Imagine that, at this very moment, an incident has occurred that prevents you from accessing your home, your office, your bank, your cell phone, and normal life comes to an abrupt “stop”!   Hard to imagine?   Those of you who lived in the Northeast during the blackout of 2004, remember very well what that was like.  That event was unexpected.  Other “unexpected” events like fires and earthquakes occur more often than we would expect, especially if you live in areas where such events are part of the local landscape.  When hurricanes and storms strike, they are largely “expected.”  We have advance warning of their arrival.  We now add the big “T” to our list of possible events.  Terrorism is both “expected” and “unexpected” in that we are aware that terrorist attacks can happen at any time (expected), but the timing is, for the most part, unknown (unexpected).

For most of us, the paperwork that defines our financial lives is kept in our homes, offices, bank vaults, or in files kept by our attorneys and accountants.  For those of us who live and work in what I call a “situation zone,” this concentration can be a problem during a serious disaster.  The “situation zone” is the potential area that can be affected by one disaster.  For instance, a significant hurricane can affect a very large area that could encompass your home, office and bank.  A localized explosion, however, may only compromise your office or your home, but not both (except, of course, if your office is in your home!).   So, how do you protect the paperwork that defines your financial life?  Enter the Red File®.

The Red File® is an envelope or box (the size of which is dependent on the complexity of your financial life) that contains everything that defines your financial existence.  In order to create The Red File®, you should start with a net worth statement or balance sheet that lists ALL of your assets and liabilities.  Most of us already have this type of worksheet for our significant assets and liabilities, but review the entries and make sure that all of your accounts and assets are listed even if they are small.  Now add a footnote number after each item.  In the footnote, clarify what the item is, where the “ownership” papers are kept, who (if any) is your trusted advisor or consultant for this item, the contact information of this person or company (for example, the name, address, and phone number for the agency and agent who provides insurance on your home).  When you have completed this extremely tedious task, you are ready to start gathering paperwork for The Red File®.

Gather the original documents for all of the items in your worksheet.  Make two copies of each document.  You will need two copies because you will be creating two Red Files.  Some items that will not be on your worksheet, but need to be included are: color copies of your drivers` license and passport, duplicates of the card issued by your bank that is used to identify you to a teller, several blank checks, duplicates of your healthcare ID cards, duplicate credit cards (or credit cards that are maintained only for emergencies), and whatever other documents you use in your daily life.  Other items that may be helpful are passport type photographs of all immediate family members, and a list of contact information for all of the important people in your life.  You also might consider including a photographic record of the contents of your home.  A suggested list of items to include in The Red File® can be found at the end of this article, but this list needs to be adjusted for your personal situation.

How much actual cash do you need on hand in preparation for an emergency?  Many people keep some actual cash in a “safe place” in their homes or offices.  When determining the amount you want in reserve, you need to remember that the $1.00 bottle of water will probably cost $10.00 during a disaster, and that you will not get change for your $50 bill!  You will need money for food, water, fuel, transportation, etc.  You will most probably not need money for your mortgage or rent payment, or for other “scheduled” payments.  Therefore, after you figure out how many people you are responsible for, and how long you might have to maintain those people (at least one week, at a minimum), consider how much food, water, fuel, etc. might cost in your location.  Remember to keep small denomination bills rather than large denomination bills in your “stash.”  The gas station attendant will probably not have change for your $50 or $100 bill.

Some people will be able to place all of the documents that define their lives in an envelope, and some will need a large steamer trunk!  If your Red File® can fit in a Federal Express or UPS type envelope or box (the kind that you will know has been opened because doing so destroys the package), then put the file in the envelope or box and seal it.  Then attach a letter of instructions to the package.  The letter of instructions will tell the receiver who is allowed to have access to the contents, and under what conditions it is to be opened.  Then place the package (with letter attached) inside another envelope or box and ship it to a trusted friend, trusted family member, or trusted fiduciary that lives in a different part of the country (preferably not in a hurricane or flood zone!).  This package contains all of your very important personal documents, so remember to ship it using a secure service!

If you are particularly paranoid, you can place a piece of colored thread under the seal of the envelope containing The Red File® so that you will know if someone opened the envelope and replaced it with new envelope.  There are several other tricks you can use to help you know if the envelope or box has been tampered with, but that is a subject for another article.

If a situation develops that requires you to access some or all of the contents of The Red File®, either you or a person you have designated can contact the person holding the file and either ask that person to open the file and get you what you need, or request that the package be shipped back to you unopened.