Moment | Getty Images
It’s smart to be financially prepared for an emergency.
However, being ready is more than simply having emergency savings in place. Instead, think of it as your financial first-aid kit.
“It’s really important to have our financial first-aid kit ready and organized because life can change in a moment, as we’ve learned from the pandemic,” said Winne Sun, managing director of Sun Group Wealth Partners in Irvine, California.
“One day you might be fine and, the next day, you need to scramble to figure out where your financial resources and records are.”
To create your own financial first-aid kit, get a binder or an encrypted drive in which to place all your documents.
Start with your financial statements — for investment and banking accounts, for example — as well as your tax documents, pay stubs and Social Security statements. Place copies in the binder or scan documents into the drive, and keep any originals in a safe.
“That saves you sorting through folders and piles of documents and a shoebox full of receipts,” said financial preparedness advocate Tony Steuer, author of “Get Ready: A Step-By-Step Guide to Maintaining Your Financial First Aid Kit.”
“Having everything in one place allows you to easily access them and get a total overview of your financial life.”
It also means you won’t have to scramble for the information if you lose your job and need to apply for a loan.
Sometimes we forget how important it is to have these financial records organized and in place until we need them.
managing director of Sun Group Wealth Partners
Additionally, include a record of your last credit score, a copy of your mortgage and the title for your car, Sun said.
Plus, at the minimum, do a budget worksheet.
By writing down what you own, your expenses and your debt, you can get a snapshot of your situation that you can instantly access if needed, Steuer said.
Wills and insurance
There has already been a rise in the creation of online wills before Covid-19, and that trend accelerated after the pandemic hit.
The good news is that drawing up a will is relatively simple to do online. Or, you can do a virtual meeting with an attorney. The only time you have to come face-to-face with someone is when the document is signed, said Sun, a member of the CNBC Financial Advisor Council.
More from Invest in You:
Americans are burned out working from home. Here’s how to cope
Here are job-hunting strategies for those in mid-career and out of work
Conventional personal finance advice can fail for some
Also include any other estate-planning documents you have, such as living wills, advance directives and trusts, in your financial first-aid kit.
The same goes for any documentation of insurance you have, such as health, auto and home.
Also include things that may not be considered traditional insurance but are a “safety net,” Steuer said.
That could be benefits like paid sick leave and accrued vacation time, as well as unemployment benefits available to you and even retirement savings (think of it as insurance for your retirement).
Access to equity
Of course, experts always advise having emergency savings to help get you through the rough patches in life. Most recommend stashing away three to six months’ worth of living expenses, or more.
If you own a home, it’s also a good idea to take out a home equity line of credit, which can serve as a “financial lifeline” if needed, Sun said.
For those who are younger, Sun suggests investing in a Roth individual retirement account. Contributions are made after tax, which means that you’re not only building your retirement savings tax-free, you also can also tap into your contributions at any time without paying taxes and a penalty fee.
In addition, gauge the ability of your family and friends who may be able to provide a loan or financial assistance “if things get really dire,” Sun advised.
Phone numbers and passwords
Compile the URLs, usernames and passwords for all your accounts.
If you have a financial advisor, include their phone number in your financial first-aid kit. The same goes for any credit cards you have, along with their contact phone numbers.
In addition, list all your medical practitioners and their contact information.
A financial calendar
Maintaining and updating your financial first-aid kit is an important but often overlooked regular step. People “set and forget a lot of this stuff,” said Steuer.
Create a calendar to remind you to revisit your budget, credit report and other documents every year.