Smart Money Podcast: The Cost of Climate Change: Preparing for the Worst

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode wraps up our nerdy deep dive into the broad effects of climate change on personal finances, with a focus on how to manage a natural disaster.

Check out this episode on either of these platforms:

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Our take

Are you ready for a natural disaster? The time to ask that question is now — not when the disaster is bearing down on your home.

In the final episode of our nerdy deep dive into the intersections of personal finance and climate change, NerdWallet insurance editor Caitlin Constantine and host Sean Pyles discuss a 2019 report from the Urban Institute, which found that the financial impacts of natural disasters linger long after the disaster has passed. The researchers discovered that credit scores drop and rates of bankruptcy and foreclosure increase in the years after natural disasters. They also found that the impacts are more pronounced for people who live through medium-sized disasters, which are less likely to draw long-term recovery funding, and for people who were already struggling financially.

Caitlin also talks with Kate Bulger, senior director of business development for Money Management International, a nonprofit financial counseling agency. In this role, Kate is involved with MMI’s work supporting people who are rebuilding their finances after natural disasters. They discuss the obstacles that prevent people from preparing for disasters as well as steps people can take to get ready. That includes doing a home inventory, ensuring you have enough home insurance and paying down your debt now.

More about post-disaster financial recovery on NerdWallet:

Where to Turn When a Natural Disaster Upends Your Finances

NerdWallet’s Guide to Finding Financial Help After a Disaster

Make a Financial Recovery Kit to Rally Faster After Disaster

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: 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.

Kate Bulger: 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.

Sean Pyles: Welcome to the NerdWallet Smart Money podcast. I'm Sean Pyles.

Caitlin Constantine: And I'm Caitlin Constantine.

Sean Pyles: We're back with the final episode of our nerdy deep dive into the broad effects of climate change on our financial lives. Caitlin, 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?

Caitlin Constantine: 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.

Sean Pyles: 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.

Caitlin Constantine: Yes, they seem that way because they actually are. In fact, the World Meteorological Organization, which is an arm of the U.N., 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.

Sean Pyles: Geez, fivefold, 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.

Caitlin Constantine: I'm very fortunate in that I have 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.

Sean Pyles: 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.

Caitlin Constantine: All right. Well, our goal is to pull you back from the edge, Sean.

Sean Pyles: 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 [email protected].

So, Caitlin, who are we hearing from today?

Caitlin Constantine: Well, we are talking with a disaster expert.

Sean Pyles: A disaster expert. I'm not sure if I would want to be one of those.

Caitlin Constantine: 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?

Sean Pyles: Yeah, I do. I actually grew up in the Chicago area, and I remember thinking when that storm hit that that could've just as easily torn through my town.

Caitlin Constantine: 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.

Kate Bulger: Thank you for having me.

Caitlin Constantine: So by and large, how prepared financially do you think most of us are for that possibility of a natural or even a manmade disaster happening? What do the numbers tell you about what that looks like?

Kate Bulger: 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, 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.

Caitlin Constantine: I wonder if part of this whole dynamic is just people actively avoiding thinking about this, or maybe there's a little bit of denial. I mean, the idea that something could come through and could wipe us out financially without us even being aware of it or prepared for it, it's hard to sustain that level of concern over time, right?

Kate Bulger: 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.

Caitlin Constantine: 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?

Kate Bulger: 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, even when it is a perfectly peaceful time and you're feeling very at ease, that is an impossible task for most people. 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.

Caitlin Constantine: 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 thoughts about that?

Kate Bulger: 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 maybe your computers, those kind 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 have paper you have to keep up with in your house.

Caitlin Constantine: This actually kind of leads into the next question, which is related to financial inventories. So there are people — 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?

Kate Bulger: 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 have the name of the institution, the phone number of the institution is usually right there. Your account number's 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're 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.

Caitlin Constantine: 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?

Kate Bulger: Yeah, 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 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 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 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.

Caitlin Constantine: OK. 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?

Kate Bulger: 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.

Caitlin Constantine: 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?

Kate Bulger: Yeah. Saving is, 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're usually happy to tell you 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, 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 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, maintain a low amount of credit card debt if you can.

Caitlin Constantine: And 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?

Kate Bulger: Yeah, absolutely. I just mentioned, after a disaster, there are just a ton of expenses, but one of the ways that you can 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.

Caitlin Constantine: 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?

Kate Bulger: 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 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 when that fully destroys your home. That is incredibly traumatic, and it is hard to overstate how much of a barrier that could become to your recovery.

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's groups like Project Porchlight 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.

Caitlin Constantine: 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?

Kate Bulger: You might have guessed, 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, “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 case workers who are there to help, too, if you haven't finished your recovery at that point.

Caitlin Constantine: So to keep talking a little bit more about complicated financial aspects, let's talk about taxes. 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?

Kate Bulger: 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 depending on the disaster and depending on your situation and your expenses, 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.

Caitlin Constantine: OK. 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?

Kate Bulger: Absolutely. And you're right, scams are incredibly common after a disaster. 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. 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 — if it's 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 and 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.

Caitlin Constantine: OK. That's actually a really, really great tip. 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.

Kate Bulger: Thank you for having me.

Sean Pyles: Caitlin, that is a lot to think about, especially for something that nobody wants to think about.

Caitlin Constantine: Oh, for sure. 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?

Sean Pyles: Only me as I'm trying to fall asleep at night.

Caitlin Constantine: Your brain playing that over and over again just as like a lullaby to get you to go to sleep. I'm familiar with that song.

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. 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. Here's hoping you never need to use it, but it's better safe than sorry. Right?

Sean Pyles: Absolutely. 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.

Caitlin Constantine: 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 instead of 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 "the canary in the climate coal mine."

Sean Pyles: 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.

Caitlin Constantine: 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.

Sean Pyles: 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, like, 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.

Caitlin Constantine: Right? Embrace your inner Boy Scout and be prepared. But 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. 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.

Sean Pyles: 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 have come down recently is that, 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 last episode, make sure that you're putting your dollars toward the investments and companies that will bring about the change you want to see.

Caitlin Constantine: 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.

Sean Pyles: 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 [email protected]. Visit nerdwallet.com/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. Kaely Monahan mixed our audio. And a big thank-you to the folks on the NerdWallet copy desk for all their help.

Caitlin Constantine: 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.