Are You Prepared for the Next Natural Disaster?

April 11, 2017

I seem to have a thing for natural disasters. I know that sounds strange, but I do. I cannot hear about a local natural disaster without immediately getting on the Internet to figure where I need to go to help. I think of how helpless I would feel if everything I had was gone, and I feel compelled to do something – even if it is to pick up debris or pass out sandwiches.

Doing this for a number of years has created what many would consider to be an unusual obsession with preparing for disasters. A lot of this comes from the lessons I learned being onsite to personal disasters and talking to people who have been through a natural disaster. Below are some of the lessons I learned:

ATM’s are in slim supply after a natural disaster. Keep cash on hand to cover necessities. I remember traveling two hours to a tornado site and helping with the cleanup all day. As I got in my car to go home, I saw that my gas was nearly on empty. It took me almost an hour to find a gas station since most were destroyed in the tornado.

The only one that was working could only accept cash. If I had no cash, I would had been stuck. Most people do not think about it, but most natural disasters take out power, which would also take out the ability to use an ATM and a store owner’s ability to accept plastic. Keep a certain amount of cash on hand to cover necessities in a disaster like gas and food.

Make sure your documents are in a place that can survive a disaster and give you easy access to the documents if you need to leave in a hurry unexpectedly. One of the biggest frustrations the survivors of the natural disasters I talk to experienced was not being able to get all of the available natural disaster aid immediately because they had no documentation to prove who they were or to file an insurance claim. What I learned from their stories was to make sure I have all of my important documents in one place that can survive a disaster, like a fire-proof safe. You can use checklists like the one on the FEMA website to gather your documents. You can take this one step further by storing your documents electronically as a backup plan in case you could not get to them otherwise.

Do not assume you are covered by your insurance. Review your insurance policies and call your insurance carrier and ask about coverage. Nothing broke my heart more than the anguish of people who realized that few or none of their possessions would be covered by their insurance carrier. Please do not assume that everything you own will be covered. Thirteen years of talking to natural disaster survivors have taught me that this is not the case.

Make it a practice to review your insurance policy annually. Consider using websites like AlertSystemsGroups.com to learn the disasters your area is the most at risk to experience. Contact your insurance carrier and ask if you are covered for these disasters.

Ideally, you want to be covered for cost to replace your possessions at today’s cost without factoring in depreciation. Also, do not assume your insurance company will take your word on everything you have in your home. Consider taking pictures of your possessions and scanning receipts of high dollar purchase to prove what you own.

Find out how you are covered if you can no longer live in your home. This may sound obvious, but one of the biggest needs for many survivors was having a place to stay if they could not live in their homes. FEMA does offer rental assistance, but this can take time when patience is in short supply. Contact your homeowner’s policy about additional living expenses coverage. This coverage could cover hotel, rental, and even restaurant meals and storage fees.

Don’t wait until it’s too late. Take action now. FEMA has a comprehensive guide to prepare you financially for a disaster, but don’t step there. Make it an annual practice to review your homeowner’s insurance policies to make sure that if the unexpected hits, you can return to your normal life as soon as possible.

How Long Should You Keep Financial Documents?

January 11, 2017

When sorting through paperwork or electronic statements and other records, you may be wondering how long to keep what. Generally speaking, if you can access something online, like a bank account statement, bill or insurance claims letter, you don’t need to keep a paper copy. As long as you’re able to log into an account and download statements, shred the paper (and discontinue receiving paper statements) and reduce clutter.

For other things like receipts and tax returns, a scanned electronic copy also suffices when needed, so if you want to organize your files electronically, have at it. Just make sure you have a secure place to store digital assets like an external hard drive or encrypted cloud-based account. However, there are still a few things that require the originals, such as a will, marriage license, Social Security card, etc. While there are no hard and fast rules for all documents, following are some commonly suggested guidelines for how long you need to keep even the digital copies:

Tax Returns: Seven years is the general rule of thumb for keeping tax returns and the related documentation like W-2s, receipts for charitable donations and other paperwork to support income and deductions claimed. The basis for this is that the IRS has three years to audit your return for any reason from the date of filing. If during an audit, the IRS finds a substantial omission, such as under reporting income by 25% or more, it has six years to challenge your return, so you want to have those documents available to address the challenge.

Life Insurance Policies: Keep the original policy for the life of the policy plus 3 years.

Medical Records: For medical expenses you paid using a health savings or flexible spending account, you’ll want to keep receipts for up to seven years to show that the funds were spent on qualified expenses in case the IRS audits those accounts. Many HSA or FSA providers allow you to upload receipts for them to track. In that case, you can shred the receipts, but make sure you keep your online access for at least three years after you’ve spent the funds, just in case.

Receipts for Home Improvements: Any remodel projects or improvements that could enhance the value of your home can be added to your basis and possibly reduce any taxable gain when you sell your home, so keep these as long as you own the home for maximum tax savings.

Home Sale Documents: Once you’ve sold a home, you may be tempted to toss all the paperwork you signed back when you bought it, but keep the closing statement that shows you no longer own it in case a future mortgage lender asks for proof or there is any type of future title dispute on your old home.

