Wednesday, July 13, 2011

Emergency Prep: Don't Forget About Money

I've talked about emergency funds in a past segment here on Frugal and Provident, but they are just important to your emergency preperations as they are to your financial security. Here are some things to consider:
  • When we prepare for disaster it should be for all kinds, including natural, manmade, and even economic. Having food, water, and money will help you weather just about anything.
  • Emergency prep includes unexpected health problems and unexpected loss of income. You can't rely on credit cards to keep you afloat.
  • Remember to have a supply of cash money on hand. Should there be a natural disaster are a number of reasons why you might need cash, and might not have access to atms or credit card machines.
  • Every little bit counts when it comes to emergency funds. Ideally you want six months to a year of living expenses in the bank, but don't let that deter you from starting to save even if it is a small amount. While it's better not to have to go into debt at all, $500 of debt is better then $1000, $1000 is better then $2000, and so on. A little bit is just how much less you will have to pay back when you get back on your feet.
  • The following things are not emergency funds: houses, cars, jewelry, belongings, credit cards, and retirement funds. A house is not a good source because as we've seen sometimes they're worth less then you owe, or are impossible to sell/ tap your equity in a bad market. Cars, jewelry, and other belongings aren't because there's no way to know if you'll be able to sell them or their worth when you need them. Credit cards just equal debt. Retirement funds are not meant to be emergency funds. Worst case scenario they are an option, but they come with a lot of risks when withdrawing early. Make sure you understand all penalties that may come from touching that money before you retire.
You'll feel so much more peaceful if you know you have some money put away.
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