Emergency funds © Comstock/PictureQuest

The Basics

9 ways to prepare for disaster

Have an emergency fund? A stash of food and water? Is your income insured? Can your kids do CPR? Catastrophe can strike at any moment, and you'd better be ready.

By Kiplinger's Personal Finance Magazine

Stuff happens. And it often happens when you least expect it.

With fears of swine flu swirling, storms an ever-present danger and the economy in a tailspin, now is a good time to ask yourself how prepared you are for disasters, both personal and communal.

For example, on an individual level, what if you lost your job, became ill or lost a loved one? On a broader level, what if a natural or man-made disaster struck your town? Are your finances and family prepared to withstand the shock?

Many people shy away from emergency planning because it seems like a downer. No one likes to think about bad things happening. But look at it this way: Preparation means freedom. When you have an emergency strategy in place for whatever life throws at you, you free yourself from worry and have greater peace of mind. Plus you'll increase your likelihood of coming out of the emergency with minimal damage and ease your transition to getting your life back to normal.

Here are nine essential things to do to safeguard yourself against life's unpleasant surprises:

1. Build your emergency fund

Everyone should have enough cash on hand to cover at least three months' worth of living expenses. That means enough to cover your mortgage or rent, food, utilities, debt payments and other regular expenses you can't put off even in an emergency. That may seem like a daunting task, but start out small. Make a goal to save at least $1,000. Then work your way toward one month's expenses. Stash your cash somewhere accessible, safe and profitable. (Check interest rates on savings accounts, certificates of deposit and money market accounts.)

2. Cover your assets

Make sure your homeowners or renters insurance is current. Keeping an inventory of your possessions will also help you get faster service if you need to file a claim. And make sure you know what your insurance covers. For example, most homeowners policies protect you if a major storm hits, but they won't provide flood or earthquake protection.

3. Protect your loved ones and livelihood

If you have a family or someone else who relies on you for financial support, your untimely death could be financially devastating. Buying life insurance is a good way to provide for your survivors after you're gone.

You'll also want disability insurance, just in case something happens to you that prevents you from working for a time. Many people get some form of disability insurance through their job, but you'll want to make sure it's enough.

4. Make your wishes known

Everyone needs a will. There are two parts to the essential will. Part one handles end-of-life issues, such as who inherits your property and who gets custody of any children. Part two handles issues that may arise while you are alive but unable to speak for yourself, including medical and financial decisions. (Don't forget to share your opinion on organ donation, too.)

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Hurricane © Digital Vision Ltd. / SuperStock
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5. Safeguard important documents

Protect your finances by keeping essential documents in a fireproof home safe, including birth certificates, adoption papers, passports, Social Security cards, insurance policies, and property and automobile deeds. You might also include a backup disc of family photos or important computer files. It's a good idea to toss in some money, too, in case you need to evacuate your home in a hurry (stopping at an ATM in the middle of an emergency will be the least of your worries).

Continued: Create a survival kit

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