Bank Statements/Credit Card Statements: Generally, it is recommended that you maintain one year’s worth of statements, unless they are easily accessible online through your bank. If the statements support tax deductions, they should be maintained for seven years along with your tax files.

Utility Bills: If utility bills support deductions made on your tax return, they should be kept for seven years from the end of the year in which they were claimed. All other bills can be shredded after three months as long as you’ve verified they’ve been paid.

Pay Stubs: If you still receive paper pay statements, keep the latest stub if it contains the year-to-date salary history or keep a year’s worth of stubs until you receive the year-end check that recaps the entire 12 months of pay and the taxes withheld. This is especially important to consider if you’re planning to apply for a mortgage in the coming year so that you can prove your income. Once you receive your W-2 and verify that it matches your pay stubs, you can safely shred your old stubs.

Warranty Documents: Dispose of these when the warranty expires or you get rid of the item under warranty.

Receipts for Purchases: Once you’ve verified that a charge to your bank account or credit card matches the purchase receipt, you may dispose of the receipt unless you need it for a future merchandise return. Pay special attention to restaurant receipts to ensure that the tip amount you wrote matches the charge to your account. Your receipt will serve as your proof if a wayward server inflates his/her tip.

Investment-Related Paperwork: It’s important to maintain a record of investment purchases in any taxable brokerage account so that you can properly figure any capital gains or losses when you sell. If you have stocks or mutual funds set up for dividend reinvestment, you’ll have multiple purchase transactions to track, so consider making a spreadsheet and keeping the statements as a back-up. You can get rid of any prospectuses you receive though (or sign up for electronic delivery and then delete the email). Investment management companies are required to provide these, but you can always find them online.

Things Not Worth Keeping: User manuals, which you can find online now and ATM receipts.

Things to Keep Forever in a Fireproof Safe or Bank Safety Deposit Box:

Birth certificates
Marriage certificates
Divorce decrees
Military discharge paperwork
Certificates of authenticity for any original artwork or other valuable property
Deed, car title – any document that would be difficult or impossible to replace

Once you determine which records you no longer need to keep, it’s important to properly dispose of them. Shredding the documents before putting them in recycling or the trash will help prevent identity theft. Then go and enjoy your less cluttered life!

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The Importance Of Reading The Fine Print Of A Lease

February 06, 2015

My twin daughters are sophomores at Ohio State University and decided to move off campus for their junior year. This is a rite of passage for college students and my girls are very excited to live with four of their friends in a restored, old house about three blocks from campus. After a fast and furious search, all the kids fell in love with this house, verbally agreed to rent it, and some even signed the rental agreement on the spot.

My daughters called me in a panic and wanted me to sign the parental section “RIGHT NOW!” Hold up! We aren’t Congress –we are going to read the contract before signing it. Based on this experience, here are a few lessons that my daughters learned:

Read the fine print.
Get it in writing.
If you don’t understand it, find help.
Be prepared to walk away.

Read the fine print. Once I received a copy of the lease, I read a section buried in the middle that said,“The property must be show ready at all times. If not, there will be a $50 fine. This means beds made, no clothes on the floor, no dishes in the sink and the grass cut.”

Wait, what? I can’t speak for the other four kids but I know my daughters can be complete slobs (in spite of their upbringing). I asked my daughters about this clause and neither one knew it was in there! What are the odds that six 20-year old college students are going to keep their place “show ready?” Which leads to the next point…

Get it in writing. I insisted that my daughters understand what that clause means. Does the landlord expect the place to be this way all the time or just when he’s trying to rent it out? Will he give notice before showing up? Will the fine be assessed per occasion or infraction?

For example, if someone left dishes in the sink and another person’s room looked like a tornado hit, does that cost $50 or $100? This wasn’t clear in the lease so they asked the landlord to clarify it in an addendum. I also insisted that all the roommates understand this clause and how it will affect them. As unrealistic as I think this is, all the roommates agreed to this clause and signed an agreement among themselves that they will hold up their end of the bargain.

If you don’t understand it, find help. After my daughters saw that clause, they went back and truly read the lease. For the most part, it was self-explanatory, however they had several questions. Luckily, I’ve read my fair share of leases and other legal documents so I could explain the terms and walk my daughters’ through the meaning behind the legalese.

But what if I didn’t understand something? One resource is my company’s EAP which has a free legal service. I have the option of a free 30-minute consultation and if I need more specific help, I can be referred to a local attorney at a reduced rate.

Lastly, after reading the lease, I thought the kids should walk away and find another house to rent. They all felt differently and really believe this will be a great experience. Time will tell, but I see this as an important life lesson. My girls now realize that they must read and understand a document before they sign it. Soon they will learn that friends don’t always make good roommates, but that’s another story!

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Keep It or Chuck It?

January 03, 2014

One of the questions a lot of my friends have asked me as we got to the end of the year was about keeping their financial documents. I have friends on both ends of the spectrum. Some keep EVERYTHING and are tired of seeing boxes pile up in their attic. Others keep NOTHING and figure that with online statements, if they need it they can request it. Continue reading “Keep It or Chuck It?”