NerdWallet's Smart Money Podcast - The Cost of Climate Change: Preparing for the Worst

Episode Date: May 25, 2023

How would you recover if your life was upended by a huge disaster — a fire, hurricane or flood? Getting your affairs in order before a disaster hits — and knowing what help is available afterward — can help you recover faster and more fully. In this episode of our nerdy deep dive into climate change and your money, we talk about how to rebuild your finances after the worst happens.

The eye of a hurricane is headed straight for you. A wildfire breaks out and the wind is pushing it in your direction. A one-in-a-thousand-year flood hits the small creek that flows near your house. Are you ready? The time to ask that question is not as the disaster is bearing down on you. Turn on your video on your camera on your phone and start walking around your house. So go through every room, go around the outside, try and take pictures of everything, open every drawer, open every closet. Those images, those pictures that you get are invaluable after a disaster.

Welcome to the NerdWallet Smart Money Podcast. I'm Sean Piles. And I'm Kaitlin Constantine. We're back with the final episode of our nerdy deep dive into the broad effects of climate change on our financial lives. Kaitlin, we've covered mental health, housing, banking, investing, and all the changes that have been wrought by what's happening to the planet. What's next? Well, Sean, early in this series, we pointed out that when people hear news about climate change, it's often in the context of some catastrophic natural disaster, like a tornado, a hurricane, wildfire, flooding.

Right. And we pointed out that climate change and its effects on our finances are much broader than those disasters, although they do seem to be more powerful and frequent these days. Yes, they seem that way because they actually are. In fact, the World Meteorological Organization, which is an arm of the UN, released a report back in 2021 that showed that climate change has caused an increase in weather related disasters by fivefold over the last 50 years. And so today, we're going to address that directly. Jeez, five-fold. That's enormous. And honestly, it's something that I just cannot fathom, dealing with that kind of event. I know you've been through hurricanes, so it's probably a little bit more real for you, but it's just inconceivable to

those of us who haven't lived through losing everything. So I'm very fortunate in that I've never lost everything, just a fence, a roof, and a fridge full of food. But it is something that's always a possibility, no matter where you are. So better to be prepared. And we're going to help folks do exactly that. Because please, please, please, you really should. I was reading through a 2019 report from the Urban Institute that is all about natural disasters and finances, and it's pretty sobering. So events like these lead not just to the obvious issues, but ultimately they can lead to lower credit scores, more debt going into collection, bankruptcy, foreclosure. You can see how the impact just

cascades through every aspect of a person's life with ramifications that last for years beyond that initial recovery period. Yeah, I read through that report and it is fairly terrifying. One of the standout points to me is that you don't even have to go through a huge cataclysmic disaster for your finances to be upended. In fact, medium-sized disasters can sometimes lead to worse effects on folks' finances compared to major disasters, perhaps because these disasters don't receive as much publicity or money for recovery. I'm hoping that in this episode, you can help us learn more about how to deal with these big disasters and not fall into a pit of doomerism because I think I'm on the

edge here, Caitlin. All right. Well, our goal is to pull you back from the edge, Sean. Thank you. I'm confident that you can do it. And listeners, we want to hear what you think about this too. To share your ideas, concerns, solutions around climate change and finance with us, leave us a voicemail or text the Nerd Hotline at 901-730-6373. That's 901-730-NERD or email a voice memo to podcast at nerdwallet.com. So Caitlin, who are we hearing from today? Well, we are talking with a disaster expert. A disaster expert. I'm not sure if I would want to be one of those. You know, honestly, me neither, but somebody has to do it. So I reached out to Money Management International, which is a nonprofit financial counseling agency, and Kate Bulger is one of

their disaster point people. Sean, do you happen to remember the huge EF5 tornado that wiped out a huge swath of Joplin, Missouri in 2011? Yeah, I do. I actually grew up in the Chicago area, and I remember thinking when that storm hit that that could have just as easily torn through my town. Well, that was a turning point for Kate. She spent time there in the aftermath, and she got to see just how devastating it is and how long recovery can take. And she's been working in disaster recovery, especially financial recovery, ever since then. Kate, thank you so much for joining us today. We're so glad to have you. Thank you for having me. So by and large, how prepared financially do you think most of us are for that possibility of a natural or even a man-made disaster happening. What do

