Prepare for Emergencies - Part 4

Tip #296 - Prepare for Emergencies - Part 4- One of the most common emergencies is an unexpected big expense. Sometimes we're sailing through life and paying our monthly expenses, and everything seems to be going smoothly, financially. Then you walk into your house to find the furnace has blown out. Or your car's transmission suddenly dies, to the tune of $3000. Both of these big expenses, however, are probably not totally unexpected. If you have a 30-year old furnace, you should probably expect that it will not last much longer. If your car is 15 years old and has never had a new transmission put in, it's likely time. I wouldn't constitute either of those events as true emergencies. They are expenses that should be planned for and saved up for.

However, sometimes we are faced with an expense from out of the blue. For example, suppose your car is parked on the side of the road and is "totaled" by another car. Even though you have car insurance, the value they offer may not be enough to replace your reliable car. Or suppose your son throws a ball and breaks your window. Your insurance deductible is too high to use it, so you pay out of pocket. That may be a $500 expense that you didn't see coming. What if a tree falls down in your backyard, not hitting any part of your house or fence? Insurance doesn't cover that. Instead, you will be paying the cost of having the tree removed. Add a stump grinding to it, and you expense could be close to $1,000. These are the types of expenses that are unexpected, sudden, and costly that we can't truly plan for. Instead, these fall under our emergency category as a means to pay for them. If you don't have this category, you will be scrambling at the last minute to try to find funds to cover these unexpected costs. Eat less? Skip a vacation? Go in debt? None of those choices is idea. Instead, having a fund set aside for these unexpected, sudden, costly expenses can cover you when you need it.

IRL - One day two winters ago, it had snowed several inches. My husband went out to shovel the pathway to our house when he found that the front patio had sunk literally into the ground. What he found out, after investigating, is that the patio was built on top of a big hole in the ground. It was definitely not built to code (although code was likely different in 1953) and was unsafe. Our insurance wouldn't cover it. We needed a whole new patio put in. Mind you , this was in the winter under snow - not exactly the time contractors are building patios! Fortunately, it warmed up soon after. My husband, who is quite handy, actually decided to tackle this project himself. Even though we have money in our emergency fund, we prefer to still be frugal with our expenses when we can. He still ended up spending several hundred dollars to rebuild our patio, but less than if had hired someone. And we were able to breathe easier knowing that our emergency fund covered our expense and the ground, too!

I am still around!

We are moving this week and packing up the house, buying a house, and selling a house has proven to be a bigger chore than I expected! I've also been working part-time, and we traveled over the holidays. It doesn't leave much time for blogging, but I promise to finish my thoughts on preparing for emergencies once we get settled in our new North Carolina home.

Prepare For Emergencies - Part 3

Tip #295 - Prepare for Emergencies - Part 3. In parts 1 and 2 of this series, we are talking about being prepared for emergencies - not just financially, but emotionally and physically as well. We defined that an emergency is unexpected, sudden and can devastate you financially, emotionally, and/or physically. In the last post we described how to be prepared for a job loss. Today, we'll talk about being prepared for a diagnosis of a serious illness and death of a family member.

If someone in your immediate family has a serious illness diagnosis, that constitutes an emergency - it's usually, sudden, unexpected and has financial, emotional, and physical consequences. How can we be prepared for that? While, we can probably never be fully prepared, we can do steps in advance of this happening that can make a sudden diagnosis a bit easier to digest.

First, review your health insurance plans. Know what your insurance covers, in general. Be aware of any health services that your office offers such as a Flex spending plan and counseling. Second, obtain a list of specialists from your general practitioner, so you have a place to start if you need to scout out a doctor. Third, keep up your network of friends, neighbors, and local and even long-distance contacts. If your husband is suddenly diagnosed with multiple sclerosis, it's likely that you know someone who has a family member or friend who you can contact to get the low-down of the disease, treatments, and local doctors. Fourth, be aware of time off policies for work. You will need to clarify the policy once you need to use it, but being armed with knowledge in advance helps save time when a diagnosis becomes a very busy time. Last, make sure you have that emergency fund in place. This is the time that you may need to dip into it. No matter how good your health insurance, doctors' visits may involve co-pays, gas and car maintenance costs, time off from work, special foods or other products, and greater living expenses such as food-on-the run, babysitters, etc. Once the emergency is known and the initial newness of it has worn off, this will likely become a budget category for you or cause you to raise your budget in the expense categories just mentioned.

