Financial Takeaways From the Disaster in Japan

Seeing such destruction wrought upon the islands of Japan comes as a terrible shock. We expect earthquakes in Japan . We expect the occasional tsunami. But it's Japan -- they're trained and prepared for such events. Yet here we are, watching a crisis of epic proportions unfold for this storied culture even after all their planning and preparation.

After such a scenario occurs, it makes me think about other such situations like Hurricane Katrina, September 11th, the earthquake in Haiti , and similar disasters. And I wonder what I would do or how I would handle myself in such situations as those.

My scenarios and reactions often weigh heavily upon my level of preparedness, which, strange as it might seem, in turn hinges largely upon my financial situation. I think that many of the disasters that occur not only serve as an example of how precious life is, as well as our level of humanity when we react to and help others in a crisis, but indeed how we can act to help ourselves through better preparation for the unknown and the possibility of disaster at home. This preparation often begins with personal finances.

Preparation At Home

While a person can't prepare for every emergency situation, there are things we can do to enable ourselves to take on a variety of disaster scenarios with increased calm and confidence. One of the main financial lessons I have taken away from watching various disasters unfold, is to be prepared at home. Having cash on hand (in case banks, ATMs, credit/debit cards aren't working) and at least a month's supply of wood, water, medical, and similar emergency supplies on hand can be a good start.

But you might be wondering why I listed this as a financial lesson. Food and supplies might not seem like they'd have much to do with financial preparation. They are however an investment in your ability to sustain yourself, and it takes money to purchase them, which will require some financial willpower to set aside. It often doesn't take much in the way of an investment to stock up on bulk food, water, and basic emergency supplies (even a hundred dollars or so can serve well in making a nice little reserve stash of long-lasting staples), but you have to be able to set some money aside in the first place in order to create this supply.

Long-term Plans

As a society, we have become accustomed to having emergency situations resolved by our various governmental and private sector institutions in a relatively short duration. If the power goes off somewhere in America , it's a rarity if it's not back on in a day or so at most, occasionally three days. Even during Hurricane Katrina -- and I'm not saying this wasn't a long time for the people involved -- most everyone was rescued in a matter of days not weeks. But we can't always take these shortened response times for granted. What if a situation occurred in which you had to go for weeks on end without being able to get food from the grocery store? What if you had no work, no income, no transportation, no home, no access to your money or accounts, no phone?

This is where having an emergency fund of cash on hand can come in handy. If you make it to the grocery store only to discover that they aren't accepting credit cards, how will you buy food? If you have to pay someone to drive you to your parent's or a friend's house because your vehicle has been destroyed, they may want a cash payment up front. What if you have to stay at a hotel with no power? They may not be taking credit either.

There can be all kinds of situations in which having a stash of at least a couple hundred dollars in your home could get you through a longer emergency period in which you may have to ditch the security of your home base and venture out into the unknown.

Insurance

Some of you might be saying to yourself, "Well, I have homeowner's insurance; it will cover my costs and my damages should a disaster occur. I don't have to worry about being prepared. My insurance will cover my hotel costs, my transportation costs, medical costs, home repair costs or whatever else I should need to be paid."

If that's the case, then great; however, it's important to ensure that you fully understand the policy governing your home and possessions. Many people aren't fully familiar with the terms of their homeowners, renters or vehicle insurance policies and might be surprised to discover what often isn't covered. And even if certain items are covered, it might not be to the extent you expected, and the money you are due could be a long time in coming.

FYI -- most standard homeowners policies in the United States don't cover earthquake damage or flooding. So if a disaster such as what occurred in Japan were to take place where you live, you might be out of luck when it came time to file a claim and would have to hope for government assistance through organizations such as FEMA. Even if your home wasn't destroyed though, resulting structural issues could cost tens of thousands of dollars to repair, and this could result in another type of disaster financially.

More From This Contributor:

Emergency Food Supplies: What to Stock

5 Ways to Save 5 Bucks in 5 Minutes or Less

How I Survived Long-term (Regular) Unemployment

Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.