Are you financially prepared for a major emergency?
Most Americans aren’t, according to a new report.
Personal finance site GOBankingRates estimated the costs to recover from eight of the most common disasters, as well as how much you should have saved in an emergency fund to deal with each one.
Here are 8 financial emergencies that really aren’t that uncommon that could cause you financial hardship.
Job loss or government shutdown/furlough
- Estimated cost: $28,824
- Estimated emergency fund needed: $30,000
In the economy of the past couple of decades, job loss isn’t that unusual. Sometimes it comes out of the blue, too. Here’s what you should do immediately if you lose your job.
If you are a government employee, you could lose income due to furloughs and government shutdowns. The most recent government shutdown lasted from midnight on December 22, 2018, until January 25, 2019 (35 days). It was the longest U.S. government shutdown in history.
Prior to the end of the shutdown, news outlets reported that dire consequences were inevitable if the government remained closed for much longer:
- 38 million low-income Americans would lose food stamps
- 6 million faced an uncertain timetable for collecting tax refunds
- 2 million would be without rental assistance and facing possible eviction
- 800,000 paycheck-less federal employees would be plunged into dire financial straits
- Shuttered parks and museums and overstressed airports would cause tourism to tank
- Federal court system would slow to a crawl
- Disaster relief money would not get to storm-ravaged areas
- Lapsed FDA and EPA inspections would lead to dangerous outbreaks
- Private companies looking to go public would be stuck in limbo
- Stock market would plummet
Experts generally recommend saving at least six months of pay to prepare for furloughs and job losses.
- Estimated cost: $26,807
- Estimated emergency fund needed: $30,000
Unfortunately, most insurance policies for homeowners and renters don’t cover flood damage. On average, the cost of flood damage to homes is $23,635, and the cost to personal property is $3,172.
If you don’t have a separate flood insurance policy, you could be stuck with that bill. According to FEMA, just one inch of water in a home can cost more than $25,000 in damage.
Even if you aren’t in a flood risk area, flood insurance is worth considering, because more than 20 percent of flood claims come from properties that are not in high-risk areas.
To calculate how much a flood could cost you, try the calculator at FloodSmart.gov.
Property damage and loss are not the only expenses associated with flooding. Being away from home for an extended period can be quite costly, especially if you have to stay in a hotel.
- Estimated cost: $12,635
- Estimated emergency fund needed: $13,000
Fire and smoke can cause severe damage to a home. The damage-related costs of wildfires or man-made fires to your home depend on a number of variables, including the extent of the damage and possible additional costs such as water damage repair, chemical damage repair, and soot removal. Costs typically range from $3,192 to $26,987, with a national average of $12,635 for a full repair, according to HomeAdvisor.
There are things you can do to prevent or reduce damage to your home if you live in an area that is prone to wildfires (please see 90% of Wildfires Are Caused by People, Not by “Climate Change” – Here’s Why – and How – You Must Prep Your Home for the Inevitable for details).
For more on how to prevent fires in your home, check out this guide from SafeHome.org: Residential Fire Prevention and Safety Guide.
The sudden death of a loved one
- Estimated cost: $8,755
- Estimated emergency fund needed:$15,000
Losing a loved one is not only a tragic event, but it can also leave you with unexpected financial hardship. The average cost for cremation with a memorial service is $8,000, and the average cost of a burial with a traditional burial service, including a casket and visitation, is $15,000, according to FuneralWise.
This isn’t to mention any surprise hospital bills that may have come hand in hand with the death.
Hurricane or tornado
- Estimated cost: $7,232
- Estimated emergency fund needed: $13,000
The costs associated with a hurricane or tornado vary widely depending on how severe the damage is, with costs ranging from $2,255 to $13,178.
According to the GOBankingRate report, having $13,000 saved will cover the high-end average cost of repairs. In many cases the damage is not covered by insurance, particularly if flooding is also involved. Check your insurance policy to see what is covered in the case of a hurricane or tornado.
But keep in mind that costly repairs are not the only expenses these natural disasters can bring.
If you live in an area that is prone to hurricanes or tornadoes, plan for the potential loss of unemployment (temporary or long-term), higher gas prices, extensive repairs to your property, and unfortunately, the possibility of property loss.
The costs of being away from home for an extended period of time also needs to be considered. Will you stay in a hotel until you are able to return home?
- Estimated cost: $4,529
- Estimated emergency fund needed: $5,200
It’s best to invest in protecting your home before an earthquake hits, rather than paying to cover costs of the damage afterward.
