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Are you really prepared for a money emergency? This is the financial first-aid kit you need to stock

Here's what you need in your financial first-aid kit
Here's what you need in your financial first-aid kit
Key Points
  • Half of U.S. households lost income due to Covid-19, highlighting the need to prepare for unexpected and critical personal finance issues.
  • Access to cash is critical, not only an emergency fund, but if available, a home equity line of credit and after-tax retirement savings like Roth IRAs which can be tapped without a big tax hit.
  • Financial documents, from investment and banking accounts to Social Security and wills, all need to be stored in a secure but accessible place, whether that be a safe or encrypted drive.

The coronavirus pandemic has highlighted the need for emergency preparedness, including with your money.

Half of U.S. households lost income due to the economic fallout of the coronavirus pandemic, according to a recent Bankrate survey of over 3,700 Americans conducted in June. That's why it's critical to have an emergency financial aid kit, said Winne Sun, managing director of Sun Group Wealth Partners in Irvine, California.

"I recommend everybody have one," she said. "And the good news is it's actually not that difficult to put together."

Think of it like a first aid kit you have at home, filled with bandages and medicine. Instead, this one is for your financial documents and access to cash in case of emergency.

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It's something Sun had to deal with recently when her dad had an accident and was rushed to the hospital. 

"It was a really, really scary time," she said. "One of the first things they asked for was his trust and his health care directives.

To create your own financial first-aid kit, get a binder or an encrypted drive in which to place all your documents.

Financial statements

Start with your financial statements — for investment and banking accounts, for example — as well as your tax documents, pay stubs and Social Security statements. Place copies in the binder or scan documents into the drive, and keep any originals in a safe.

"That saves you sorting through folders and piles of documents and a shoebox full of receipts," said financial preparedness advocate Tony Steuer, author of "Get Ready: A Step-By-Step Guide to Maintaining Your Financial First Aid Kit."

"Having everything in one place allows you to easily access them and get a total overview of your financial life," Steuer said.

It also means you won't have to scramble for the information if you lose your job and need to apply for a loan.

Sun advises individuals to include a record of your last credit score, a copy of your mortgage and the title for your car.

Plus, at the minimum, do a budget worksheet. By writing down what you own, your expenses and your debt, you can get a snapshot of your situation that you can instantly access if needed, Steuer said.

Access to cash

Of course, experts always advise having emergency savings to help get you through the rough patches in life. Most recommend stashing away three to six months of living expenses, or more.

If you own a home, it's also a good idea to take out a home equity line of credit, which can serve as a "financial lifeline" if needed, said Sun, a member of the CNBC Financial Advisor Council.

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For those who are younger, Sun suggests investing in a Roth individual retirement account. Contributions are made after tax, which means that you're not only building your retirement savings tax-free, you also can tap into your contributions at any time without paying taxes and a penalty fee.

In addition, gauge the ability of family and friends who may be able to provide a loan or financial assistance "if things get really dire," Sun said.

Wills and insurance

There already had been a rise in the creation of online wills before Covid-19, and that trend accelerated after the pandemic hit.

The good news is that drawing up a will is relatively simple to do online. Or, you can do a virtual meeting with an attorney. The only time you have to come face-to-face with someone is when the document is signed, Sun said. 

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Also include any other estate-planning documents you have, such as living wills, advance directives and trusts, in your financial first-aid kit. The same goes for any documentation of insurance you have, such as health, auto and home.

Also include items that may not be considered traditional insurance, but are a "safety net," Steuer said. That could be benefits like paid sick leave and accrued vacation time, as well as unemployment benefits available to you and even retirement savings (think of it as insurance for your retirement).

The use of digital storage for important documents has grown in recent years, but there are key steps to make sure it is done correctly and safely.

Phone numbers and passwords

Compile the URLs, usernames and passwords for all your accounts.

If you have a financial advisor, include their phone number in your financial first-aid kit. The same goes for any credit cards you have, along with their contact phone numbers.

In addition, list all your medical practitioners and their contact information.

Mark it all down, and update it

How to create a financial cushion
How to create a financial cushion

Maintaining and updating your financial first-aid kit is an important but often overlooked regular step. People "set and forget a lot of this stuff," said Steuer.

Create a calendar to remind you to revisit your budget, credit report and other documents every year.


It's also vital to communicate all of the above information to your loved ones, so they know where to locate the information in the event you can't.

"We plan for life," Sun said. "As a parent, I have a first-aid kit with me at home and in the cars whenever we go out, in case my kids get hurt. ... Sometimes we forget how important it is to have these financial records organized and in place until we need them."

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