Preparing for a Financial Hurricane

Jamie Dimon, chairman of Chase Bank, said he expects a financial hurricane. His quote was, “That hurricane is right out there down the road coming our way.”

Mr. Dimon is no meteorologist, and neither am I, but I would like to talk about the reality of a financial hurricane, planning for the big wind and rain events that we might expect this summer.

We are all praying for a calm hurricane year, but it is still wise to prepare for a named storm to land here.

The first step is simple – cook out of the home freezer. Our objective at my house is to have only frozen water bottles in the freezer by no later than August 15.

I have heard too many stories of freezers of seafood and game going bad in the post-storm power outages. This is a serious financial loss and often leads to the necessity of replacing the freezer. So, clean it out and cook it up.

The next step is simple and inexpensive – buy a tire plugging kit and a car powered tire inflator. Storms rip roofs off and litter the roads with roofing nails, causing flats at the worst possible time. Bought together, these car accessories cost less than $100 and can save you many times that amount.

Another important step is to call your insurance agent and ask about your named storm deductible. Be prepared for sticker shock. We have seen storm deductible amounts ranging from $10,000 to $50,000. If you have the money, we recommend opening a separate savings account and depositing the storm deductible. If you don’t have that much cash, consider a home equity line of credit. Real estate appraised values are historically high, so you may qualify for loan sufficient to pay your storm deductible.

If you go the home equity route, we also encourage drawing on the line any time a named storm has us in its sights. If the storm passes and all is good, repay the loan. If the storm unfortunately hits, you will be prepared and protected from the possibility that your line may be cancelled if there is major damage in our area.

Many people who go the home equity route for named storm deductibles choose to draw the loan and deposit the balance in a savings account. They then work to repay the loan as quickly as possible. While it may seem odd to borrow money that they don’t need, the rationale is that an open line of credit is like a tempting treat for someone trying to lose weight. If the line is available, the temptation is there to use it for a non-essential purchase.

We also recommend preparing a packing list before a mandatory evacuation is ordered. Many of us remember the odd post-Katrina wardrobes necessitated by hasty packing. A written list that includes toiletries, medications and clothing for a possible long stay will reduce evacuation stress.

Finally, stash some cash. If the electricity goes out, credit cards won’t work, and neither will ATM cards. We don’t know if a financial hurricane is coming, but we do know that preparing for an actual hurricane is a very good idea.

Guy Williams is president and chief executive officer of Gulf Coast Bank and Trust Company. Their Kenner branch office is located at 3410 Williams Boulevard. Missy Criswell, vice-president and branch manager can be contacted at 504-544-6340. Brian Behlar, vice president and commercial lender, can be contacted at 504-565-3661.