A fire, and only minutes to make critical decisions

A fire, and only minutes to make critical decisions

BOSTON (MarketWatch) -- At 6:45 a.m. on Feb. 22 my daughter burst into my office yelling something about a fire in the chimney. There was no immediate danger, but smoke was building, there were flames shooting out the chimney cap and it was clear everyone needed to be out.

The fire department had been called, a few precautions were taken to minimize the fire and whatever fuel it had, and then my wife and I walked out of the house to meet the first officers to the scene.

And as soon as I stepped out of the house, I realized I had made a mistake. The "family disaster kit" had been left downstairs, back in my office, and there was no way the officers were going to let me back in to get it, regardless of the danger of the situation.

In the end, it turned out to be little more than a fire drill; the fire was extinguished within a half hour, there was minimal damage and, most importantly, everyone was safe.

In the scheme of disaster prevention, however, the drill was a mild failure, because in the five minutes I had to safeguard my family's life, I left behind the finances. Had this been a real disaster, it would have tested the veracity of the manufacturer's claims that I had purchased a fireproof box. (Several safety experts I talked with said that leaving behind the file in a fire is the right thing to do, that it only travels in disasters -- like hurricanes -- where evacuation comes with some advance warning.)

Moreover, when things calmed down, I checked the box and found some key areas where it would have let us down.

"Disasters can strike quickly and without warning," says Darlene Sparks-Washington, director for preparedness for the American Red Cross. "Taking action to prepare in advance can reduce the physical, emotional and financial impact of a disaster, and help you respond faster in a disaster situation where every second counts."

The idea behind any disaster file is to have the important, this-will-rebuild-your-life data in one place.

It's not the safe-keeping spot for one-of-a-kind documents, like birth certificates and marriage records, which belong in a safe-deposit box, but a certified copy of those papers in the disaster file is a good idea in case you need to produce them to get government assistance.

In a hurricane or earthquake, the same problem that destroys your home could endanger the bank vault of your safe-deposit box. Copies of the documents can also be left with a trusted friend or relative who lives in another city -- to guard against natural disasters -- although experts are split on this idea, noting that the documents in the file would be an identity thief's dream and inappropriate to give anyone.

What to include

The file -- kept in a waterproof/fireproof box -- should include your financial records and account numbers, along with contact details for those accounts. When I made my file a few years back, in the wake of all of the hurricanes that had been in the news, I simplified the process by following an expert tip to copy a month's worth of bills, plus bank and brokerage statements, thereby securing account numbers and customer-service phone lines, precisely what is necessary in case of emergency.

In a real catastrophe, it might seem frivolous to have credit-card numbers handy, but past disasters -- like those big hurricanes -- have been rife with tales of consumers who had to battle creditors over late fees and other charges. By calling immediately after the bad event, a consumer may be able to get some measure of leniency from lenders. Moreover, ignoring those responsibilities -- even during a crisis -- increases the potential for hassle.

Next, experts suggest adding in mortgage and loan information, employee-benefit statements and, perhaps most importantly, copies of insurance policies.

There are a number of software packages that include organizers that will help you create your inventory of key financial information. But software programs are only as good as the person keeping them, and copying information on your computer won't be much help if your computer is destroyed.

If, as a result, you prefer to stay low-tech, check out the "Your Important Records" section of "Your Financial Organizer," a booklet produced by TIAA-CREF. You can find the booklet by searching online at TIAA-CREF.org or you can go directly to the records page at https://www3.tiaa-cref.org/calcs/financial_organizer/section_3a.html.

Once your accounts are secure, include a copy of a "household inventory." Your inventory should contain as much detail as possible about purchase dates and prices, current value of an item and more, but it does not have to be a written record. Take a video camera and walk from one end of your home to the other, making a travelogue of everything you see. Or print pictures with descriptions on the back. The Insurance Information Institute offers free software for helping to prepare a home inventory; you can download it at www.knowyourstuff.org.

Don't forget cash

Jocelyn Silsby, manager of preparedness implementation for the Red Cross, said that the last thing to go into the disaster box is "enough cash to last you for three days, just because there are some disasters that could make it that the banks are closed, or the ATMs are not available, or you don't have your cards and can't get replacements for a few days."

A few experts suggest tossing the most recent tax return in the file, but there's a good chance the paperwork is on file with your tax preparer. Moreover, in the middle of a crisis, future dealings with the Internal Revenue Service are about the last thing a consumer needs to worry about.

The one plus to putting tax records into the file is that it creates a logical time to update the paperwork. Upon returning to my office after the chimney fire, I found several items out of date.

"Your file is only good if it's current," said Silsby. "The question becomes how many things have changed that you will forget about. ... I like the idea that when you change your clocks, you also change the batteries on your smoke detectors, and check your disaster file."

In other words, check in on your file this weekend, before or after you move the clocks. As the recent experience in my home proved, you never know when it's going to be your turn to have the disaster drill become your reality.