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Disaster advice from financial experts

Don't panic.

That's the advice that financial planners, stock brokers and CPAs give about handling finances during turbulent times.

Whether it's a personal disaster -- your family loses its home to a fire or a flood -- or a national catastrophe such as the terrorist attack on 9-11, it pays to keep cool.

Losing your head won't improve things and might make matters worse.

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Keep cash in accounts
There's no need to withdraw a large sum of cash as some concerned consumers did in the wake of last year's terrorist acts.

A little bit of spare cash is fine, says Morris Armstrong of Armstrong Financial Strategies, especially if you live in an affected area. People are likely to find that many ATMs are not going to be working for a day or two. "So it may make sense to have an extra hundred dollars or so," Armstrong says. "But don't go overboard."

Unfortunately, people place themselves at a much bigger risk by withdrawing large sums of cash, says Dale Vetter of Vetter and Associates, a financial planning firm in Willingboro, N.J. That cash could disappear if a person's mugged or something else goes wrong.

"Just take enough money out to cover a day or two so you're not short of cash," Vetter says.

Have a plan in place
The best way to weather a financial storm brought on by a disaster of some sort is to be prepared.

Start by having your financial papers in a secure place, says Jordan Werner, a Bozeman, Mont.-based financial consultant with D.A. Davidson & Co. That could mean having one copy of papers at home and another at work. Or, just having a way to reconstruct things can suffice. For example, list phone numbers and account numbers that you will need to regain financial documents like bank statements or life insurance policies.

If you record your financial information in a computer program like Quicken, be sure to back it up regularly, Vetter says. Keep your back-ups in a fireproof box, or better yet, store it away from your home.

Document your personal possessions. Most insurance companies recommend taking a personal inventory but that can be cumbersome. Instead videotape or take pictures of your house and your possessions, says financial planner Morris Armstrong. "You'll be more apt to do that than to sit down and write a list," he says.

Before a personal disaster strikes, also make sure that you have adequate homeowners insurance. Vetter also recommends adding liability insurance onto your total property insurance. That will help protect you in the event that you're sued because someone is injured on your property.

Also try to create cash reserves, an emergency fund that you can tap when disaster strikes. Those who are in the worst position to weather a change in financial fortunes are people who live from paycheck to paycheck, says Karen Schaeffer, founder and president of Schaeffer Financial in Rockville, Md.. "It can be the difference between it being unpleasant, but survivable, or having to seek bankruptcy," the financial planner says.

Don't let emotion rule
Finally, Schaeffer says to remember that people who have been through a traumatic experience, such as a death in the family, the loss of a home due to a flood or some other calamity will not be thinking clearly.

"Please understand that the human emotion of grief clouds decision making," Schaeffer says. "They are in a state of shock and should seek help."

Your financial adviser, a family member not involved with the trauma, or even a friend can help you get back on track.

So don't panic. Follow the recommendations of these advisers and you'll find that it is possible to rebuild your financial house when the worst does happen.

Jenny C. McCune is a contributing editor based in Montana.

-- Updated: April 16, 2004

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