A similar-type emergency but one more extreme is the loss of a family member. If the family member is a spouse that is the breadwinner, then the financial consequences, not to mention the emotional ones, can be devastating. What can you do before a death in the family to prepare for this unexpected event? First, you can make sure any breadwinner or the person who provides a service to your family (cooks, childcare, driver) has life insurance. This life insurance should be enough to cover the expenses - at least for a few years - that this person usually takes care of - housing, food, utilities, childcare, etc. If there are children in the picture, it should cover them for at least as many years until the children are grown. Without getting into a whole post about life insurance, just make sure that you talk to someone (hopefully an unbiased person) about your life insurance needs before you need it, and make sure you are covered before the unthinkable happens.

Another way to plan for this type of emergency is to have a will. I cannot overestimate how important this is. When someone dies, if their will clearly states where funds will go, the beneficiary will receive the money much faster than if it has to go into probate. Third, make sure other policies have the correct beneficiary status updated. If you have a 401(k) at work, for example, is your spouse your beneficiary or is it still your parents (from the time you were single an started the job)? As you get older and have more accounts, it gets harder to keep track of this. So check on this status once per year to make sure they are updated to your current situation.

If the death of a family member is not a breadwinner or does not provide any type of services that would cost money, the loss is going to be an emotional one more than anything. There is no way to prepare for such an emergency, other than to have a good network of family, friends available to you. By being a caring, loyal friend when times are good for you, will likely lead to others stepping up to help you when you need it.

In Real Life (IRL) - In September, a family in my town lost their son to a tragic, unexpected, and sudden accident. One minute the boy was happy and playing. The next minute, he was gone forever. No one would have predicted it. I did not know this family before the accident. And other than through the web and from friends and local events, I still do not know this family personally. But I have seen the outpouring of love and helpfulness by their neighbors, their church, their community, and from their online friends and even strangers that has helped hold this family up.

Their son's loss of life did not impact them financially, but the devastation that his death brought to them cannot be overestimated. I do not think there is a thing a person can do to prepare, in advance, for this type of tragedy. Other than to be a good person and friend to your family, friends, and community, as it appears this family was. Because at such a horrific time in their lives, I believe their family and friends (and their personal religious convictions) are the only things holding them up. I hope no one I know or any readers here ever experience such a loss, but to see how this family is handling it, you can read the mom's blog: An Inch of Gray. She is a beautiful writer. While it is depressing reading about their tragedy, it is uplifting to see how this woman is handling a devastating emergency.

No one will ever be fully prepared for sickness or death. But doing anything that you can in advance, like the steps mentioned above, and admitting to yourself that life involves both sickness and death and no one will ever avoid them entirely, may make it slightly easier if such unexpected tragedy strikes.

Prepare For Emergencies - Part 2

Tip #294 - Prepare for Emergencies - Part 2. As I mentioned in Part 1 of this series, nowadays we hear over and over about saving for an emergency fund. But without defining what an emergency is, it's hard to know when you are "allowed" to spend that fund. I define an emergency as something that is unexpected, sudden, and catastrophic in at least one way (financially, emotionally, or physically). When an emergency strikes, it's best to have plans. But of course, we cannot prepare for every type of emergency there is. But we can do some sort of planning for typical emergencies. What are typical emergencies? I can think of some common ones:

1. Loss of a Job
2. Serious Illness Diagnosis
3. Mother Nature Strikes
4. Death of a Family Member
5. Unexpected Big Expense (Need new car, new roof, etc.)

Most emergencies fall into one of these categories. So before any of these types of emergencies happen, make a plan with how you would deal with them if one of them does. Part of this would be having the ever-so-talked-about emergency fund. This emergency fund will help out in all five of these scenarios. Clearly for number 1 and 5, the emergency is that you need money to pay for either a big expense or to cover your everyday living expenses. For scenario 2, 3, and 4, the financial emergency may be secondary to other pressing emotional and physical needs, but would clearly be needed in most cases.

So in order to plan for an emergency, you should start an emergency fund. There are articles and blog posts galore dedicated to this topic, so I won't get into them here. But you should decide on an amount you want to save - 3 months' - 12 months' salary is typical and plan a way to save up for that money either all at once or little by little. While you are working on that, come up with other plans to deal with your 5 emergency scenarios.

1. Loss of a Job. Before you lose a job is the best time to plan for the time that you might lose one. In addition to having an emergency fund, you can do other things in advance of losing a job. Keep your resume updated at all times. Why wait until you've lost a job to update it. It's harder to think back on all that you've accomplished and it takes time away from job hunting. As you accomplish things at work, add it into your resume, revise it, keep up on current style and have it at the ready.

