Handling a Major Oil Spill in Your Own Life

We can take some financial lessons away from the BP disaster.

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With the environmental tragedy unfolding in the Gulf comes some hard questions. How could the explosion have been prevented? What were the warning signs? Why is it taking so long to cap the well? And of course, how could the tragic loss of 11 lives been avoided?

While it may be some time before these questions are fully answered, there is a lot we can take from this tragedy and apply to our own lives. For example, how prepared are you should a financial disaster strike you or your family? With that question in mind, let’s take a look at some steps we can all take to better prepare for the unthinkable.

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1. Don’t ignore warning signs: Initial indications are that BP ignored warning signs that something was amiss. Warning signs should be seen as a blessing, as they give us an opportunity to take action early to avoid a disaster. Whether you see indications that your employer is in financial trouble, that an investment is going south, or that your roof is leaking, don’t ignore the warning. Take action early to avoid bigger problems later.

2. Hope for the best, prepare for the worst: We all hope that our financial lives will sail along smoothly. While we shouldn’t live our lives in fear of financial disaster, we should be prepared for it. As a starting point, one of the best ways to prepare for financial hardship is to establish an emergency fund. Open a high-interest savings account if you don’t have one already, and start saving for a rainy day. Even if it’s only a few dollars a month, you’ll see your savings grow in no time.

3. Have a disaster plan: While BP undoubtedly undertakes disaster planning, one has to wonder whether its plans included dealing with the current crisis. Planning for a financial crisis can go a long way in dealing with it promptly and effectively. For example, what would you do if you lost your job today? Is your resume updated and do you know who you would contact to look for a new job? What would you do if your business lost its most important customer? While we may not have all the answers to these questions, it’s best to prepare for these possibilities before they happen. Whether it’s staying in touch with colleagues who can help you find a job, keeping your resume updated, or diversifying your sources of income, the time to take these steps is before circumstances force your hand.

4. Protect what is most important: BP failed to protect what was most important—its people and the environment. We ought not make the same mistake. For most of us, that means making sure we are properly insured. Insurance is a critical component of sound financial planning. Whether it’s to cover your life, health, car or home, sufficient insurance helps protect your finances and provide for your family. While insurance can be an easy expense to forgo, the consequences can be dire, so make sure you have sufficient coverage.

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5. Stay focused: BP is focused on one thing—capping its oil well. When financial disaster strikes us, we should be equally focused on addressing the problem as best we can. Unfortunately, that’s not always the case. As a practicing attorney, people often come to me for legal advice. One acquaintance recently asked for help because her bank was threatening to foreclosure on her home. I agreed to help for free, and we schedule a meeting. She didn’t show. Why? She went to her son’s soccer game instead. While attending our children’s sporting and other events is a very important and enjoyable part of parenting, that one game should not have taken precedence over keeping the family home. When disaster strikes, addressing the situation should be our number one priority.

6. Take responsibility: BP has publicly stated that it will take responsibility for the damage caused by the oil spill. Only time will tell exactly what this means, but we should take responsibility for our financial decisions as well. If a bad decision has put you in a bind, it does no good to spend your time blaming others. Take responsibility for your situation, and get to work addressing the problem.

7. Get help: While BP has rightly taken the lead in capping the oil well, many others are involved in the effort, including federal, state, and local authorities and private organizations. This high level of collaboration is seen clearly in cleanup efforts. The same should be true when addressing our own financial hardships. While the primary responsibility for our finances should fall on each of us, seek help where it is available and makes sense. Whether it’s assistance from friends and family, charitable organizations, or even government programs, take advantage of the help that is available to you.

DR is the founder of the popular personal finance blog, the Dough Roller, and author of 99 Painless Ways to Save Money.