As millions of people shelter in place to prevent the spread of the coronavirus (COVID-19), we are reminded of the importance of being prepared, not only for the short term but also for the weeks and months following a natural disaster.
While we can’t prevent hurricanes, wildfires, and other potential threats, we can make plans to help buffer any financial crisis they may bring. It’s never too soon to start crafting a financial plan, which is one of the critical elements of a disaster-preparedness blueprint.
“Running away from a natural disaster to a safe haven physically can be quite different than running away from one financially,” says Dr. Bob Castaneda, a global senior finance executive and program director for Walden University’s BS and MS in Accounting and MS in Finance degree programs. “Natural disasters can take both an emotional and physical toll on anyone experiencing the event. Anticipating and planning for a natural disaster can help to remove the emotions from decision-making.”
What can individuals do to prepare financially for a crisis such as an earthquake, flood, wildfire, pandemic, or hurricane? First, if evacuating your home may be a possibility, Dr. Castaneda offered the following suggestions:
Facing a Job Loss
If you lose your job as the result of a natural disaster or other emergency, it’s important to act quickly to assess and manage your financial resources, Dr. Castaneda said.
“The first thing to consider if one loses their job is to identify what funds will be coming in from unemployment, severance, etc., as well as what discretionary and mandatory expenses are being incurred,” Dr. Castaneda said. “Think about what expenses can be cut right away without ‘burning down the barn.’ If you determine more is going out than coming in, look again at your budget and be prepared to cut expenses as needed.”
Dr. Castaneda shared these expense management ideas:
As you consider how you’ll make ends meet after losing your job, withdrawing funds from a 401(k) should be a last resort, Dr. Castaneda cautioned.
“It’s very easy to remove funds from a 401(k), but it takes time to replenish them,” he said. “Most fund managers will not allow the participant to withdraw any funds unless they have a complete withdrawal or a roll-over of funds into another account. This is an important point to consider, as one can have an unexpected tax burden if not properly planned.”
Planning for the Future
According to a 2015 report from the Federal Emergency Management Agency (FEMA), 80% of Americans live in counties that have been hit with weather-related disasters, but only 39% have developed emergency plans, Dr. Castaneda said.
“FEMA also reported in their March 2018 report that as an individual’s income goes up, they are more likely to take action to prepare, and that as income decreases, they are less likely to set aside money for emergencies,” he said.
If you’re employed—or when you’re back in the workforce again—resolve to start building an emergency savings fund. Having three to six months of expenses in the bank can go a long way toward helping you weather any future storms.
Choosing an Accounting Career
If finance is your passion, as you plan for the future you may want to advance your career by earning an online accounting degree. Walden University, an innovative leader in distance education, offers BS in Accounting and MS in Accounting degree programs, an MS in Finance degree program, and a Graduate Certificate in Managerial Accounting. Walden’s Master of Business Administration program also offers an Accounting specialization to help you meet your personal and professional goals.
Walden University is an accredited institution offering online accounting degree programs at the bachelor’s and master’s level. Expand your career options and earn your degree using a convenient, flexible learning platform that fits your busy life.
Dr. Bob Castaneda is the program director for Walden University’s BS in Accounting, MS in Accounting, and MS in Finance degree programs. He brings a great deal of expertise to Walden’s College of Management and Technology, including experience at companies including American Express, PepsiCo, and McDonald’s Corporation, and is a member of Financial Executives International, the American Institute of CPAs, and the Illinois CPA Society.
Walden University is accredited by The Higher Learning Commission, www.hlcommission.org.