the numbers tell you about what that looks like? Most people are not prepared. Most people underestimate how much they will need. They underestimate their real risk of a disaster. It feels like something that happens to other people. You hear about 100-year storms, 500-year storms, and that seems so far away and so not something that's likely to happen to you or in your lifetime or in your town. But unfortunately, that is just not the case. And so understanding things like how much you're going to pay for your insurance, what your deductible is, right? And having some amount set aside for things like just refilling the fridge after a disaster, that is important. And folks generally aren't prepared for that. I wonder if part of this whole dynamic is just people like actively avoiding thinking about this,

or maybe there's a little bit of denial. I mean, like the idea that something could come through and like could wipe us out financially without us even being aware of it or prepared for it. It's kind of hard to sustain that level of concern over time, right? Oh, absolutely. And there are so many other things that are demanding our financial attention. I can't blame people. Getting ready for a disaster is difficult to do, and it can feel like an unending task. And there are so many other things around us that we would frankly rather pay attention to.

It's not surprising. But I also think that's part of why it isn't just on the individual. It is on employers to help people out. It is on local governments. This is all of us together working. It shouldn't just be on the individual to be prepared. This is a big topic. I want to break this up into two categories for our listeners. First, to talk a little bit about what our listeners can do to plan for a disaster ahead of time. And then we can talk about what they should do afterwards if, God forbid, a disaster actually happens to them. So let's go ahead and we can start with the

planning phase. I focus on home insurance at NerdWallet. So I know that one of the first steps that you're supposed to take is to do a home inventory. And actually, this is the case even if you don't own your home. So can you walk us through what's involved with this process? Our take is to try and make it as easy as you can. And so our recommendation is turn on your video on your camera on your phone and start walking around your house. So go through every room, go around the outside, try and take pictures of everything, open every drawer, open every closet. Those images, those pictures that you get are invaluable after a disaster. Because if you are asked to sit down and make a list of every single thing you own, even when you're not stressed, right? Like

even when it is a perfectly peaceful time and you're feeling very at ease, that is an impossible task for most people. Right. And then trying to do that same task when you are going through the chaos and the trauma of a disaster is even more impossible. So we encourage people, get your whole family into it. Give your kid the camera and see what they can get. It doesn't have to just be you, but at least once a year going through and getting those videos and pictures. And with most of us having a smartphone, it sounds like that's a fairly straightforward way to do it. But I have actually read some stories where people who did their home inventory through a video, they ran into some issues with their insurers because they didn't have receipts to go along with that inventory. I mean, that would be a pretty

massive shoebox to have receipts for every single thing that you own. Do you have any sort of thoughts about that? So for big items that you have, or if you have a particularly expensive collection, something like that, trying to take pictures of receipts as you purchase things is definitely a good policy. I think for most people, for the average person, just thinking about like maybe your computers, those kinds of things, and even just keeping those receipts electronically, a lot of us are purchasing these items online anyway, or retailers allow us to email a receipt over. That can be a big help too. So it's not something you have to paper, you have to keep up with in your house. This actually kind of leads into the next question, which is related to financial inventories. So there are people, you know, I know some people who do this,

they keep their lists of their bank passwords and their account numbers in a file in their desk at home, which is great until your home is destroyed in a hurricane or a wildfire, and then you're possibly out of luck. So how do you recommend that a person takes a financial inventory and keeps it safe so that they don't run into this potential issue? Our recommendation is when you go through to pay your bills, starting this month, if you can, listeners, but as you're paying your bills, take a picture of that bill and that payment coupon. And so what you're going to have on there is the name of the institution that you're

paying or reviewing. If you're looking at your bank statements, you'll have the name of the institution. The phone number of the institution is usually right there. Your account number is going to be on that. Take pictures of them on your phone, store them in the cloud securely. And that can be a great way and a great easy way to do it. I know a lot of people who also have the kind of a Ziploc bag approach that they'll take. So they'll take one page of their statements for all of their different accounts, all the different things they pay. Once a year, they'll put them all into a Ziploc, shut that Ziploc and put that Ziploc

wherever they put other items that they are planning to either evacuate with or put it in an area where they plan to shelter in the event of a disaster in their area. That absolutely works as well. So one of the problems that we know that people will sometimes run into after a disaster is that banks and ATMs are like they're not functional or maybe they're just entirely gone. So there's advice out there to keep cash on hand. Do you agree with that advice? And if so, how much cash should people have and where should they be keeping it? Yeah, so I think having cash on hand is a great idea as long as having cash on hand isn't too much of a temptation to spend it immediately

or isn't too much of a temptation for someone else in the home to spend it immediately. And so keeping cash kind of wherever you feel like is safe and out of sight works well. I know people who literally keep it in their sock drawer or my preferred option is to keep it in a bag where the rest of your disaster preparedness stuff is. So for instance, where I live, tornadoes are the main threat in our area. And so that's sort of what we are most prepared for. In the basement where we would go to shelter in the event of a tornado, we have a bag with a change of clothes. It's got a little cash. It's got our bills and statements in it and a couple other things, but kind of the things that we would want close at hand immediately after a disaster.

