Your Financial Emergency Kit

Oct. 26--As soon as we hear a warning of an earthquake or tornado, we immediately run to the store to stock up on everything, from batteries to canned foods. Few of us, however, ever think of preparing a financial emergency kit as well.

Think about what would happen if you were suddenly injured or worse. Does anyone know where your bank accounts are? Which credit cards do you have? What are your monthly bills? In many marriages, one of the spouses takes on the role of household chief financial officer (CFO), while the other spouse is left uninformed.

To prevent confusion and stress should something happen to your household CFO, prepare a master list of all your financial accounts: banks, credit cards and mortgages. Don't forget your insurance policies as well. Always update the document and make sure both spouses know where the information is and how to proceed in the case of a family emergency.

A great method to catalog such items is by preparing a net worth statement. Think of it as an individual's equivalent of a company balance sheet. It lists all of your assets and liabilities. Your net worth is your assets minus your liabilities. Your statement should list each account, its number and its value. The statement should also spell out who owns the account and whether there's a designated beneficiary.

A well crafted net worth statement has other benefits, as well. You can track your assets over time. It will also allow you to measure your financial health by measuring the ratio of your debt to your income, assets and equity. The goal is to minimize your debt, while expanding your wealth.

You should also consider including essential documents in your emergency kit. This is especially true if you are threatened by a true natural disaster. The Federal Emergency Management Agency (FEMA) published a detailed brochure in September that listed key items, from copies of your driver's license and prescriptions to insurance cards and any existing wills.

Remember disasters of any kind are sudden and catastrophic. So make sure your spouse and loved ones are properly -- and financially -- prepared.

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Ara Oghoorian, CFP, CFA, is the founder and president of ACap Asset Management in Los Angeles. A fee-only investment management firm, it specializes in helping doctors and physicians make sound financial decisions. Contact Ara at [email protected] or on the Web at www.acapam.com.

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