As the process of healing and re­building continues ever so slowly in the hurricane-ravaged areas, many of us are taking a closer look at our own lives. Most people do not live in a hurricane zone, but we have all been reminded of the possibility that Mother Nature will knock at our door with a disastrous tornado, earthquake, or even a tsunami. A house fire, car accident, serious illness, or job loss could prove just as devastating.

If a disaster should strike, money is the last thing you need to worry about. However, you can make it easier on yourself and your loved ones if you disaster-proof your finances. The following tactics can help you when you need them the most:

Create a monthly spending plan. The US Bureau of Economic Analysis estimates that personal savings as a percentage of disposable personal income is essentially zero.1 That means that in an average month, the average person spent more money than he or she earned. If you’re on par for average, you probably won’t need to wait for Mother Nature to create a disaster—you’re creating your own.

Create a budget, and stick to it. Since budgets are in the same category as diets—most of us begin one every January and are off by now—you need to find a budget that you can stick to. For most of us, an automatic online budgeting system works the best by easily tracking transactions from multiple checking accounts, debit cards, and credit cards.

But even if you use the cash-and-envelope method of budgeting, create a spending plan and commit yourself to it. Make sure you set aside some money to spend on those impulse buys, which will give you some freedom without negatively affecting your overall plan.

Back up your financial records, or use a Web-based system. If you are not taking advantage of the Internet to track and control your finances, you may be taking an unnecessary gamble. PC-based systems, like paper-based ones, can be destroyed in any disaster. Even a broken water pipe or a small house fire could destroy your computer—and the records stored in it. Mike Himowitz of the Baltimore Sun says that although a flood can destroy your PC, backup files in an off-site location most likely will be protected.

“More importantly, with online banking, you can access your account and pay bills from any PC with an Internet connection,” Himowitz says. “One of the main concerns voiced by those who fled their homes to escape Hurricane Katrina is that they have no access to their money and no physical way to pay their bills. With online transactions, your physical location—and the location of the PC you’re using—no longer matters.”

Himowitz suggests using a storage com­­pany to provide online backup. Some types of financial-planning software provide budget and personal-finance software solutions, as well as an online backup service. Another route is to use a secure online spending-management program that tracks fi­nan­ces and pays bills from any Internet-connected computer.

Set aside an emergency fund with 3 to 6 months’ worth of living expenses. In the event that disaster strikes, things could quickly go from bad to worse if you don’t have enough set aside to cover basic living expenses, such as mortgage, food, and car payments. An easily accessible emergency fund is one of the single most important things you can do for your financial well-being.

A savings or money-market account, not real estate investments or stocks, provides easy access to your money. Select an account with no service fees; these can be as high as $100 per year. Also, make sure you are getting a good interest rate. Many online banks cur­rently offer savings accounts with yields of 3% to 4% based on an average daily balance rather than a minimum daily balance.

If setting aside this much money seems unattainable, start small. Cut out those daily trips to the vending machine, and you’ll be amazed at how quickly the money will add up. Use cash gifts, tax refunds, and annual bonuses to build your fund. When you set up your monthly spending plan, include an automatic contribution to your emergency fund.

Create an estate plan. Most people would like to avoid planning their estates, but by doing it now, you will be taking care of your loved ones’ futures. Many people believe that a will is all they need. For some that may be true, but it can also force beneficiaries to pursue costly and difficult probate-court proceedings in order to carry out your wishes. A trust usually avoids the expensive legal mess and makes the transfer of assets relatively simple. Most people should have both a trust and a will, but you should talk with an estate planner to see which is right for your situation.

You can purchase software to help you create a valid trust document, and then simply have a lawyer review it. It will still cost around $200 in lawyer’s fees, but that’s merely one tenth of what it could cost for a lawyer to draft the document.

Review your estate documents often, and update them whenever any major changes take place. Make sure your loved ones are aware of the documents and their location. Always keep copies of all important documents in a separate, secure site, such as a safe deposit box.

Give to those less fortunate. Don’t overlook the importance of charitable giving. Overspending all too often comes from our desire, not need, for more. Donating to a charity helps keep your needs and wants in perspective. If a disaster strikes, won’t you be hoping others will do the same for you?

If you are unable to give any money, donate your time. Call your local government office or visit for opportunities in your area.

What is truly important in our lives does not have a dollar sign attached to it. But by getting your finances in order now, you can focus your attention on taking care of the things that matter the most if disaster does come your way. PSP

Steven B. Smith is president and CEO of In2M Corp and author of Money for Life: Budgeting Success and Financial Fitness in Just 12 Weeks (Chicago, Ill: Kaplan Publishing; 2004). For more information, visit or contact [email protected]

This article has been reprinted with permission from In2M Corp. It appeared in the December 2005 issue of Physician’s Money Digest.


1. Isidore C. The zero-savings problem. Available at: Accessed February 1, 2006.