The hosting company that hosts our website had an accident two weeks ago. A big accident. Despite their extensive security and redundant systems, they not only lost forever all the data on our server, but they also lost forever all the data on our backup server. Not everyone hosted by this company was so unlucky, but we were among 100 or so companies that were severely impacted. It took our hosting company until yesterday to finally tell us that all hope was lost, that there was no way that the data recovery experts could ever recover any of the data on the extensively damaged hard drives. Happily we had our own backup plan, our “Plan C” as we have been calling it. We had our own copies of website data that allowed us to quickly rebuild our websites and get this blog back up and running. Plan C wasn’t perfect, and had never been really tested before, and some data we’ll never see again, but at least we had the protection that allowed us to resume business quickly. Other companies were not so lucky.
This situation serves as an excellent reminder that we should all have a “Plan C” in our financial lives. In case of illness, death, job loss, natural disaster or other unexpected events, our Plan C should be able to sustain us while we get back on our feet. For all of us that means that we should have enough money put away in savings to be able to live six months without our normal income. How do we build up that savings? By delaying our gratification until we have the savings safely tucked away. Don’t purchase that TV or take that vacation before that account is full. Pay yourself first.
Your Plan C also needs to include your own data backup plan. Do you keep your financial data in Quicken or another financial management software? If so, make sure that that data is backed up and kept in a different location from your computer in case of fire. Mozy.com is one of a number of providers that offer free remote data backup for home users. Your Plan C should include a list of accounts, user IDs for online access and passwords. If the one spouse who handles all the financial matters suddenly dies, the other spouse is potentially helpless without quick access to that data. Keep a list of this information in the home safe or in a safety deposit box.
Lastly, don’t forget to review your insurance coverage from time to time. Are you insured against all of the financial risks that your family faces?
As you formulate and execute your Plan C, involve your kids in this exercise. Tell them what you are doing. Having them see you delaying your own gratification while you build up your savings account in case of emergency will set an excellent example for them. Showing them that you are planning in case of disaster or the unexpected will give you a good opportunity to talk about everyday risks and help introduce them to the concepts of insurance and “disaster recovery.” It will also make them feel safer knowing that you are always looking out for the best interests of your family.