HomeRenters InsuranceClimate change will impact how much you need in savings. Here’s how.

Climate change will impact how much you need in savings. Here’s how.

For the financially fragile, climate change is making life even more expensive.

How do you budget for wildfires, flooding or extreme heat if you’re already living paycheck to paycheck? Where do you find the money to relocate when a tornado destroys your home?

You saved all your life for retirement and bought that dream home in Florida. But you can’t afford to insure it, because of all the hurricanes smacking the Sunshine State.

Why we all need to think like Floridians now

During the first eight months of 2023, there were 23 billion-dollar weather and climate disaster events, according to the National Centers for Environmental Information, an office within the National Oceanic and Atmospheric Administration. The Maui wildfires made the list after destroying more than 2,000 buildings, state data shows.

The total damage from these events exceeds $57.6 billion, which doesn’t include the costs of Hurricane Idalia in late August.

We already know many Americans don’t have enough saved for regular old financial emergencies such as a major car repair. So how can they amass enough in a rainy-day fund to live on when a storm surge has swept away their house and car?

Most Americans, even those who have saved well, are seeing their budgets strained because of major climate change events. And it’s only going to get worse.

“Extreme weather events such as heat waves and large storms are likely to become more frequent or more intense with human-induced climate change,” the Environmental Protection Agency says.

September shattered global heat record — and by a record margin

A Bankrate survey found that almost 3 in 5 U.S. adults have incurred expenses due to extreme weather events in the past 10 years.

When asked what’s costing them the most, 32 percent said higher energy costs, followed by losses due to food spoilage (think power outage from a storm). Others cited home or property damage, lost income, dealing with a damaged car, medical bills and evacuation expenses.

More than half of U.S. counties face future exposure to at least one of the three climate hazards — flooding, wildfire or extreme heat — according to a recent Treasury Department report on the effect climate change is having on the financial well-being of Americans.

Low-income families are particularly vulnerable.

“While climate hazards impose financial challenges for households across income and wealth spectrums, financial burdens are not distributed evenly,” the Treasury Department report said. “For vulnerable households, the financial costs and losses associated with climate hazards have the potential to compound existing inequities.”

You may not be able to budget for every extreme weather event, but there are steps you can take to mitigate the impact if it disrupts your income or displaces you from your home.

How to protect your financial life from wildfires, extreme weather

Add extreme-weather expenses to your emergency fund

“It helps to plan ahead and know what types of expenses are likely in the event of extreme weather or other types of natural disasters,” said Bruce McClary, senior vice president for media relations and membership for the National Foundation for Credit Counseling.

Be prepared to pay for emergency housing or replace food that spoils because of a power outage. Even if you have insurance, you may need to cover some expenses until your claim is paid.

Do you have enough saved to cover your insurance deductibles? If the answer is no, know how to connect with the resources available to support disaster victims.

“FEMA [the Federal Emergency Management Agency], American Red Cross and a number of community organizations can provide access to much-needed support in the aftermath of a disaster,” McClary said.

If you want more personal finance advice that’s timeless, order your copy of Michelle Singletary’s Money Milestones.

The federal government has a website — at ready.gov/financial-preparedness — to help you plan and find resources.

Money Management International, a nonprofit credit counseling agency, has created a free, post-disaster financial recovery program called Project Porchlight that is available to anyone in the United States who has been affected by a natural disaster. You can find information about the program at porchlight.org or call 877-833-1742

Counselors can help with FEMA aid and insurance paperwork or provide guidance on how to manage financially while waiting for a claim payment.

If you’re still getting paper checks or are reluctant to bank online, you may want to rethink this aversion to digital banking. Mail and in-person banking services could be disrupted by a major storm.

The best tech to have in a natural disaster

If you don’t already, use direct deposit for your paycheck. Switch to electronic payments for government benefits such as Social Security.

Know what’s covered in your policy

“Beyond having emergency savings on hand, it helps to know how your insurance may cover you in different situations,” McClary said.

You should be regularly reviewing your property, auto and other insurance policies.

Home insurers cut natural disasters from policies as climate risks grow

If you’re renting, do you have renters insurance? About 50 percent of the Lahaina homes in Hawaii were occupied by renters, according to the Census Bureau.

Standard homeowners and renters insurance policies don’t typically cover flood damage; coverage must be purchased separately. For information, go to floodsmart.gov.

This is hard to write, so I imagine it’s even harder for many to think about. But what if you died during a disaster? The Maui wildfires took the lives of 115 people.

How will those who depend on your income survive financially without you?

Even a small term life insurance policy can help.

With more frequent climate hazards, it’s not really a matter of whether you’ll be in the path of a severe storm, a wildfire, flooding or an extreme heat wave, but when.

B.O.M. — The best of Michelle Singletary on personal finance

If you have a personal finance question for Washington Post columnist Michelle Singletary, please call 1-855-ASK-POST (1-855-275-7678).

My mortgage payoff story: My husband and I paid off the house in the spring of 2023 thanks to making extra payments and taking advantage of a mortgage recast. Even though it lowered my perfect 850 credit score and my column about it sparked some serious debate with readers, it was one of the best financial decisions I’ve made.

Credit card debt: If you’re in the habit of carrying credit card debt, stop. It’s just a myth that it will boost your credit score. For those looking to get out of credit card debt, see if a balance transfer is right for you.

Money moves for life: For a more sweeping overview of my timeless money advice, see Michelle Singletary’s Money Milestones. The interactive package offers guidance for every life stage, whether you’re just starting out in your career or planning for retirement.

Test yourself: Do you know where you stand financially? Take our quiz and read more personal finance advice.

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