Secondly, network now. Again, don't wait until you are without a job to contact your old fraternity brother from college. Then it will seem like you are using him. Keep up your contacts continuously. Belong to organizations that you enjoy and make contacts with. Join occupational groups. then when a job is lost, your contacts are already in place.

Third, have a plan b for a second source of income. Perhaps you are a 9-5 accountant at a big firm. If you lose your job, you want to get another similar job, but have a plan b for a second source of income. Perhaps you can do taxes on the side while job hunting. Or you can teach accounting at a community college. Before you lose your job, think about what other jobs you can do as a side income. It doesn't have to be related to your field. If you are an accountant who loves to knit, you might want think about (in advance of losing a job) where you can sell your products while you are looking for a full-time accounting job.

Fourth, prepare for any emotional stress you will be going through. Think about a counselor you might need to turn to during this time or whether you have a friend who is a good listener who can help you.

In this economy, loss of a job is not an unlikely scenario for many people. Be prepared for this possible event. So if the unfortunate happens, you have a plan in place to cover your expenses and find a new job as quickly as possible.

If you want to be super organized, keep a list of your emergency preparedness plans (not unlike what to do in a fire drill). Then when the unthinkable happens, and you may not be thinking straight, you can go to your list and follow it. So as to not make this post too long, we will discuss preparing for the other scenarios in future posts.

IRL (In Real Life) - While dishing out this advice, I don't necessarily practice what I preach. Sometimes I fly by the seat of my pants. Job loss has been an emergency that we've been dealing with over the past few months. And, honestly, I wasn't prepared for some of it. While not exactly "job loss" I had planned to go back to work part-time when my son started preschool at age 3. Fortunately, we weren't counting on my income because it turned out my company did not need me back. When I left in 2007, the economy was still in pretty good shape. By 2010 when I wanted to return - not so much. Honestly, I never considered this possibility because times were good when I left. Fortunately, we had adapted to just living on my husband's income so it wasn't a total emergency, but I did plan on using my part-time income for future expected expenses.

I came up with a plan b which was to just take any part-time job I could. And this past spring I did. It was a not-much-above minimum wage job, but it was near my house and fit my schedule. Imagine my surprise when after the summer, they let me go (supposedly temporarily until the retail season kicks back up again).

I would have come up with a plan c, except in that time period, my husband found out they were closing his office. Again, while this wasn't exactly job loss, since they offered him a job in a new location, it had many of the same qualities of it. Picking up and moving to a new locale is not an easy or cheap endeavor. So much of what I suggested above came into play as my husband considered finding a new job so we didn't have to move. Unfortunately, we weren't fully prepared. His resume was sorely out of date. And while I helped him polish it, I don't feel it was the best because it was done hastily. And while he didn't specifically network in advance in order to find a job, he did have a lot of contacts from some volunteer work he does as well as professional organizations he belongs to. And while they got him some interviews, nothing really panned out.

So we are not only dealing with sudden expenses of selling a house, moving, storing, and fixing things around the house. We are dealing with high emotions on both our parts and our kids' parts. This "job loss" has become a major life change for our family that will take months, if not years, to adjust to. We could have had better plans in place for this emergency. As going through it has made me realize that having an emergency fund is not enough to get you through when an emergency strikes.

Prepare For Emergencies - Part 1

Tip # 293 - Prepare For Emergencies. In almost any financial article you read these days, you will see advice to have an emergency fund. Often it says the fund should equal 6 months' to one year's worth of expenses. But beyond that, these articles often do not give you much guidance. What constitutes an emergency? Should I have contingency plans? Do I need to consider all of my expenses? How do I deal with emergencies physically and emotionally as well as financially? What do I do after the emergency is over?

Because of these many unanswered questions, I thought I'd write a few posts with more detail regarding planning for emergencies. What is an emergency? Is the 20-year old roof leaking considered an emergency? How about your new car needing a new radiator? Your husband breaking his leg and not being able to work for a month? Are any of these emergencies? Are all of these emergencies?

