In the first half of 2020, at least 207 natural disasters were recorded worldwide. That number jumps to 284 natural disasters for the first three-quarters of 2020 in the United States alone. Shocking as these numbers are, they are only the tip of the iceberg. They don’t account for the global COVID pandemic, social unrest, and other events disrupting people's daily lives.
With uncertainty and change defining the year, people all over the world are more aware than ever of the need to disaster-proof their finances. Yet, for many, the prospect of tackling that challenge can feel overwhelming. Fortunately, it doesn't have to be.
Here are a few simple but powerful tips you can use to digitize your financial documents and protect your finances from every kind of disaster.
The first step to disaster-proofing your finances is getting a solid, up-to-date grasp on what you're protecting. Set aside a little time to take an inventory of what you have. Consider using an app to help you determine and track:
What you own
Where it is
What it's worth
Don't just track physical possessions. Take an inventory of your key documents, too. This may include:
Proof of ownership for investments of all kinds
Documentation of bank accounts, retirement funds, and other assets
Documentation of mortgages and other loans or monies owed
You may find that you are missing important financial documents or that they are inaccurate or out-of-date. If so, use this opportunity to print, order, or acquire new and accurate copies.
With your inventory and the latest financial documents in hand, review your insurance policies. Check your:
Life insurance policy
Health insurance coverage
Home, condo, or renter's insurance
Car insurance policy
Any other policies you hold
Use an online insurance calculator or talk to your agent. Make sure that you have enough coverage to fully replace, restore, or rebuild your home, vehicle, and possessions if disaster strikes.
Check your policy against your inventory to ensure nothing is missing or outside your policy's scope
Have expensive items appraised and their value documented if necessary
If you have an actual value policy, consider upgrading to a replacement value policy
If you are a renter or condo owner, ensure that you know exactly what your landlord's or HOA's policy does and does not cover
Consider umbrella insurance, flood insurance, and other coverage that can fill in gaps in standard policies. Nothing is worse than being hit by disaster only to find that your insurance does not cover everything you thought it did.
Once you've updated your insurance, make sure that you have documentation of your new policies for your records.
Nearly half of Americans don't have enough emergency savings to cover unexpected bills of as little as $400. This can be crippling in the event of a disaster, when they may need to pay for:
Temporary relocation expenses
Health care services
Home or vehicle repairs
If you already have an emergency fund, take a moment to reevaluate it. Make sure it contains enough funds for your current situation and that it is accessible in the event of a disaster.
If you do not have an emergency fund, review the Consumer Financial Protection Bureau's guide to establishing one. Make a plan to set up a fund for yourself and your family.
Once you have your financial house in order, it's time to ensure that you'll have access to all your hard work after a disaster. The easiest and most effective way to do this is to scan documents and save them to the cloud.
Saving to the cloud ensures that your documents are not tied to a single place or device. It allows you to password protect them while also making them accessible to friends, family, and others who might need to access them for you after a disaster.
Documents that you should scan and save include:
Your home inventory
Titles and deeds
Bank and retirement account information
Insurance policies and value assessments of expensive items
Proof of ownership of investments and real property
Copies of passports, birth certificates, and marriage certificates
Wills, trusts, and other financial or legal documents
You may also want to scan and save:
Photos and documents of personal or sentimental value
Lists of logins and passwords
Other reference documents with information you would want if forced from your home by a disaster
Scanning and saving documents to the cloud is crucial even if you have a safe deposit box, personal safe or other secure hardcopy storage. This is because, in the event of a large-scale or regional disaster, hard copies may be destroyed or lost. This is true both of the copies at your home and elsewhere.
Due to their nature, cloud copies are not vulnerable to such loss. They can be retrieved anytime from anywhere, regardless of the scale of the disaster. Cloud copies can also be easily shared, which can simplify and streamline your recovery.
When preserving financial documents, it isn't enough to know what to scan and where to scan documents to. It is also critically important to have a good quality scanner with the right document scanning software.
Why does this matter?
First, you need a scanner capable of handling high volumes. Tax returns and insurance policies can be dozens of pages long. Scanning and uploading these types of long documents can be a nightmare if you are not properly equipped.
Feeding one page at a time can take hours. You can then spend even more hours trying to collate and save individually scanned pages into cohesive files. The right scanner and software, however, can get the same job done in seconds hassle-free.
Second, you need a scanner that provides top-level quality and readability. It does you no good to scan documents that are not clean, crisp, and legible when you retrieve or reprint them later.
Finally, you need a scanner at home for maximum accessibility. If you cannot access your scanner as you work through the other steps in the process of protecting your financial documents, you risk losing, forgetting, or missing things.
Investing in a quality scanner, then, is a key step in protecting your financial future.