Financial Recovery Following a Disaster

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Purpose

The Financial Recovery ProcessRestoring stabilityPlanning for the futureQuestions and answers

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Who is FPA?

Membership organization for the financial planning community

FPA volunteers provide free planning advice to help individuals and their families recover from natural disasters

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Recovery Priorities

Make Sure You and Your Family are OK Register With FEMA, Red Cross, etc. Secure Housing Get Access to Cash Check on Your Job Launch Your Financial Recovery

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Steps Toward Financial Recovery

1. Re-establish address, bank accounts

2. Determine all available income sources

3. Address your debts

4. Prepare a realistic spending plan

5. Review tax considerations

6. Avoid common mistakes

7. Set goals and create a plan for the future

8. FOLLOW THROUGH WITH THE PLAN!!

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Step 1: Address & Bank Accts.

Mailing address is required for evacuees to register with FEMA and aid agencies

Change of addresshttps://moversguide.usps.com

Bank account is required to receive aid and hold fundsNew account may be needed if old bank

incapacitated

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Step 2: Identify Income Sources

a) Federal, State and Red Cross Programs

b) Insurance Claims/Proceeds

c) Job-Related Benefits

d) Life Insurance Policies

e) Retirement Plans

f) Other Sources

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Step 2: Identify Income Sources a) Federal, State and Red Cross

Immediate FEMA and Red Cross emergency financial aid

Medium term State unemployment benefits Federal Disaster Unemployment Assistance State food stamp programs

Long Term FEMA Individuals & Household Programs grants SBA Real Property and Personal Property

Disaster Loans (for individuals/families) SBA Physical Disaster and Economic Injury

Loans (for businesses)

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Step 2: Identify Income Sources a) Register to get financial help

FEMA – http://www.FEMA.gov 1-800-621-FEMA (3362)

Red Cross – http://www.redcross.org1-866-438-4636 (AL, FL, LA and MS)1-800-975-7585 (all other states)

Louisiana 2-1-1 Get Connected/Get Information

NOLA Ready- http://new.nola.gov/ready

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Step 2: Identify Income Sources b) Insurance Claims

Contact your insurer ASAP Report how, when, & where damage

occurred Document all damaged property –

(take photos, gather receipts, etc.) Prepare an ongoing inventory list –

(inventory needed for taxes as well) Ask for living expense reimbursement

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Step 2: Identify Income Sources b) Sample Inventory Form

HOME INVENTORY  Description Brand/Model Serial Number Where and

when boughtPrice paid Replacement /

appraised val.Receipt kept?

LIVING ROOM / DEN              

Television              

VCR/DVD player              

Carpet/rugs              

Curtains/shades, etc.              

Sofas              

Cushions              

Chairs              

Coffee table              

End tables              

Desk              

Bookcases              

Books              

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Step 2: Identify Income Sources b) Flood Insurance

Flood damage usually NOT covered by homeowner’s or renter’s insurance

Flood is water that covers the groundEven if it starts out as rainEven if it’s driven by hurricane winds

Government-backed flood insurance may be available in flood-prone areas

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Step 2: Identify Income Sources

c) Job-Related Benefits

Paycheck Advance Paid Time Off Advance Donated Paid Time Off Family & Medical Leave Act

If caring for injured family memberhttp://www.dol.gov & (866) 487-9243

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Step 2: Identify Income Sources

d) Life Insurance Policies

Tap Cash Values of Permanent Insurance Whole, Universal, Variable, etc.

Loans Must pay interest Reduces death benefit No taxes, no penalties Policy may lapse if loan is too large

Withdrawals Reduces death benefit No taxes or penalties up to premiums paid

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Step 2: Identify Income Sources

e) Retirement Plans

Borrowing or withdrawing from retirement plans should be a LAST RESORT May trigger income tax and penalties May seriously disrupt long-term retirement plans

Loans from 401(k) & Profit Sharing Plans: Amount – 50% of available balance Repayment options – 5-10 years to repay

Hardship Withdrawals from IRA & 401(k): 10% penalty unless used for approved costs Income tax must be paid on amount withdrawn

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Step 2: Identify Income Sources

f) Other Sources to Consider

Family & Friends Agree now on terms to avoid future disputes

Local Organizations Churches and volunteer organizations like the Lions Club

Veteran Organizations Credit Cards

BEWARE of interest and fees!! BE CAREFUL not to overload on debt!!