Retrofitting is done to prevent displacement from a home’s concrete foundation, making the house safer and less likely to suffer damage during an earthquake. The cost to retrofit the average home costs between $3,600 and $6,300, with an average cost just above $4,700, according to HomeAdvisor.
If you live near an active fault zone, it is especially important to consider investing in earthquake preparations. According to a 2018 report from National Geographic, more than half of the continental US could expect a major quake within the next 50 years.
- Estimated cost: $1,322
- Estimated emergency fund needed:$1,500
The GOBankingRates report based these figures on out-of-pocket expenses for emergency care, and states that having $1,500 saved will give you some financial cushion, “in case your ER bill ends up being a bit higher than average.”
Medical expenses can exceed $1,500 by a lot – especially for those without health insurance. In fact, medical problems contributed to 66.5% of all bankruptcies, “a figure that is virtually unchanged since before the passage of the Affordable Care Act (ACA)”, according to a study published as an editorial in the American Journal of Public Health on February 6, 2019.
That study revealed some troubling facts:
The findings indicate that 530,000 families suffer bankruptcies each year that are linked to illness or medical bills.
Bankruptcy debtors reported that medical bills contributed to 58.5% of bankruptcies, while illness-related income loss contributed to 44.3%; many debtors cited both of these medical issues.
The current study found no evidence that the ACA reduced the proportion of bankruptcies driven by medical problems: 65.5% of debtors cited a medical contributor to their bankruptcy in the period prior to the ACA’s implementation as compared to 67.5% in the three years after the law came into effect. (source)
Dr. David U. Himmelstein, the lead author of the study, said of the findings:
“Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy. For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, copayments and deductibles that illness can put you in the poorhouse. And even the best job-based health insurance often vanishes when prolonged illness causes job loss – just when families need it most. Private health insurance is a defective product, akin to an umbrella that melts in the rain.” (source)
The possibility of unexpected medical expenses is just one more reason to start building an emergency fund as soon as possible (if you haven’t already). Here’s how to do that.
- Estimated cost: $775
- Estimated emergency fund needed: $1,500
The financial costs associated with car accidents vary greatly depending on insurance coverage, the severity of the accident, legal costs, fines, and other factors.
If you are in a minor accident and do not want to get your insurance company involved, be prepared to pay for any damage to your car (or, to the other person’s car if you are at fault).
Costs will vary based on the extent of the damage, but the average body shop bill for minor accidents is the average auto body shop bill after an accident ranging from $500 to $1,500, according to the GOBankingRates report. It’s important to know what your deductible is and whether or not your insurance covers a rental car for the duration of the repair.
Financial emergencies can happen to anyone.
Unexpected financial emergencies can happen to any of us and are not limited to the eight scenarios listed above. See the article 20 Times I’ve Been Glad I Had an Emergency Fund for many more examples of situations that can cause financial trouble. Many Americans are only one missed paycheck away from financial disaster.
If you don’t have a lot of extra money to stash away, remember that every little bit saved adds up. Making small changes in your day-to-day habits can make a big difference.
Consider this example from 30 Frugal Living Tips: Small Changes That Result in Big Savings:
Two dollars, saved on a daily basis over the course of a year, is $730.
If you save $2 on 4 different things, that total is $2920.
If you do find yourself facing a financial emergency, please see the article What to Do When You Have a Financial Emergency for things you can do to get through it.
About the Author
Dagny Taggart is the pseudonym of an experienced journalist who needs to maintain anonymity to keep her job in the public eye. Dagny is non-partisan and aims to expose the half-truths, misrepresentations, and blatant lies of the MSM.
I keep getting emails that say that due to a clause in the Dodd-Frank bill that banks can seize your bank accounts in some situations. Can you explain this to me? And tell me how I can keep my money in the bank in some account they can’t seize?
I too, would appreciate more information on this.
You might also want to check into the bill that was signed a few years ago that refers to bank bail-ins. What it means (if I understand it correctly) after the date it was signed, your money in banks is no longer considered a deposit in your name, but an investment in their business. Credit unions might be a slightly safer option, as they are owned by the customers and not the bank investors. Storing cash in a fireproof manner might also be an option, as you aren’t going to lose much (on .05% interest). Precious metals are another way to go….
Make a few trips to Canada and purchase some Canadian Gold Leaf coins as well as Search for sources for Silver, and Gold buy it and store it, forget paper money, in a real SHTF situation most folks will not accept paper money, gold and silver is better.
