Over the past month or so I've been pretty consumed (in thought as well as actually working to help) with the devastating floods that hit parts of West Virginia, including the area where I grew up. When I first went there to take supplies our church collected and to volunteer to help people clean up I could not believe what I was seeing. It looked just like a disaster scene out of a movie! The destruction that the flood waters left behind was absolutely unbelievable. As I processed what happened there, three things came to mind that are applicable to personal finance. Two of them have to do with what you should do to prepare for a financial emergency and the other concerns being able to respond when disaster strikes.
The first thing that I thought about was an emergency fund. I wondered how many people whose homes and cars were flooded had money set aside to help them get through this emergency situation. Money is not the answer to everything, and it certainly is not going to solve every problem that these floods created, but it would definitely make going through something like this a little easier if there were several months of living expenses sitting in a savings account. Having an emergency fund in place creates margin and allows you to deal with financial emergencies differently than if you had little or no money saved. If you do not have any emergency savings I would suggest that you get on a detailed budget, get yourself/your family out of debt, and begin to frantically build an emergency fund.
The second thing that came to mind was insurance. I wondered how many of the impacted people had the right insurance, from home to renters to auto to life. I know that insurance evokes negative feelings in many people, but it is absolutely necessary. Insurance is all about risk management. You pay a price (premium) to know that if something happens the insurance company will have to pay the bulk of the cost, not you. You are transferring the risk for the most expensive things in your life to the insurance company. If you haven't done so recently, you need to take the time to make certain that you have the insurance coverage that you need.
The final thought I had (pertaining to personal finance) when thinking about this whole situation had to do with people's ability to respond financially when something like this happens. If you've followed this blog you know I started with the end in mind, and that was giving. The main reason I find myself very interested in getting and staying on track financially is that it provides me with the ability to be generous with the money God has placed in my control. Too many people today live so far above their means and are in so much debt that they are unable to respond monetarily when disasters happen. If that's where you find yourself I would encourage you to do everything you can to change your situation. If you need help getting started I would love to point you in the right direction and help you find a plan that works. Being able to give when people are in desperate need is a wonderful blessing to them as well as you.
After seeing the effects first hand, I wouldn't wish a flood on anyone! (Well, I don't guess would have before either!) But if you find yourself in that situation, or any other financial emergency, I hope that you are prepared. Being prepared to me means having an emergency fund of 3-6 months of living expenses set aside, as well as having the proper insurance coverage in place. And if you see other people dealing with something like a flood I hope that you are able to help out in many ways, including being able to write a check or hand over some cash!