In lieu of the recent events that happened due to typhoon Pablo’s destruction, we again present Mr. Colayco’s advice on how to better prepare yourself against typhoons and other natural calamities. This may have been written during the time of typhoon Ondoy, but Mr. Colayco’s financial wisdom knows no bounds!

The floods of Typhoon Ondoy were extremely devastating. This time, Ondoy did not choose only the poor and marginalized. For the first time, even exclusive villages were flooded. In many cases, both personal and household items were swept away by the flood.

For most, even if the items are still there, they are no longer usable or cannot even be repaired. So many thought they were going to die and being alive seems to be the greatest blessing of the day.

The response to help each other was also overwhelming.

Neighbors opened their homes to strangers who needed a second or third floor or even a roof to evacuate to. The sharing of money and food is awesome as we see so many people in the supermarkets buying boxes and boxes of foodstuffs not for themselves but to give away.

Soon, the reality of having been caught unprepared for much needed expenses to repair homes, offices, buildings, factories, cars, etc. will settle in.

Nobody wants to suffer and certainly nobody wants to be caught unprepared when natural calamities strike our homes and communities. We know these things happen and that they happen with regularity. They are a fact of life and we must accept it and do something about it.

And yet, why do so many of us always get caught unprepared? We seem to think that when these calamities strike, we will be spared and that it is the others that will bear the brunt of the problem. It’s never us.

We grieve for the victims of Ondoy especially those who had family who lost their lives. Losing them is trial enough but for those who lost their breadwinner, moving forward will be so much more difficult. There are several financial reminders needed while the lessons are fresh in our minds.

Reminder on Insurance

Ondoy’s devastation should remind us to take a second look at the importance of insurance. Those who have family dependent on them should taking life insurance to somehow lessen the pain of their loss. Term insurance does not cost very much. Another is property insurance, specifically for our home, its contents and our cars.

For house insurance, the most common perils that you should cover are fire, typhoon, and earthquake.

Fire, in particular, can render one completely devastated because, most of the time, you can lose almost everything permanently including your memories (pictures and mementos). But the floods of Ondoy reminded us that floods can be just as devastating as fire. If you had insurance against typhoon, the losses you incurred with the floods would have been covered.

Whether or not you own your house, you can consider covering it with insurance. As always, you do not want to claim on insurance and it is difficult to spend on premium payments because you might feel that you are throwing away money for nothing. After all, you do not get any part of your premium payment back. These premium payments are one hundred percent expenses. However, if you can afford it, it is better to be protected.

If you don’t own your house, you can cover the contents of your house like furniture, equipment and personal effect. If you do own your house, you should be covered as well for the house itself.

Coverage means that if the items covered are damaged by the perils covered, the insurance company pays. While you do not really recover the real things that matter after a fire or typhoon or earthquake, at least the insurance payment will help you buy back some of it and replace to a great extent the physical assets damaged or lost.

Word of caution though, read the fine print in your insurance document to make sure you are really covered for what you want.

Car insurance has many types of coverage. The most common are for third party liability, theft, and own damage. Insurance coverage for the devastation type by Ondoy must specifically be defined in the policy acquired. As a minimum, it should cover the cost of restoring your car damaged by floods or typhoons.

Car accidents can be painful physically to the people involved. It also involves a lot of reporting, documentation with the police and other authorities. However, it becomes even more troublesome it you are not insured. If you own a car, insurance is one of the required costs of ownership.

Reminder: Set up cash reserves for personal emergencies

One of the very first rules about money management is to pay yourself first so that you can set aside at least six months salary or earnings precisely to cover emergencies. For most income earners, it takes years to build up a six-month cash reserves. If you save ten percent of your monthly earnings, it will take you five (5) years to accumulate six months cash reserves for emergencies.

Practically speaking though, there are faster ways to accumulate this goal.

For those who did not lose all their assets in the flood, one way is to dispose of some assets we may have acquired and which we do not really get to use today. I am sure, most of us have some idle assets that we can sell and convert to cash now. Look around you. Make an inventory of things like appliances we have more than what we need, e.g. an extra TV, radio, excess furniture, clothes, gadgets, electronic “toys”, etc.

Have a good look at these possessions and choose what you can afford to dispose of now. Chances are, losing some of these assets will not diminish or hurt your present lifestyle. Selling theses assets will most certainly contribute to building up cash reserves for emergencies right away.
Get started and build your personal cash reserve now! Do not procrastinate. One of these days, it may be too late and you will no longer be able to recover from your emergency losses.

* First published on September 30, 2012 at the GMA Network website