And for us, that's a really good place to keep it, but really wherever is safe and won't be a temptation. And as for how much, the minimum amount I would say that you really want to shoot for, but again, you don't have to be perfect, is enough to refill your fridge and to fill your gas tanks, assuming your car or cars are on empty. Okay. We talked earlier in this series about home insurance and making sure that you're as covered as possible for an event that could potentially wipe out your housing. But are there other insurance options that listeners should be looking into? So we don't necessarily specialize in insurance, but the one thing that I would say to make sure that they're looking at is not all types of disaster insurance that you might need are necessarily part of just a standard homeowner's insurance policy. So flood insurance is a separate insurance plan. And I would encourage everyone, regardless of where they live,

even if you're on top of a mountain in the desert, go ahead and get flood insurance. It is absolutely worth it. I have one other trick advice that we use for insurance, and that's most people that we work with don't have any idea what's covered until the disaster occurs. And that is the worst time to find out what's covered. So I encourage people to take your insurance company's phone number, their customer service phone number, and stick it in your phone. And every time you hear a news story or a podcast, or you read something about a disaster, call them and ask them if you would be covered for it. You are singing the song of my people with this one. What else can our listeners do to prepare their finances for the possibility

of a disaster? Yeah. So saving is the, again, the number one thing. If there's only one thing people do, savings is the thing I would encourage folks to do. But the other piece is understand what options are available for the debts that you have in the event of a disaster. So for instance, if you are a homeowner, most mortgage companies offer some kind of after disaster assistance. Same thing with credit cards, with auto loan companies, and they are usually happy to tell you kind of general terms about what they do finally minimizing credit card debt is also a great way to be prepared for disasters it's good for you financially anyway right to minimize credit

card debt but in the immediate aftermath of a disaster once machines are back up and you're able to use credit cards and you're able to use credit cards, and you're able to use your bank cards, whatever, having available credit can be a real lifesaver. For most folks, when they go through a disaster, there's a period where they aren't working, and they may or may not be getting paid. There's also just a lot of expenses that are unexpected, and the cost of things, everything rises quickly in the aftermath of a disaster. And so having some available credit can make you more resilient in those first couple of months. So we encourage people to maintain a low amount of credit card debt if you can. So I've seen that you've actually also talked about making sure that your credit score is solid in this context. Can you talk a little bit about that as well?

Yeah, absolutely. So after, you know, I just mentioned after a disaster, there are just a ton of expenses. But one of the ways that you can sort of overcome those expenses is with borrowing. And so the Small Business Administration offers disaster recovery loans for consumers. It sounds a little crazy. Small Business Administration, they're lending to people who aren't small business owners in this case. But that is based on your credit score. They look at credit worthiness and they're not the only ones. So having a really strong credit score makes a big difference in how much you can borrow and the terms of those loans. So let's talk now about what we should do if the worst does happen. Say that your home is flooded or it's been burned to the ground in a wildfire or a tornado hit and your stuff is

everywhere. After you've made sure that everyone is safe and alive, who should you be calling first? Do you call FEMA? Do you call your insurance company, your bank? Your insurance company should be your very first stop. Let them know there's going to be a long line for having someone come out and look at your property and sort of do that evaluation. So getting to them very quickly is important. After your insurance company, I would say FEMA is really your next stop to put in that FEMA application. And I will say those applications can be really complicated in the aftermath of a disaster. It is going through a disaster, particularly one that fully destroys your home, right? That is incredibly traumatic.

And it is hard to overstate how much of a barrier that can become to your recovery. So my next piece of advice would be to ask for help if you need it. So if you are going to FEMA, you're struggling with that form, don't wait. Reach out for assistance. There are groups like Project Porch Light and MMI that I work with. There's also volunteers that FEMA uses and FEMA employees who can help. But don't let challenges with filling out a form be the thing that slows down or even stops your recovery. And so once you've got that aid application filled out, next go to your creditors. Knowing what they offer is a huge relief too. So realistically, I mean,

as much as I would love for people to come back and revisit this podcast, they're probably not going to come back and listen if the worst happens. So where can they store some information about hardship programs that might be available to them? Or is that just going to become available to them post-disaster? Can you talk a little bit about how they can keep track of that information? You might've guessed it, a big fan of keeping track of things on your phone. And so having just a note in there where you're going to store like, here's what this group will do. Here's what's available. Hey, I heard about this for help. I find that helps out a lot. But I will say after a disaster, people are working very hard to try and get assistance programs out to folks. And so if you are stuck and you don't know where to go, calling your bank can be a help. FEMA sets

up recovery centers even after FEMA has left. Most government and municipalities have some kind of local recovery center that they'll set up that is full of resources and help. They're often volunteer-based. And then if Congress has allocated funds for that disaster, once those funds make it into the community, which is usually one to two years later, they'll have long-term disaster caseworkers who are there to help too if you haven't finished your recovery at that point. So to keep talking a little bit more about complicated financial aspects, let's talk about taxes. So I'm actually not sure if there's a way to prepare your taxes for the possibility of a disaster. But if you do happen to become a victim of a disaster, what are some important steps that you might be able to take with your taxes? So first off, take pictures. After a disaster, take pictures

of what your home looks like. Even though that can be really emotionally difficult to do, take pictures of everything. And as you are paying for things to recover or repair or have debris removed, keep all of those receipts. There are several different programs that can come out and, you know, depending on the disaster and depending on your situation and your expenses, like governments have a lot of options for tax relief and having those receipts, having those pictures makes a world of difference. The other side is even if you're not receiving tax relief, often the congressional allocated dollars that they give after a disaster. They're called CDBGDR

funds. When those come into a community, they often have programs where they will reimburse people for expenses. And so having pictures of all of those receipts that you've used for your recovery, the whole recovery, can help you take advantage of those as well. Okay. You live in a place that's prone to tornadoes. I've lived in a place that's prone to hurricanes. So we both unfortunately know that a reality of disasters is that scams are not uncommon in the aftermath of a disaster. So can you give our listeners some tips for how to avoid being duped during what's probably going to be one of the worst times of their lives? Absolutely. And you're right. Scams are incredibly common after a disaster. So the first thing to know, I think the most common scam that

we see are people pretending to be insurance adjusters or pretending to be workers from FEMA or SBA or even the government who are telling people that in order for them to complete their inspection or complete an evaluation, that the consumer has to pay that person directly right away. That is never, ever the case. Volunteers will not charge you money. FEMA will not charge you money. Your insurance company is not going to charge you money like that. So if somebody comes to your door claiming they're from some agency out there and they are asking you for cash, do not give it to them. My second recommendation is when someone calls you or comes to your door, check out their credentials, make sure they are

who they say they are. Look, you know, if they're with FEMA, they're going to have a badge. If they're with your insurance company, they're going to have a badge. If they say they're with your bank, same thing, they're going to have ID on them. And if you're even a little bit worried, call the, you know, if it's, you know, your insurance or your bank, whatever, call your insurance company or your bank and confirm that they actually sent someone out to your home. The second most frequent scam that we see is scams around contractors and repairs and materials. So very frequently we see folks who they've got a contractor, the contractor is going

to buy the materials that they need to do the repair. They charge you for those materials, but the way the contract is written, it doesn't mean that they actually have to use the money that you gave them to buy the materials. And so the consumer gets stuck with the cost of those materials twice. It's awful. And it comes as a surprise frequently once they're moving forward in collections for those folks. The best way to avoid that is to make sure you read your contracts in detail first. And second, to look really closely at your contractors. It is hard to get a contractor out after a disaster.

There's incredible demand. But you should still vet them and make sure there's someone reputable. It is better to have to wait a little bit longer in your recovery to get someone who can do the job and will do what they say they're going to do in the timeline they say they're going to do it rather than having somebody who takes all of your money and walks away a quarter of the way through the repair. Okay. That's actually a really, really great tip. So in fact, all of this has been really, really great information. Here's hoping our listeners never need to use this information, but I'm glad we've been able to share it with them

today in case they do. And thank you so much again for taking the time to join us today. Thank you for having me. Caitlin, that is a lot to think about, especially for something that nobody wants to think about. Oh, for sure. Like who spends their time thinking about what am I going to do if my entire life just gets wiped away in one storm in one instance, right? Only me as I'm trying to fall asleep at night. Your brain playing that over and over again just is like a lullaby to get you to go to sleep. I'm familiar with that song. So before we wrap up, though, I do actually want to take a minute to talk about one thing, which is something that's

called Project Porchlight. So Kate mentioned it, and it's part of Money Management International's Disaster Assistance Program. And they help with everything from filling out all of those forms from FEMA to understanding the role of the Small Business Administration and working with your home insurance. They're basically a one-stop shop for help in the aftermath of a disaster. So you should keep in mind that the post-disaster time is usually incredibly stressful because you really just went through something that's highly traumatic. And it may be tempting to think right now that you could manage it all on your own, but when you're in the thick of it, having someone with experience who can guide you through the process is so valuable and so important.