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Step 3: Address Debt Obligations

Notify mortgage company Most offer 90-day grace period in disaster zones

Notify credit card company Request a grace period Be careful if your credit history is not great

Contact other creditors Negotiate payments on services you are not

using: utilities, Internet, telephone and cable

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Step 4: Create a Spending Plan

Take control of spending by creating a realistic spending plan

List all sources of income

List everything you spend, divided by:Spending on things you NEEDSpending on things you WANT

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Step 4: Create a Spending Plan

Sample Expense Tracking Chart

Spending Plan Month Ending:________________________________

Expense Type Week 1 Week 2 Week 3 Week 4 Week 5

Weekly Total by Expense

Type

Monthly Planned

Spending

Difference Plus or Minus

Rent            

Food - Grocery Shopping                

Savings                

Phone                

Transportation                

Medical Expenses                

Laundry/ Dry Cleaning                

Clothing                

Personal Products                

Debt Repayment                

Personal Care/Hair                

Education / Training Exp.                

Church / Charity Dona.                

Other Misc                

TOTAL EXPENSES                

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Step 4: Create a Spending Plan

What Are Needs and Wants?

Income Needs Wants

Salary Housing Entertainment

Pension, Soc. Sec. Food Eating out

Savings Utilities New clothes

Govt. grant or loan Transportation Toys/electronics

Unemployment Insurance Gifts

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Step 5: Tax Considerations

IRS May Defer Filing Deadlines Possible Deductions

Casualty Loss DeductionMedical Expense DeductionExpenses for Replacing & Repairing

Income-producing Property Earned Income CreditTRACK COSTS AND KEEP RECEIPTS

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Step 5: Tax Considerations

Getting Professional Tax Help Taxes Are Complex – Consult a

Professional Free help may be available

VITA – Volunteer Income Tax Assistance Program 1 800.829.1040

TCE – Tax Counseling for the Elderly 1 800.829.1040

AARP Tax Aid Program Email: taxaide@aarp.org 1 888.227.7669

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Step 6: Be Careful of These!!!

Credit Card Cash Advances Payday Advance Loans Zero Down, Zero Interest Offers Reverse Mortgages Misspending funds received from FEMA

WATCH OUT FOR SCAMS AND PREDATORS

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Step 6: Be Careful of These!!!

Dealing with Contractors

Disaster zones attract predators Demand proof of licenses, permits, etc. Get contracts and costs in writing Pay periodically as work progresses Make sure work meets building codes Don’t make final payment until you’re

satisfied with the work

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Step 7: Plan for the Future

Decide on life goals and determine the financial steps needed to reach them

Revise your income and spending plan to achieve steps toward your goals

Choose investments and insurance matched to your goals

Create an emergency fund

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Step 8: Follow Through

Implement the Plan Monitor and Maintain the Plan on a

Regular Basis Make Adjustments As Your Situation

Changes

A PLAN THAT IS NOTIMPLEMENTED IS WORTHLESS!!

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Important Resources

Financial Planning Association of Chapter Name www.chaptersite.org / 1.chapter_phone_number

Federal Emergency Management Agency www.fema.gov / 1.800.621.FEMA (3362)

Nat’l Association of Insurance Commissioners www.naic.org / 1.816.842.3600

Internal Revenue Service www.irs.gov / 1.866.562.5227 (disaster hotline)

Special thanks to FPA of Dallas/Ft. Worth for its work on this presentation

This presentation is the property of the Financial Planning Association® and is not to be used without the express, written permission of FPA. No part of this may be reproduced or utilized for any purpose other than specified by FPA.FPA’s pro bono programs are funded in part by generous funding from the Foundation for Financial Planning