Emotions tend to take over during times of physical disaster — a reality being experienced by flood victims in Minnesota and North Dakota, according to professionals. But the time will come when the subject of finances must be dealt with.
“When the waters subside, along with some of the raw emotion — and your safety is assured — step back and survey your financial options,” suggests financial advisor Barclay G. Carriar, St. Cloud.
“When people suffer a grave loss, they may act without being grounded in rationality,” Carriar said. “They shoot from the hip and make mistakes with their money they may later regret. They think only in terms of getting cash quickly, and they may forget about surrender charges or other fees.”
Carriar, advisor with the St. Cloud office of Johnson, Carriar, Carlson-Wallace and Associates, a division of American Express Financial Advisors, offers some tips for flood victims who now must face the challenge of coming up with cash — to pay for temporary housing, to replace personal belongings and to just resume as normal a life as possible:
— Develop a hierarchy of needs. If your home is gone, housing is obviously the greatest immediate need. Tackle your needs one at a time, in priority sequence, from house to appliances, to bedding or piano. For many people, meeting the deductible on their flood insurance will be their number one financial priority.
— Check with relief agencies such as the Red Cross. Numerous programs have services to assist you in a variety of ways, from temporary housing to food and supplies to clean-up and counseling.
— Investigate all financing programs — state, local and federal. Keep in mind that government subsidies often do not translate into outright grants. It’s more likely flood victims will be offered low-cost loans. One such agency is the Federal Emergency Management Administration (FEMA).
— Once your basic safety needs are addressed and clean-up is well underway, enlist the help of a financial professional before you borrow haphazardly from your accounts or invade savings. A professional can help you access your most liquid assets first. Poorly timed sales of your investments can result in fees, losses and tax problems.
— Think carefully before making a decision to do something as serious as declare bankruptcy. The consequences may be more stringent and long-term than you realize.
— Consider borrowing from your 401(k) or 403(b) account before liquidating your IRA that would incur taxes and other penalties.