In Case Of Emergency, Break Glass
Having covered insurance, measurement and management of risk tolerance, and other topics in the last two parts of this series (here http://lifeinvestmentseverything.blogspot.com/2013/01/cutting-off-tail-part-1.html and here http://lifeinvestmentseverything.blogspot.com/2013/01/cutting-off-tail-part-2.html), I will now turn to a subject area that I hesitate to cover lest I be considered a kook or nutball survivalist. However since the topic at hand is hedging the worst outcomes so that you can sail through life in a more carefree manner I think I would be doing my readers a disservice if I did not at least mention ideas on how to mitigate the very worst situations. Accordingly, I will offer some thoughts on how to cost effectively prepare for natural and other disasters that might disrupt daily life as we know it and possibly put you and your family at risk.
First, what disasters am I thinking of when I suggest some preparations? No, I am not anticipating a zombie invasion or an invasion by a foreign power. The kind of disaster I am thinking of is a major storm, wildfire, tornado, etc. that would probably disrupt utilities, make travel difficult or impossible, and result in locally empty supermarket shelves. In most cases, you will be on your own for 3 to 7 days as government or other assistance is likely to take at least a few days to coordinate and whatever the cause of the disaster may impede access to where you are. In the case of major hurricanes (Sandy, Katrina, etc.), even the National Guard was not able to have a major presence in the affected area for several days and in the meantime food, water, heat, etc. were in very short supply for the people in the affected area. I think it is reasonable for everyone to prepare for disasters of this magnitude. Obviously there are other disasters that could require self sufficiency for a longer period of time, but most people are not likely to find value in trying to hedge away very unlikely downside scenarios. My intention is to offer relatively easy, relatively low cost forms of insurance against reasonably likely bad things happening, not suggesting you build a $2 million bunker in the wilderness defended by armed monkeys.
What is required in a disaster to ensure safety? Simply put, food, water, light, climate control, and security. Food should be a pretty obvious need and can be accomplished as easily as keeping a week's worth of non-perishable food on hand at all times. Buy some extra of what you already eat and keep it on hand, rotating your stock and always using the oldest stuff first. You may have to make some provision to be able to cook what you have on hand if your utilities are not on. Your stove may not be working, your hot water heater may be out of commission, and with no electrical service most of your appliances will not function. As a result, it would be a good idea to have on hand a backpacking stove, barbecue grill with an extra burner (for boiling/cooking), or some other means of cooking a meal and heating water without the use of your normal appliances. In a pinch, you could always cook over a fireplace or in an improvised fire pit in your yard, but you had better have ample fuel, a healthy tolerance for smoke, and possibly tolerant neighbors.
Water is the next must-have (what my Latin teacher in high school would have called a sine qua non). If you have to, you can make it for a week or more without food. Without safe water to drink, you would be challenegd to make it 48 hours. Make sure that if you have no utilities (electric, water service, etc.) you still have on hand a minimum of a gallon per day for at least 3 days for each person and dog in your household. You might be pretty smelly after a few days, but you would at least have enough to drink. Storing water can be accomplished a number of ways, but by far the easiest way would be to just buy gallon jugs of water at the supermarket and stick them in a basement or closet. I live in a dry climate and would be in trouble quickly without water coming out of the tap, so I have one of these drums in my basement http://www.costco.com/Shelf-Reliance%c2%ae-Deluxe-BPA-Free-55-gallon-Barrel-Water-Storage-System.product.11766218.html More than likely, you don't need to go to as much trouble and expense, but it was an easy way to have a bunch of safe drinking water on hand. In a pinch, you could tap your water heater's tank for water, but if the drinking water supply is contaminated (common in major floods and storms) you would have to be able to treat it to make it safe (boiling, etc.).
The next need in a disaster is light. Things will seem a lot less scary if bad things happen if you can have a bit of light after dark. Flashlights, LED lanterns and the like are the easiest, most failsafe and cheapest way to go. If you wish to go a bit further there are wisely sold LED flashlights and lanterns which can be recharged via a hand crank (we have one for camping). Its a bit of a pain, but you don't have to worry about batteries being dead when you need some light.
Climate control may sound like a silly thing to need in a disaster, but don't knock it. If you live in a climate with extreme heat, you will very much value some way to stay cool. This can be as simple as a basement where the temperatures remain moderate in the summer or as elaborate as a gigantic whole-house backup generator that can run your central AC. Perhaps more importantly, you will want to have a way to heat your home in cold weather in the event of a disaster. A major storm is bad enough, but if it is compounded by water pipes that burst due to freezing, you have an even bigger mess. A fireplace or woodstove is an ideal solution if you keep enough fuel on hand to run it a few days. If you don't have a fireplace, a space heater or catalytic heater may be a good thing to keep around, but pay very close attention to product warnings about oxygen consumption, potential carbon monoxide poisoning, and fire danger.
Finally, in a disaster you will have to worry about security. Its a sad truth that after a major disaster things get messy for a while and opportunists and bad actors come out of the woodwork in the form of looters, thieves and assorted criminals. Looting was widespread in the aftermath of hurricane Sandy, even in fairly affluent areas. That being the case, you should have appropriately robust doors, door frames and locks on your home to secure it. If you live in a house, keep shrubbery trimmed to avoid providing hiding places for miscreants. If you ever wanted a dog, this is a good excuse. Even small dogs will generally serve as effective noisemakers, alerting you of potential trouble and suggesting to the miscreants that they try their luck elsewhere. Finally, you may wish to consider having some means of self defense on hand. If your state an local laws permit and you have the desire to do so, you may wish to take the Vice President's advice and acquire a shotgun for home defense. If your views on life or your local laws preclude you from doing so, a can of pepper spray would probably a good idea.
Hopefully nobody needs any of the above things, ever. Unfortunately, we know that disasters can and do happen on a regular basis and a small amount of preparation makes for a cheap insurance policy. For more information on disaster preparedness, visit the Red Cross' website at http://www.redcross.org/prepare/disaster Having prepared for the worst, you can then go on and live life with less worry.
As usual, the above is not intended as investment advice, spiritual advice, or anything other than my observations about life. Consult your advisors, do your own due diligence, and be careful. Objects in mirror may be closer than they appear.