little planning, you can minimize the financial impact of an unexpected crisis. The Virginia Society of Certified Public Accountants (VSCPA) suggests that you take some actions to protect yourself.
Organize your financial records
Organizing your financial and family records can save you time, money, and trouble. Sort through the paperwork you’ve been collecting and move important permanent records, such as birth certificates, wills, property deeds, and trust agreements, to a secure fireproof location off your premises. Other records can be organized within a file cabinet or whatever system works for you.
Calculate your net worth
Looking at your total financial picture is a simple way to know exactly where you stand. Take the time to prepare a net worth statement, which will give you a realistic sense of your assets and your liabilities.
Build an emergency fund
Most CPAs agree that it's a good idea to create an emergency fund equal to roughly six to nine months worth of living expenses. The right amount for you depends on your financial circumstances. It will take time and a few sacrifices to set aside that amount of money, but it's worth the peace of mind it provides in an emergency. Using an automatic savings plan to direct money to your emergency fund is a relatively painless way to save. Be sure to keep your emergency funds in an easily accessible account, such as a savings or money market account. While the interest rate might be low, bear in mind that liquidity is the goal for your emergency fund.
Be adequately insured
One of the best defenses against financial difficulties is a well-formulated plan for insuring yourself and your possessions. You should review your homeowner's insurance at the start of each year to determine whether your policy amounts are keeping pace with the increased value of your home. Also, review your car, life, and medical insurance polices regularly to ensure sufficient coverage.
Identify possible credit line sources
If you own your home, a home equity line of credit can help you through a financial emergency. But it’s important to apply now, while you’re in good health and employed. Unlike a home equity loan, a line of credit is there if and whenever you need it.
Meet with a CPA
While it might be time-consuming, preparing financially for disasters could save you significant time and frustration in the event of an actual emergency. A CPA can work with you to review your plan and ensure that you are well-protected in the event of an emergency.
Take advantage of free resources
The VSCPA offers the "Ask a CPA E-mail Program" free to Virginia residents. Experienced, licensed certified public accountants will provide answers to your personal finance and tax questions within three business days. CPA volunteers can also answer any financial questions related to a disaster, such as a hurricane or fire. Consumers can submit their questions and find more money management resources at www.FinancialFitness.org.
About the Virginia Society of Certified Public Accountants:
The VSCPA is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. For general information, e-mail [email protected] or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA."