[Enigma]

If you live in hurricane alley like I do, this time of year can be worrisome.

I was discussing with a colleague about using some of my HELOC for a reserve, just in case. I was told I should do it now.

Most banks close your HELOC off within 5 days of an approaching storm. If you take cash out, NEVER deposit it in the same bank as the HELOC bank. Some people did that and they found their monies gone after a storm. BURIED in the fine print of the HELOC is usually a clause that allows the bank to offset what ever the balance on the HELOC if they have reason to believe the collateral is gone or damaged.

Also, once a storm hits and has moved on, immediately contact your creditors and notify them that you have been through a major storm. That payments maybe late or delayed if you must live on reserves. Be proactive and don't get 60-90 days behind and then call your creditors and say "oh by the way.....".

[Qtip]

Thank you so much for this invaluable post Enigma, I would have never thought of it. Them dirty little rascals have all their angles covered.

[Hedwig]

Good advice. I didn't know about the offsets, but it's good to have money in a bank not in the same area.

If a storm affects you, it could affect the bank. Especially a local one.

I'd put at least part of that reserve in an internet bank (FDIC insured, of course). Then at least the bank isn't destroyed.

[stargazer0725]

And remember to separate it out into different length investments: (some in a 3 month CD, 6 month, 9 month, and 12 month), that way you can gain back some of the interest you'll have to pay. Gives you some liquidity in the funds, but the longer terms guarantee a higher interest payback.

[jlynn]

Originally Posted by stargazer0725

And remember to separate it out into different length investments: (some in a 3 month CD, 6 month, 9 month, and 12 month), that way you can gain back some of the interest you'll have to pay. Gives you some liquidity in the funds, but the longer terms guarantee a higher interest payback.

So you're suggesting reserves in a totally liquid account (like a passbook type savings), to get you to your next next step - say you chose a 3 month CD, enough in the passbook to get you there - and then a stair step approach to non-liquid assets?

[stargazer0725]

Yep! I read that somewhere and thought is was a really good idea.

[neil5623]

Originally Posted by Hedwig

Good advice. I didn't know about the offsets, but it's good to have money in a bank not in the same area.

If a storm affects you, it could affect the bank. Especially a local one.

I'd put at least part of that reserve in an internet bank (FDIC insured, of course). Then at least the bank isn't destroyed.

Not a bad idea, but it may not hurt to check with the local bank about what happens. Remember Hurricane Rita a couple of years ago? The one overshadowed by Katrina. It blew through my area, power to the credit union was out for a week or so, and it stayed closed for a few days after that. All electronic functions continued, but the clearing of checks was slowed. The staff was able to operate electronically from a remote location.

[jlynn]

Don't most banks keep backups in remote locations for just such disasters? I swear I read that somewhere.

[stargazer0725]

Originally Posted by stargazer0725

Yep! I read that somewhere and thought is was a really good idea.

Originally Posted by jlynn

Don't most banks keep backups in remote locations for just such disasters? I swear I read that somewhere.

Probably read about it at the same place I found my investment advice!

[jlynn]

Originally Posted by stargazer0725

Probably read about it at the same place I found my investment advice!

Then I hope I'm right, or we both might be in trouble.

[Hedwig]

Originally Posted by jlynn

So you're suggesting reserves in a totally liquid account (like a passbook type savings), to get you to your next next step - say you chose a 3 month CD, enough in the passbook to get you there - and then a stair step approach to non-liquid assets?

Yes, it's a strategy often recommended. You get higher rates for longer-term investments, but you may not be able to wait that long. So you "ladder" your investments. After you do this for a few years and keep renewing the CDs, you'll have almost all of your money in CDs because one will be maturing within the next couple of months. But you always need that buffer in the money market or some other account that is very liquid.

[Pale Rider]

As Neil pointed out, some small local banks and credit unions had backup tapes, but the problem was no power, lack of employees who evacuated, and buildings that may or may not have been damaged. Another approach is to have a secondary account in a larger national bank that has branches in most major cities, and preferably where you will be evacuating to. I was able to find a branch of one of my banks and wire transfer some money to cover some automatic payment plans.

Another note of interest on the delayed payments. While evacuated for Rita, I called all the creditors to inquire about the 90 days with no payments. Guess what. Interest accrued and the full payment was due at the end of the 90 day period. I decided it would be better to just continue making normal payments.

[Hedwig]

Yes, they didn't really help much. Just racked up some more profit for themselves.

[Pale Rider]

Another thing to remember is to have a list of phone numbers for all creditors and accounts to take with you. Most credit cards have the number on the back, but other accounts such as loans and mortgages may have a number that you do not call regularly. Make a list before you have to evacuate. I made several payments by phone so they would not be late.

[Hedwig]

That's a good idea.

If you don't have your logon information for web sites memorized, find a way to take that with you as well. You can always go to a library or somewhere to log on to the computer and make payments.