How To Be Prepared For Any Disaster—Fire, Flood Earthquake, Hurricane
 If you had 10 minutes to evacuate your home during a natural disaster, what would you take with you? Where would you get cash if ATM and credit card networks were down? Would your insurance be adequate to rebuild your home?
Obviously, the safety of you and your family is your first concern -- but ensuring your financial security is second. As a certified financial planner based in disaster-prone Southern California, here’s what I tell my clients.
Keep enough cash in the house for a weekend away. It can take that long after a disaster for merchants to be able to accept credit or bank cards.
Also keep $300 in one-dollar bills on hand. Reason: Stores may not be able to make change. After the last earthquake in this area, some people had to hand over $20 bills to pay for a carton of milk or a bottle of water.
Keep important items in a secure, fire-safe box near the front door -- perhaps in a coat closet. (Keep original documents in a safe-deposit box or a fireproof safe.) The box should be lightweight so that you can carry it to your vehicle in an emergency. It should contain…
Legal papers. Copies of titles to your home and vehicles, marriage and birth certificates, passports, insurance policies, military and medical records, Social Security cards, driver’s license numbers, wills and powers of attorney.
Extra supplies of medications if your doctor will prescribe them. Rotate them monthly so that the newest medication always is available. Also keep lists of medications, doctors’ phone numbers, etc. People with extreme allergies should include Epi-Pen injectors.
Financial records. Copies of credit card and employee benefit statements, household budget, tax returns for the last three years, contact and account numbers for financial accounts.
Key to your safe-deposit box, if you have a box.
Extra checks.
Inventory of household possessions, including professional appraisals for valuables, such as jewelry and antiques, and receipts for the cost of major home improvements, such as kitchen remodeling or a new deck.
Helpful: Use a digital camera or camcorder to record your home’s contents for insurance purposes. Go room by room, giving an audio or written description of the approximate cost, condition and age of each piece of furniture, appliance and decorative element -- even towels and clothing. Send a copy on DVD or CD to your insurance agent, as well as copies of receipts for big-ticket items, to expedite future claims.
While many documents may also be stored in a bank safe-deposit box, keep in mind that your local bank could be closed for several days or weeks after a disaster.
Backup plan: Scan documents into a single electronic file, and save it on your computer hard drive. Regularly back up the file to a removable flash storage device that you can take with you in the event of a disaster. These portable devices are the size of a cigarette lighter and plug into your computer’s USB port. They are available for about $50 in electronics or office-supply stores.
You can buy a scanner for as little as $69, or have your documents scanned at an office-supply/photocopying store.
Maintain an emergency fund. Keep three months’ to a year’s worth of basic living expenses—rent/mortgage, food, insurance, etc.— in safe, liquid investments, such as short-term CDs and short-term municipal bonds. This will protect you from a disaster as well as a loss of income—if your place of work is damaged, you may be without a paycheck for some time.
Also: Recent laws have forced all financial institutions to implement disaster-continuity plans. Obtain copies of the plans from your bank and brokerage house to learn how to access your money after a disaster.
If you live in a disaster-prone region, look into retrofitting your home with the help of government loans. Consult a home inspector about what steps to take. Mortgage giant Fannie Mae and the Federal Emergency Management Agency (FEMA) offer 10-year predisaster-mitigation loans from $1,000 to $20,000 for projects such as reinforcing roofs, installing flame-retardant shingles and elevating a building.
Such upgrades can substantially reduce insurance premiums. Mitigation loans have no minimum income requirements, closing costs, annual fees or prepayment penalties. You don’t have to risk your house as collateral, as you do with a home-equity loan. Terms: 9% to 12% fixed rate for the life of the loan. For more details, contact FEMA at 202-566-1600 or 800-621-3362 or www.fema.gov (search for “Project Impact Prevention Loan”).
Make sure your homeowner’s insurance includes appropriate disaster coverage. Depending on where you live, you might need flood insurance through the government’s National Flood Insurance Program (annual premiums of $300 and up) and riders for hurricanes and/or earthquakes ($2,500 a year and up for a $200,000 home with a $10,000 deductible). Such riders are expensive, but losing everything because you’re not covered is more expensive. Smart: Increase your deductible to $3,500. Premiums drop at that level, making riders more affordable. For more information, contact FEMA.
Make sure you have “replacement value” coverage that pays you the amount necessary to replace articles with ones of similar quality at current prices. Check that you will be reimbursed for living expenses if your home is damaged and uninhabitable. Cost: Less than $100 in annual premiums for $10,000 of coverage.
If you have a home office, you will need a commercial policy to cover damage to business-related equipment. (Homeowners' policies do not cover home-based businesses.) Many homeowners' policies limit replacement of computer equipment to $2,500. You can double this coverage for $20 to $30 per year.
Helpful resources: Download Disaster Recovery: A Guide to Financial Issues free from the American Red Cross, (website here). FEMA also offers Are You Ready?—a free guide to disaster preparation.
By Nigel B. Taylor; Taylor and Associates. Reprinted with the permission of Bottom Line/Personal; Boardroom, Inc.;
281 Tresser Blvd., 8th Floor; Stamford, CT 06901.(website here)
This article is provided by Bull & Bear Capital Advisor Robert Liggero, MBA, CFP®.