I think we first need to define what an emergency is. Each person's definition may be slightly different. My definition of an emergency is something shattering that is sudden and unexpected that impacts your financial, emotional, and physical life. In that case, the 20-year old roof leaking would not be an emergency. It might be sudden and shattering but one could reasonably expect that a 20-year old roof would leak so it is not unexpected. That event could have been predicted with some certainty. A new car needing a radiator might be sudden and unexpected but it is not shattering, and therefore isn't an emergency. Your husband breaking his leg and not being able to work for a month is shattering, unexpected, and sudden and meets my definition of an emergency.

Each person's interpretation may be different on what is shattering. To someone in dire finances, the cost of a new radiator may be. So the first step in preparing for emergencies is to figure out what an emergency is. It might be the same as my definition or slightly different. Most likely it will have the sudden and unexpected component to it. The "shattering" component may be slightly different depending on your financial, physical, and emotional circumstances. To some a car breakdown even if sudden and unexpected is emotionally draining and possibly financially draining and would constitute an emergency. For others a car breakdown is no big deal either emotionally or financially. It might make sense to put a dollar amount on your shattering portion - something like any sudden and unexpected event that costs over $1000 is considered an emergency. Or any sudden and unexpected event that will cost us over $200 each week for the next month is considered an emergency.

So, our first step in preparing for emergencies is to define what an emergency is. Then we can figure out the following steps - which is meeting the emergency head-on. We'll discuss them in future posts.

In Real Life (IRL) - I've been thinking a lot about emergencies lately because we've had a lot of potential ones. At the end of July, my dad told me that he had prostate cancer. He is 74, and fortunately it is slow-growing form of cancer that is treatable. Nevertheless, the "C" word, which I hate more than almost anything, is scary. While the financial consequences for me aren't really affected by my dad's diagnosis, my emotional ones and physical ones were dramatically. I had a hard few days digesting this information, and living far away (3 hours), it has some physical constraints, too.

But that wasn't the only piece of "emergency-like" news I heard. A day after my dad told me his diagnosis, my husband called me from work and told me that he got word that his office is closing at the end of October and that he was offered a job at the home office in North Carolina. While this news wasn't totally unexpected as they gave us warning a year ago of this happening, in May they told us there were no current plans to close his office. So it was somewhat unexpected timing, and the date seemed sudden as I thought they'd give us 6 months' lead time. If my husband takes the job, then there are financial consequences of moving, packing, selling the home, travelling to find a home, renting or buying a home, etc. If we don't move, we have other financial consequences of looking for a new job or being without for awhile. Combined, my dad's news and the job news, was making me an emotional wreck.

A few weeks went by and things settled a bit as my dad found out treatment options, and my husband and I did a scout out of neighborhoods in North Carolina and considered some options locally. Then one day in mid-August, our house starting shaking and things started falling off the walls and bookshelves. An earthquake had hit Virginia. Scary indeed! And while it didn't end up being an emergency, it certainly opened my eyes to how an earthquake could easily cause one! And of course, a few days later, we were in hurricane-preparedness mode. Fortunately, it turned out to be a non-event here, but in the past we've had a flooded basement, downed trees, and no electricity as the result of a hurricane, so I know how quickly that can become an emergency.

So to say that emergency preparedness has been on my mind lately would be an understatement. It has made me evaluate our preparations for emergencies in life - not just financially but emotionally and physically, too. I'll discuss these further in my next posts.

Most Everything Is Sellable

Tip #292 - Most Everything is Sellable. Back in the days before the Internet, you might try to make money by putting up a sign at the local grocery store advertising your old lawnmower for sale. Or you might put a placard in your car announcing its sale. But you would never dream of selling your extra garage door remote or the brochure or manual that came with your brand new 1972 Chevrolet Nova. Maybe you'd put some stuff out in your next garage sale and earn a quarter or two off of your old things. But most likely you'd throw away your brochure when the car was junked. The garage door opener remote would probably be thrown in the back of the drawer in case you met someone who has the same garage door opener brand and model as you.

Well, those days of the pre-Internet are long behind us. And today most everything is sellable. Things that may have once been considered junk to you are thought of as prized possessions for someone across the country or halfway around the world.

So this tip is: do not throw anything away until you have checked whether it has value or not. Do not just assume that what you have is junk. An old pen from Pan-Am Airways? It might be worth a few bucks. Your son's set of chapter books that he is no longer into? Probably has some worth to someone. An old brochure from a 1950's range - chances are someone wants it. A keyless remote to your old car? Likely that someone wants it.

Of course not everything you have is sellable, but chances are there are more things that have worth than you realize. So before you throw things out, check online - eBay is probably your best bet - to see if items like yours are selling for any money. And if they do, put it up for sale and make money on your unwanted things. Happy selling!