So, folks, get a pen and paper and write this down and stash it somewhere safe. Their phone number is 877-833-1742. That's 877-833-1742. Here's hoping you never need to use it, but it's better safe than sorry, right? Absolutely. So this has been an incredible series, Caitlin, and I hope our listeners feel like they're more prepared for this era of climate change. Let's talk a bit about some of the really important points that we've learned. Sure. We started out with an episode that took a big picture view of the effects of climate change and how it's affecting everything from national economics to the cost of food and energy.

And then we also talked about some ways that we can cultivate the mental resilience needed to deal with all of this, you know, instead of like embracing nihilistic YOLO or being in denial about what's going on. And then we also talked about how this impacts the affordability of home insurance, which a recent New York Times op-ed described as, quote, the canary in the climate coal mine. We also shared some info to help listeners better understand how to assess their climate risk, which can be so tricky, if not downright impossible to figure out on your own. Then we changed gears and talked about how we can make our banking and investment choices better align with efforts to fight climate change. That also means learning how to spot greenwashing. And then earlier in this episode, we shared a lot of good info about what you can do to prepare for the possibility of a natural disaster right now. Because seriously, you do not want to wait until

you're in the crosshairs of a wildfire to start making these moves. One thing that I'm going to keep thinking about and talking about with my friends is how to get out of that climate doomerism mindset, where folks just don't even want to plan for the future because they think society is just going to unravel. And to that I have a couple of responses. First, that that way of thinking and living is basically shooting yourself in the foot. You might as well save for retirement now and set yourself up for success according to how society functions today. Doing anything but that is actually ensuring that your future is really difficult regardless of climate change.

And second, realize that it's really, really unlikely that everything is just going to fall apart at once. Sure, disasters are going to happen, and then the next day, life continues on. You'll need to get your affairs in order, maybe file an insurance claim, go buy some groceries. You should work to have some savings so you can be resilient and rebuild after whatever comes your way. But also, you might want to pick up a wilderness survival book just in case. Right? Embrace your inner Boy Scout and be prepared. But, you know, I do agree with both of your points. I have a friend who worked for more than 20 years doing humanitarian

work in conflict zones. And something she told me that has always stuck with me, which is that a society in conflict doesn't just like cease to exist overnight. It's more like things just get harder to navigate. You know, resources are a little harder to come by. systems are slower and less efficient, but you still keep on living your life despite everything that's happening all around you. So I think that climate doomerism is a really understandable position to take on this, but ultimately all it does is leave you unprepared to deal with the future, whatever that ends up looking like. Yeah. And another thing I want to talk about are the individual actions that folks can take. Something that I grapple with a lot hosting this show is how to discuss ways that people can reclaim their power and agency in the face of systemic challenges, whether it be the racial wealth gap, disparities in pay along gender lines or climate change. And where I've come down recently is that, like, look, these issues are bigger than any one person, but that doesn't mean that you as an individual are powerless to affect change in

your own way and make the best of a difficult situation. When it comes to climate change issues in particular, that can mean doing things like contacting your representatives if you want them to pass and enact climate legislation. And then on your own, like we talked about in this episode, make sure that you're putting your dollars toward the investments and companies that will bring about the change you want to see. Most definitely. So this is a common thread

throughout the whole course of this series, which is that there's this big need for those larger systemic solutions, but that need for systemic solutions doesn't mean that we as individuals are totally powerless. We have our dollars, we have our votes, we have our voices, and we have our individual actions and choices. And I really think it's important to remember that a system doesn't exist independently of the people who comprise it. We are part of the system, which means we can and we do influence

it all the time. And I think that if we keep that in mind when thinking about climate change and we act accordingly, we might end up surprising ourselves with what we're able to accomplish when we all work together. All right. Do you have a money question for us, climate related or otherwise? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Visit nerdwallet.com slash podcast for more info on this episode. And remember to follow, rate, and review us wherever you're getting this podcast.

This episode was produced by Tess Vigeland and Caitlin Constantine. I helped with editing. Sarah Schlichter helped with fact-checking. Kaylee Monaghan mixed our audio. And a big thank you to the folks on the NerdWallet Copy Desk for all their help. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes,

and it may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.