Ask Liz Weston

Get smart with your money

emergency preparedness

Q&A: Loose change and the ‘Big One’

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Dear Liz: In your column about saving loose change, another reason to keep a couple of coffee cans full of coins is for when we have the “Big One.” ATMs and banks and stores that rely on computers will be down, but loose change and small bills will be spendable.

Answer: Every disaster preparedness kit — which every home should have — should include some cash for emergency spending. But the cash should be in the form of bills, not change, which will add unnecessary weight to your kit if you have to evacuate. A few hundred dollars in bills are easily carried — not so the 20 or 30 pounds of change that make up an equivalent amount of spendable money.

Are you ready?

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Christchurch Earthquake - Avonside House CollapsesThe earthquake that rattled us out of bed Monday morning also served as a reminder: it’s time to check the emergency supplies. And it occurred to me that preparing for emergencies has a lot in common with preparing for retirement. Consider:

Most people are woefully unprepared. Not just “under-prepared” but not even being in the same room as prepared. When it comes to retirement savings, one-third of workers have less than $1,000 set aside and 60% have less than $25,000, according to the most recent survey by Employee Benefit Research Institute and Greenwald and Associates.

The solution: Use your imagination. Emergency preparedness experts recommend thinking, in detail, about how you would feed, shelter and tend to the hygiene needs of your family if you were without power, water or a roof for three days. Walking yourself through those days will get you motivated to make your life easier should something happen. A similar exercise can jumpstart your retirement planning: Go to the Social Security estimator, see what you’re scheduled to get at retirement, and imagine trying to live on that.

Many people are overwhelmed. The list of emergency supplies you’re supposed to keep in your home, car and office can be pretty daunting, especially if you’re on a budget. Likewise, the amounts of money people are supposed to save for retirement can seem unrealistically large.

The solution: Start small. Anything you scrape together will help. Getting a kit together can start with some canned goods and a few gallons of water stored in a plastic tote. Getting your retirement together can start with a 1% contribution to a 401(k) or an automatic transfer to an IRA. Build from there, as you can.

You can’t “set it and forget it.” Once you’ve assembled them, disaster supplies have to be regularly checked to see what’s expired or wandered off. (Somebody may have pilfered the batteries in an “emergency” for a game console, for example.) Likewise, once you start saving for retirement, you need to check in to make sure your investments are properly allocated and regularly rebalanced. Changes in your life or your plans can necessitate changes in your retirement savings, as well.

The solution: Put it on your calendar. Schedule checkups at least once a year.

By the way, you can find lists of emergency supplies at the Red Cross and FEMA’s Ready.gov sites. Or check out this great graphic from the LA Times, which shows how you can store what you need in a clean plastic trash can.

If you’re interested, here are some of the supplies we keep around the house (as well as my notes about what I need to replace/get):

Outside in storage bins:

  • Water [need more; we have about half of the two gallons per person per day recommended]
  • Food (we have canned food + can opener, peanut butter, crackers, energy bars; I need to add more pet food now that we have a cat]
  • Cat and dog crates
  • Tent, cookstove, fuel
  • Shovel, hatchet, crowbar, hacksaw
  • Plastic sheeting (to replace windows), duct tape [need to get: staple gun]
  • Plastic goggles, hard hats (protection for clearing debris) [need to find: the work gloves that wandered off]
  • Gas shut off tool (we had an automatic shutoff installed, but I like to be sure)
  • Rope
  • Flashlight, lantern, batteries [looks like I moved the portable radio to some other site; now I just have to remember where]
  • Emergency toilet (bucket with a snap-on seat, garbage bags and kitty litter), toilet paper, wipes
  • Bleach, castille soap, towels
  • Mylar blankets & rain ponchos
  • Need: Fire extinguisher, hygiene kit [toothbrushes, floss, hairbrush]

Car kit:

  • Bottled water
  • Energy bars
  • First-aid kit
  • Sneakers, socks, extra sweaters and coats
  • Multi-tool (oooo I love my Leatherman)
  • Wipes
  • Wind-up/solar-powered flashlight/radio/cell phone charger
  • Regular blanket, mylar blankets & rain ponchos

Thursday’s need-to-know money news

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Detroit stationDebt collectors are spying on creditors through social media, what consumers can learn from Detroit, and is it time to become the boss?

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3 Personal Finance Lessons Learned From Detroit’s Bankruptcy

Control your debt before it takes control you.

6 Ways to Prepare for Unexpected Financial Events
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5 Basic Money Errors Retirees Make
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Making the Jump to Self-Employment
Are you ready to become your own boss?

How much cash should you keep on hand?

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Dear Liz: A few years ago I finished paying off my debt and now am in the very low-risk credit category. I have savings equal to about three months’ worth of bills and am working to get that to six months’ worth. I’m wondering, though, about an emergency that may require me to pay in cash (such as a major power outage that disables debit or credit card systems, or the more likely event that I forget the ATM or credit card at home). How much cash should a person have on hand? Is there a magic number?

Answer: There’s no magic number. You’ll have to weigh the likelihood you’ll need the green, and the consequences of not having it when you need it, against the risk of loss or theft.

Many people find it’s a good idea to tuck a spare $20 into their wallet for emergencies, and perhaps another $20 in their cars if they’re in the habit of forgetting their wallets or their plastic.

Cash for a disaster is another matter. Power could go out for a week or more, or you may need to evacuate and pay for transportation and shelter at a time when card processing systems are disabled. A few hundred bucks in cash probably would be the minimum prudent reserve you’d want to keep in a secure place in your home. You may decide that you need more.

Are you ready?

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A big storm is threatening the East Coast, and my buddy Elizabeth Razzi had some good advice yesterday for getting ready:

 “From my experience, most important prep includes doing ALL the laundry, making milk jugs of ice for the fridge, clearing leaves from drains and having a good supply of ground coffee for the French press.”

At the same time, Ann Carrns over at the New York Times’ Bucks blog was wondering about “Keeping Cash on Hand, Just in Case.” Carns asked whether it might be prudent to have a stash of green in case hackers took down an ATM network. Of course, the more likely scenario is that nature will be the culprit: hurricanes, floods, earthquakes, blackouts and other disasters can make getting cash tough.

I’ve kept a stash of cash handy ever since I lived in Alaska, land of extreme weather and earthquakes. Up there, I also learned to keep a two-week supply of food, water and fuel at home, to carry emergency supplies in my car and to always keep the car’s gas tank at least half full. (You can learn more about emergency preparedness at www.ready.gov, among other sites.) Our supplies include camp stoves for cooking, since both gas and electric lines can get disrupted. You can get single-burner camp stoves for about $20 and propane cylinders for around $5.

We’re so used to modern conveniences, from a ready supply of electricity to a steady supply of ATM cash, that it can be hard to imagine what we’d need to survive life for several days without them. If you’ve ever flipped on a light switch when you knew the power was out, you know what I mean—our brains really aren’t wired for disaster. But taking a few minutes to gather some supplies, check flashlight batteries and tuck away a little cash can make getting through any disruption, by nature or otherwise, a lot easier.

What emergency preparations have you made? What do you still need to do?