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How to prepare your finances in case a natural disaster strikes

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It’s a truth that no matter where you live, you’re likely to encounter some sort of disaster at least once during your life. You may live in an area that is prone to natural disasters like earthquakes, fires, flooding, hurricanes or tornadoes. There are also possible financial disasters like a recession or loss of income. Being prepared for possible disasters is a good idea because it can help reduce fear, anxiety, and losses. If you’re prepared for a disaster, you stand a much better chance at surviving and thriving, even in the midst of disasters all around you. We want you to know TurboTax is here to keep you up to date with important tax relief information that may help you during these times of need. 

Decide What Disasters You’re Preparing For

There are many different kinds of disasters or emergencies. While you can’t prepare for every single one of them, making a decision about what kind of disaster or disasters you are going to prepare for can help you as you begin your preparations. Here are some questions you can ask yourself:

  • Will you have to leave your home?
  • If you are sheltering in your home, will you have electricity or running water?
  • Will nearby stores have supplies, or will shelves be bare?
  • Will you have access to cash via credit cards or ATMs?

Answering these questions can help you as you start to make a plan. If you’re not sure where to start and are feeling overwhelmed with analysis paralysis, then just make a decision to start somewhere. In an emergency (or even when preparing for an emergency), the best thing that you can do is to already have some disaster preparedness tips in your back pocket and act on them. 

If you’re not sure what you should do first, then start with a 72-hour kit, sometimes referred to as a “go bag”. This can be a backpack or duffel bag for every member of your household or family, filled with clothes, non-perishable food, money and other supplies that you might need if you had to leave your home in a hurry. Having something like this is especially important if you live in an area that is susceptible to forest fires, where you may have to evacuate with minimal notice. Ready.gov has a site with tips on how you can build your own disaster preparedness kit.

Make a Plan

Once you’ve decided what kinds of disasters you want to prepare for, the very first thing that you will want to do is to make a plan. This is one reason why it’s important to first decide what disasters you are trying to prepare for — it’s hard to make a plan without knowing what it is that you are planning for. Depending on your personality, you may find that it is easier to decide what disasters you want to prepare for and make a plan to keep you squarely in the zone in a time of need.  And once you’ve made a plan to prepare for one kind of disaster, you can always review your plan. 

Preparing Your Finances For Disaster

In addition to preparing for natural disasters, you should also consider how prepared your finances are for disaster. A financial disaster or emergency can come in many different shapes and sizes. It might be the loss of your job, reduction in hours or an unexpected major expense.

One of the best things that you can do to help prepare your finances for a disaster is to have an emergency fund. If you don’t have an emergency fund at all, you can start with even as little as $1,000. Then, you can continue to build up your emergency fund over time in step with your other financial priorities. Having several months of spending in an emergency fund can go a long way towards making sure you are prepared for many different kinds of financial disaster. 

IRS Disaster Relief 

Typically once FEMA designates an area as a federal disaster, the IRS provides relief in the form of extended tax deadlines and other tax relief.

One way to get help with your expenses if you were impacted by a natural disaster is to take the tax break for your casualty loss.

You can consult the FEMA website to see if your area was declared a federal disaster. If so, you may be entitled to claim casualty losses as an itemized deduction on your tax return.  

Don’t worry, TurboTax has you covered and you can learn more about who may be entitled to relief and what type of tax relief is available

Revisit And Review

Once you have a plan and feel like you are prepared for at least some kinds of disasters, it’s not something that you want to just put on the shelf and forget about. It’s a good idea to regularly revisit and review your preparedness plan, and make sure that it still makes sense. Rotate any food, change out the clothes and generally review your plan. If you’re feeling good about your preparation, this could be a good time to see if you want to expand your preparedness plan to other kinds of potential disasters.

One strategy for reviewing your preparedness is to look at your disaster preparedness kits every six months, when you change your clocks for daylight savings time. That can be a good reminder to regularly review not only your disaster preparedness, but your overall plans as well. If you have clothes packed in a “go bag”, you can swap them out to adjust for the change in seasons for the next 6 months. This is especially important to do if you have young children, since they rapidly outgrow their clothes and supplies.

The Bottom Line

Disasters can come in many different shapes and sizes and have a varying impact on regular life. Being prepared for disasters can help you to feel more calm and less anxious and increase your probability of coming through successfully. Decide what kind of disaster you want to start preparing for and make a plan. Use the resources that are available like friends, family and the Internet. Once you have a plan, regularly review it every six months or so to make sure that it still makes sense for you. While everyone hopes that a disaster never strikes, being prepared will help make sure you’re in the best possible situation if it does.

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