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February 11, 2011 | Posted By: Andrew Wang
People are still losing their jobs, diagnosed with cancer, struck by hurricanes, fires and floods. The dollar is falling. How can you prepare for the worst and protect your personal finance?
Step 1: View your financial snapshot
You don't know how to prepare if you don't know where you are vulnerable.
Step 2: Start saving
If you don't have an emergency fund, get one now. You need at least three to six months of expenses saved. With jobs taking longer to find, saving even more will keep you safer. Sell stuff, get a part time job, do something to get money in the bank as soon as you can.
And to save more, you need to spend less. Spend as little as possible on things that aren't necessities until you have a significant savings.
Step 3: Pay off your debt
Calculate all the debt you owe (your liabilities). Pay off those credit cards first. There are two methods that work:
Step 4: Evaluate your home
If you are having a hard time paying your mortgage, you may need to downsize before calamity wipes you out.
With good credit, you might be able to re-finance your home loan. Try to opt for a 15-year instead of 30-year mortgage. We are paying 76% more for housing than people did a generation ago.
Step 5: Keep your job options open
Remind people of who you are before you are out of work and need your network to help you find a job. Update your resume. Keep in contact with your network and join the social media world. Plus, having a good social network can help you cope with calamity if it does hit.
This is a guest post from Andrew Wang. He publishes the personal finance blog Money Alps.
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