In Real Life (IRL) - Again, I've been away for weeks. No excuses, I just haven't made blog writing a priority. And in the past week, I've been house hunting! We finally found out for sure that my husband's office is closing this fall. And I am realizing how much I need to get rid of in my house before we sell it. So much to do! Part of what I realized when going through our things is that a lot of these things that seem like junk may be useful to someone. We have an old 2001 Dodge Caravan brochure (from our car that kicked the bucket last month). While it has no use to us anymore, I am sure there is someone out there who owns a 2001 Dodge Caravan who would like to have the glossy brochure and specs from his car. My husband also has a bunch of other brochures from different times when he was car hunting. He just handed me a pile and asked me to see if there's any worth for them on eBay. And a cursory glance shows that some of these brochures do sell. Who would have thought? Certainly not me! I would have put them right in the recycling bin.

Unfortunately looking up and selling items takes a lot more time than throwing away! But if I think they will make enough money, then on to eBay our junk will go. What kinds of things do you have laying around that may be worth money that at first glance wouldn't seem like it?

Beware of Incremental Increases

Tip #291 - Beware Incremental Increases. Once you have your budget laid out and you are into a routine of spending that you are comfortable with, it is sometimes easy to take things up a notch without realizing it. For example, you may be great about eating your meals at home, bringing along water bottles in the car, and walking the one mile to school rather than driving and staying within your budget. But once you've been doing that for awhile, you might stop "just this once" to get drinks at McDonald's for the kids. Or you might start to order take out when you've had a bad day even if it's not in the budget. And while all of these things may be okay to do once in awhile, when it starts to become habit, that it becomes dangerous (to your finances anyway). Suddenly these changes become the new normal, and without realizing it, you have started spending more money than you budgeted for.

It is these small, incremental changes that you need to be careful about. It is so easy to get used to these new "luxeries" without realizing that you are spending more money. Sure, it may be just a few dollars once or twice a week, but over time, they add up with little notice. For example, suppose you are a working woman and bring your lunch from home to work each day. But one day you are running late and don't make your lunch so you buy at the office. The cost is $6 - about $4 more than it costs to make your lunch at home. The next week, you hit the snooze button one extra time knowing that you can skip making lunch again and buy in the cafeteria. Before you know it, you are buying lunch about once per week at the office. Seems harmless, no? Well, in a given year that means you spent about $200 extra on lunches that you didn't budget for. That may or may not be harmless, depending on your financial situation and your other miscellaneous costs.

Suppose you also have gotten in the habit of picking up a magazine each week at the checkout counter at the supermarket each week. Again, this is something that wasn't in the budget. At about $5 a pop, it puts another $250 dent in your finances. Add in that you start meeting a friend about once per week for a drink for an additional $250 or so. All taken together, you have been spending an extra $700 for small changes that you hadn't budgeted for at the beginning of the year. These might all become important items for you to have in your life in order to keep things going smoothly and stress-free. But, they also add up to a fairly big expense, and if they become habit without being in the budget, you will not meet the financial goals you set for yourself in the beginning of the year.

So stop and evaluate the small, incremental conveniences that may have crept into your routine that you haven't budgeted for. And see if you can put them back into their place as special purchases rather than regular ones, until you can adjust your budget and include them formally.

In Real Life (IRL) - I started this post several weeks ago, and cannot remember what event made me realize that some small habits had crept into my routine that were starting to put a dent in my wallet. It was either the quick stop at McDonald's for drinks for the kids on a very hot day (and I had forgotten to bring drinks with us) or the soda I was suddenly adding into my shopping lists when I had virtually stopped drinking it for months and months. Or maybe it was the packs of gum that my daughter was asking that I buy for her when I stop at the drugstore (with her money at least). Whatever it was, I knew that none of these purchases were expensive on their own but buying them on a regular basis as they were tempting me to do would surely take money away from targeted saving account. I knew I would have to do better.

While I do think big purchases have a greater impact on my finances than smaller ones, I realize that smaller ones occur much more frequently and without nearly as much research or notice. And I know that there is some truth to the saying "watch your pennies, and the dollars will take care of themselves." And while I don't think we should necessarily deprie ourselves of small treats when we can afford them or for special occasions, I believe it is the little things that we don't realize we are spending money on that can set us back on our financial goals. To that end I am making a concerted effort to be aware of when I am started to spend money on little things on a regular basis That I have not planned for. I hope you will, too.