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Handling Family Finances During Disasters and Emergencies

Debra Pankow, Family Economics Specialist

Disasters can create serious financial crises for families. Insurance may not cover as much as anticipated or needed. Home and places of employment may be lost. Family members may be out of work due to injuries. In an ideal world, families would have adequate cash reserves or credit to draw on for disasters. But reality is likely to be far from ideal.

Making decisions about repairs and purchases, and developing resources to maintain a home can be difficult. However, some basic financial tools and household saving strategies can help families during an emergency.

Financial Strategies

  • Cut back on spending as much as possible.
  • Use cash reserves, if available.
  • Use unsecured credit. Wise use of credit cards can help. If it will be several months before the balance can be paid, consider taking out a loan. Finance charges likely will be lower than credit card interest rates.
  • Borrow against assets. Borrowing against the equity in a house that was not damaged requires refinancing, taking out a second mortgage or obtaining a home equity line of credit. Another possibility is to borrow against employee pension plans or whole life insurance policies.
  • Liquidate assets. Consider selling major assets to generate cash.
  • Discuss options for reducing interest charges on outstanding loans with creditors.

Ways to Save

  • Carefully examine each monthly bill. Decide if the service can be eliminated or reduced.
  • Investigate equal payment plans that make payments the same each month.
  • Talk to insurance agents. Increase deductibles, reduce coverage, convert life insurance to lower-cost plans or discontinue life insurance on children to reduce expenses.
  • Consider bartering. If home repairs are needed, exchange skills with neighbors, relatives and friends. See if your community has bartering networks and groups.

Ways to do Without

  • Identify services that can be eliminated for several weeks or months. Re-evaluate dining out, special lessons, clothing purchases and subscription renewals. Determine how to reduce or eliminate these expenses.
  • Avoid impulse purchases. The urge to purchase may be strong, but take the time to think about whether the item is absolutely necessary before buying anything.
  • Learn to say “no.” Sales associates can be persuasive, friends will invite you to join them in a special activity and children may ask for a new toy. Be prepared to explain that the expenditure doesn’t fit spending priorities.
  • Shop less often and follow a list you develop beforehand. More time spent in stores or shopping online increases the chances of spending money.
  • Consider alternatives before making major new purchases. Visit garage sales and secondhand or thrift stores; review classified ads for used items.

Additional Income

Evaluate your skills to see if a craft or hobby might be turned into a business as a possible way to earn additional money. Determine if a second job is a a realistic opportunity to generate additional income.

Adapted for use in North Dakota from Oregon State University Extension Service, Wisconsin Cooperative Extension, Iowa State University Extension and University of Florida Cooperative Extension materials.

Filed under: Flood, Financial Issues, Family
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