My personal money is in prepper supplies and PM. But I am trustee for a trust for a relative. If I took that money out in cash or put it a risky investment such as PMs or spend it on prepper supplies, the court would probably throw me in jail. I need a safer alternative than a bank checking account. I don’t trust the stock market either.
I lost my job and was unemployed for 3 years. So I can attest that the ’emergency fund’ figure Dagny mentions is pretty close, might want to aim higher. I wiped out any and all savings, including retirement funds. And when job loss is your personal SHTF situation, don’t forget to plan for the contingency that you may well end up underemployed (as am I). This may happen due to age-ism, lack of similar level jobs in your (previous) field, and so on. Becoming underemployed has it’s own challenges. It’s not necessarily the lifestyle changes one needs to make (and trust me, you will have to make them), but also the difficulty in rebuilding an emergency fund as well as retirement funds. I’ve also since endured a medical emergency (luckily, I do have good insurance through my current job) and the amount I am responsible for is about 3X what is recommended in the article.
So just some real-life perspective to add. SHTF does not necessarily have to mean an earth shattering apocalypse, and for most folks, it will turn about to be one of the above scenarios instead.
(as an aside, I personally only bank with credit unions)
I totally agree with you, I am one of the fortunate ones in that I am a Permanently and totally disabled veteran service connected as well as retired from the Army, and drawing Social Security. What most people do not understand is that once your into the Computer System for anyone of these programs the system is on automatic for disbursement, unless there is a change to you files. I also am covered by Medicare, VA Health and Tri-Care for life as is my family. The only issue I might have is if there is a massive power outage and I might be unable to get fuel, but we have two very good vehicles a Dodge Journey, a Ford FX4 F150 four door pick up truck, and I always keep at least 60 to 100 gallons of gas safely secured and protected, so we would have some fuel for a while, I also have Solar Power, Wind Turbines (2), and a 25KW Generator and enough fuel to operate it for close to 12 months by only using it at night or when I do not get enough sunlight for the Solar Panels to keep the battery bank fully charged. I have been planning and buy a bit at a time since about 1982, I also have MRE’s in sufficient quantity to keep my family and some associates fed for up to 24 months, we have seed banks, firearms and ammunition as well as 250# test compound cross bows and over fifty bolts for each with broad heads, we also have several compound log bows and a couple of basic recurve bows also. As to where I live I do not suggest that anyone rely on what my profile says you will not find me any where within a few hundred miles of there. I cheat. I also have an extensive library of close to 400 books both Military Publications from my days in the Military (Non-Classified ones) and books by some well known Survival Experts. I also have books relating to Schools for children from first grade all the way through High School and none of them conform to the current PC garbage or any such trash used today in our so-called public educational system. Under the laws of Colorado in-that since I have a Degree in Criminal Justice and Have a Doctor of Divinity I am qualified to teach.
I found this ad page this morning. They are probably a physical gold dealer:
Defending against Dodd-Frank’s seizure of your funds in a bank — ad page
and even more interesting, see this:
International debit card, partnered with Mastercard, backed by whatever fraction of gold bars you purchased in a secure Swiss vault. The GlintPay card began in the UK, and launched service access to the US late this last fall at the Ft. Lauderdale international boat show. As the global value of gold goes up, the value of the backing for your debit card also goes up — out of reach of Dodd-Frank banking thieves.
My unanswered question so far is whether the IRS would want its 28% pound of flesh (the tax rate they have deemed appropriate for gains in values of collectibles, since they regard gold in that category) whenever the glintpay debit card is exercised — if your backing value exceeds your cost basis for any given transaction. And is there a short-term versus long-term effect similar to capital gains issues?
Let me make a small suggestion for those facing medical bills. Ask if the doctor/hospital will make a deal with you.
Insurance companies never pay the full amount that you are charged.
Most insurance companies pay what ever Medicare allows for what ever service you have gotten. So, ask if you can make a deal and pay the Medicare allowable rate for your services. You may be able to pay a lot less than the full bill.
If they say “No” well then at least you tried.
I would at least double the amounts recommended. It is not just repair costs, replacement costs, cleanup costs, and such for any of those situations. Even a financial disaster can run up huge additional costs than simply paying the rent/mortgage, groceries, insurance, food, and the like.