Don't Let Economic Troubles Threaten Your Retirement Plans
 As the economy has worsened, not only have retirement funds dropped in value with the market, but also many people have been tempted to tap savings as a way to cut debt or otherwise shore up their finances after a job loss. Still more have found that employers have dropped matching contributions to shore up their own finances.
Worry about retirement seems to be widespread. A January survey by the National Institute on Retirement Security noted that 83 percent of Americans are concerned about their ability to retire.
Yet the worst thing you can do is tap or give up on your retirement funds. No one can know with any certainty when the investment markets will rebound, but even if you can contribute something, you stand to gain once markets start to rebound. Even more important, you risk penalties and the lost potential for the earnings if you turn your back.
Retirement anxiety can be alleviated by talking to a Bull & Bear Capital Advisors Certified Financial Planner™ professional. It’s a good idea to check in with such an expert to see where your retirement funds stand in light of all your finances before you do anything. Developing a set plan with goals and measuring your progress towards those goals are the crucial steps to a secure retirement.
In the meantime, here are things you can do to put your retirement funds in better shape.
Don’t stop funding your 401(k) under any circumstances: In March, the Spectrem Group, a Chicago-based consulting firm, reported that 34 percent of U.S. employers have reduced or eliminated matching contributions to their defined contribution retirement plans – which include 401(k)s and 403(b)s – since January 2008. The Pension Rights Center reports that besides the Big Three automakers, dozens of major companies have cut back their match, including Motorola, Starbucks, and JPMorgan Chase & Co. It’s a significant impact. US News & World Report recently reported that a worker who earns $50,000 annually and receives a full employer match of 50 cents to the dollar on six percent of his or her pay, the match cut means $16,000 less for retirement. An employer dropping its contribution is bad news, but you should make every effort to keep up with your contribution because if you don’t, you’ll miss valuable tax deductions and the chance to build your funds more effectively for the long term.
Stay invested: Because no one precisely knows when the market is headed up or down it’s best to stay invested at a time when everyone is waiting for a rebound. Keep in mind that the market’s top performing days typically come at the start of a recovery, so leave your money in your 401(k) and IRAs.
Keep in mind that withdrawing or borrowing your funds can be costly: If you have an emergency situation, be careful. Workplace 401(k) plans do allow for hardship withdrawals, but you might have an option to take a loan, which would save you the taxes and the 10 percent penalty that accompany hardship withdrawals for account holders under the age of 59. The majority of 401(k) plans allow you to borrow up to 50 percent if your vested account balance or $50,000, whichever is less.
Adjust your spending so you can save more: If you have an existing Roth or traditional IRA or other means of saving for retirement, do whatever you can to get more money into these accounts. It may not come close to meeting the shortfall from losing an employer’s contribution or the chance to add to a 401(k) after you’ve lost your job, but it’s critical to keep some savings going.
June 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Bull & Bear Capital Advisor Bob Liggero, MBA, CFP®, a local member of FPA.
A Lifetime Of Lessons In Just One Decade
 A lot can be learned from the current financial crisis as well as the irrational exuberance that many investors displayed at the beginning of this decade. During the go-go times at the end of the 90’s and the beginning of this century investors could do no wrong. We all happily watched our portfolios multiply.
There were some people who extrapolated this unsustainable growth rate well into the future.
It was not uncommon to hear some people boast that with this rate of return they would be able to retire within a short amount of time. Today people are extrapolating the current market environment into the future and they are fearful that they will not be able to retire and will need to work well into their 70’s.
There have been 13 bear markets since the end of WW-II. The average decline has been about 30%. Each of these bear markets was precipitated by a significant and often horrifying economic or financial crisis. During each bear market (as well as each super bull market) it was reported that it is different this time. Yet history tells a different story. The long term yearly average return of the S&P 500 has been about 10.4%. It has to be. The aggregate average return of all companies has been about 6.7%.
Stated differently, the combined sales of all companies have grown at an average of 6.7% over the last one hundred years. The people who were espousing that the market was only going to fall for the foreseeable future were really saying that no company was going to be profitable for the foreseeable future. Not likely.
Dividends have also added to the historical returns. The average dividend payout has been about 3.7%. From this oversimplified view it is easy to see where the long term return of 10.4% (3.7 + 6.7) comes from. But that is just a starting point. At different times in the economic cycle investors place different values on the projected income stream from these companies.
During times of pessimism there will not be much of a premium placed on the company’s future earnings, or income stream. This translates into below average P/E ratios. This in turn depresses the price an investor is willing to pay for a company. During times of optimism investors will place a greater value on the very same income stream which will increase the price an investor is willing to pay for a company.
Investors who buy into the stock market when valuations are low (a low P/E environment) have less downside risk and have a much higher chance of above average returns. This is an intuitive result, yet one that has gone unheeded by most investors. History can make an optimist out of us all, but journalism can make a pessimist out of almost anyone on any given day.
Neither panic nor euphoria provides the basis for a good financial plan. In other words, hope, fear and greed play on our emotions, and emotional decisions rarely result in good financial decisions. By focusing on the current headlines we are easily distracted from our real goals. A good financial plan focuses on what is important—like a retirement income stream that will keep up with inflation and support the retirement lifestyle that we want. A good plan will shift the main focus away from the daily noise and on what is the right thing to do, especially when it feels wrong to do so.
June 2009 — This column is written by Bull & Bear Capital Advisor Bob Liggero, MBA, CFP®.
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