Self-Defense Tips for Financial Disasters

Just about anyone could tell you what they’d do if they won the lottery, but how many people have a financial plan for disaster? Do you know what you’d do if you lost your job and had to survive without income while you searched for a new job? What if you became disabled and unable to work?

The most obvious way to prepare for disaster is to save enough money to cover your living expenses for at least three to six months. Of course, this is easier said than done when the majority of Americans are living paycheck-to-paycheck, even in good times.

In a New York Times article called “Preparing Your Budget For Disaster,” Wisconsin financial planner Kevin McKinley has an interesting suggestion for financial disaster preparedeness that might seem a bit counter-intuitive. Borrow more money from a home equity line of credit or a credit card while you still can, he says, since the availability of the funds could disappear without notice. Once you’re unable to borrow and you’ve depleted your savings, you’ve run out of options. Borrowing money before disaster strikes means you can pay it back slowly over time and keep cash in savings for emergencies.

Tags: financial emergency, protect finances

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