Pretty much every one of the events that can happen will stack up costs and expenses that are not directly associated with the disaster or event. If you cannot live in you home, you need alternative housing, which can be very expensive. And if you cannot cook your own meals there and must eat out, up go the food costs. Elderly, and young people do not do well with not being at home and the stresses can play havoc with their health, both real and imagined, and both physical and mental. There could be significant costs for that.
If you are in a different area for the duration, your regular daycare, child or adult may not be available and if you can find one, they could be quite a bit more.
Commuting expenses may be more. A business or other work wardrobe may have to be replaced.
And let’s face it, there are many good people out in the world that will help when they can. But there are others that will cause problems if they even think your situation might make you miss work. Up to simply firing you in no-fault states and no union, and in union areas, if you do not happen to be one of ‘the guys’ that gets a job when someone else might be better qualified, and wind up forced out at the least excuse so on of ‘the guys’ can have it. Or a relative.
There could possibly be long term expenses that could be coming due before you are ready again, and you have to cover one or more payments that you can usually keep caught up without a problem, but doing so when in a bind makes it next to impossible.
There are no guarantees that more than one event will happen during the timeframe when you are still coping with one already. Or more. Or someone else in the family might have problems. One or the other partner might become pregnant. Someone might have a serious accident on top of everything. Or a ticket.
Someone might be called to duty if in the National Guard or Reserves. Or a combination of things. Believe me, I have had multiple things happen to me.
I have always, since I graduated high school, tried to get and maintain at least one-years’ worth of easy access money or value to cover all of my known commitments for the upcoming year, adding to it if additional commitments are made.
I have had to prepay some things because the seller or provider would not let me have them otherwise. And I could not really blame any of them, having seen them taken advantage of before, and having been taken advantage of my self in like situations.
Twice I have seen cases where a full year of money was not enough. For one, it was a bad crop year, work was scarce, the wife was pregnant and lost the baby and he almost lost her. There was road work in the area for almost the entire year and his commute to and from work and home was double, and the commute from home to the hospital was also double and she had to be in there several times. The commute directly from work to the hospital was four times the commute from home to the hospital.
Had his employer not been a good guy, very understanding, and sympathetic, the guy would have been let go for missing as much work as he did.
The second one was me. I had the year. Just. Some of it was preps, and some was available cash and easy to liquidate items. I had an understanding family. Understanding friends. Understanding prep group. Two of them. Very understanding medical professionals. The three hospitals and four doctors’ office gave me every break they could on the bills, going out as much as 270 days before having to really prompt me for the payments they knew I did not have. Only two of them turned the bills over to collection agencies.
And even though the job I was out of was a good one, so I had a good bit set aside from that salary, it simply was not enouh to cover everything, even living with family part of the time, getting county help, housing help, medical help, and plenty of sympathy. I wound up destitute but was never homeless or very hungry, as one of my brothers made sure of that, no matter what. Financially, I have still not recovered from it, and that was in 2004/2005. Medically I had, but things are going downhill fast now and I do not have that year’s reserve at my much higher need rate.
A few thousand may be all you can put together. But I urge you to do it, and keep trying to meet and exceed a year’s worth as the amount continues to roll forward, taking more just about every month to meet the expenses of that 13th month of the next year.
This is not to scare people. Many people can do this, as long as they know they need to. It is just one less movie, one less nice spa day, one less golf game every month or so, with many other small expenses that can quickly grow into huge expenses if allowed to do so. This is to let people know that they need to look at their budgets, their cash amounts, their liquid holdings, and their lifestyle, now, before it is too late.
Just my opinion.
Just my opinion.
I had a heart valve aortic replacement in 2014, and the cost of it out of pocket after insurance paid was approximately $6,500, because I had already met the $3,000 deductible cost of that year That was lucky for me – the usual out-of-pocket cost at the time was described in the $15,000, more or less.
Not what everyone considers (I hadn’t) was how a medical emergency is a trifecta of bad news. When you are incapacitated, you 1) can’t work so income level stops. 2) Doctor’s bills, medical labs and specialists (i.e. anesthesialogy) come in. 3) Everyday bills of food, mortagage, car payment, utiliities continue to roll in too. Its a helluva fix.
What i did after getting back was attack the medical bills in waves, a third of my paycheck to the surgeon one time, the hospital the 2nd third, the labs – specialists in last. I explained it would take time, but they would be paid. As i finished payments, I continued the same rate of payment with remaining two, then last one. it took me approximately 8 months but it got done. All while mainintaining household expenses . Lucky for me the house and vehicles are fully paid for – that was in fact a huge key to getting out as soon as I did.