As I watch the financial crisis unfold in Greece, which has been going through its Great Depression for the last five years, and in China, which is facing a stock market crash suspiciously like the 1929 Wall Street one, I am thankful for a slightly more robust economy here in the United States.
“It’s unlikely we’re going to have a big crisis like [the Great Depression] again if we heed what’s going on and do some tweaking,” said Ann House, coordinator of the Personal Money Management Center at the University of Utah.
Not that it matters that much from my family’s perspective. We’re going through a micro version of an economic collapse. Two weeks ago, my husband lost his job. We have tried for years to prepare for economic emergencies. Here are some things we did well – and not so well.
We built up a short term and long term savings and emergency fund.
House recommends taking savings out first, via direct deposit, rather than putting away what’s left at the end of the month.
“I know if I keep extra money in my checking account, I will spend it until it’s gone,” she joked.
My husband’s office automatically deposited part of his paycheck into a retirement fund.
In addition, we owned a short term savings to prepare for things like holidays. Then we created a third savings account for emergencies – especially medical bills.
Hooray for us. Only 29 percent of Americans have an emergency savings, according to a survey from Bankrate, so that puts us ahead, right?
We didn’t save enough. Our emergency fund was gone by June. We thought it was plentiful because we didn’t realize this year would be the Year of the Instacare (not to be confused with the Year of Soils). My husband needed surgery, I endured dental work, a son had chronic ear infections and a daughter caught pneumonia. We’ve spent more time in doctor’s offices than some doctors.
When my husband lost his job we had enough in short term savings for two months’ expenses if nothing went wrong.
Unfortunately, just before he lost his job his car wheezed its last wheeze, necessitating its replacement. Since then we’ve needed to replace four tires in the family car; part of our sprinkler system broke; my income decreased and more medical expenses popped up. Yes, this was our last two weeks. We’re readjusting our expectations.
Most financial planners recommend saving enough for six months’ worth of expenses. We should have done more to get to that level.
House also recommends organizing important paperwork.
The Federal Emergency Management Agency’s “Emergency Financial First Aid Kit” is a great resource to organize important papers, House said.
The 44-page booklet includes four sections that identify what information to collect and keep, like social security cards, insurance policies, prescriptions and emergency contact information.
We keep our important documents – birth certificates, loan paperwork, insurance information, etc., protected and handy. Some is in a fireproof, waterproof safe. More is in an independent hard drive and in cloud-based storage.
Hooray for us, right?
Important advice: If you put stuff in a safe, don’t lose the key.
House suggests keeping up to $1,000 in cash with a 72-hour kit. After all, a coronal mass ejection can knock out an ATM almost as easily as a Greek government order.
We keep an emergency storage with food, water, clothing, shelter and money.
Hooray for us, right?
Not necessarily. The cash is all in larger bills.
“If you were out of water, and somebody came by with a water selling wagon, you might be giving the person a $100 bill for water. It’s one-dollar bills that are going to come in handy for emergencies,” she said.
Our family could keep emergency kits better updated. The last time I checked one daughter’s emergency bag I found diapers. She was six.
Finally, House encouraged reducing debt and improving credit scores.
House said more than 60 percent of prospective employers check credit scores, so a good score can mean the difference between getting and missing out on a job. It takes time and effort to improve a credit score: remembering to pay all bills on schedule, keeping oldest credit cards and paying off other debt, and painstakingly searching credit reports for inevitable mistakes. All three credit bureaus must give one free credit report per year.
We improved our credit scores and eliminated credit card debt.
Hooray for us, right?
Well, yeah. Hooray for us. We’ve got to do something right.
Oh, and if you hear of any positions in emergency management, law enforcement or writing and editing, please let us know.
Interview with Ann House: July 7, 2015