Loans Answers

Be prepared?

Question: : A question about preparing for a disaster? Suppose the disaster were a : sudden loss of income? Say for example a person knew in only a matter of : days they would loose their income due to a plant closing or a layoff or : some weather related loss of income. What would be the steps to preparing : for this type disaster?

Answer: Well folks, I’m living this one.

I’ve always considered myself to be well-prepared for any unforseen event–and was well aware that the situation at my husband’s job was rather unstable. However, when it all blew up the week before Thanksgiving I was definitely in a state of shock…and panic.

We had a safety net, DH got a severance, is collecting unemployment, etc. but in hindsight I realize that I was not as well prepared as I thought. Some of the pitfalls we’ve encountered have been:

1. CREDIT CARDS: (I know, I know.) DH and I use credit cards very sparingly, but we do use them. Our card offers a great rewards program, and up to this point, balances were always paid in full every month. Right before the layoff, we built a deck on our house and charged the materials on our credit card. As DH was anticipating his usual December bonus, we were banking on those funds to pay off the deck. STUPID!!!! Even though it’s not a huge amount of money, and I could pay it off, I feel I need to keep as much cash in my pocket as possible right now.

DH and I did secure a home-equity line of credit (free) several years ago, so here’s what I did to ease the pain of the credit card. I wrote a check from the home equity loan to pay the balance in full. In the meantime, I got some of those advance-type checks in the mail around the holidays offering *free* balance transfers with a 5.9% interest rate until June and a 25-day grace period. So when the payment on the home equity loan came due, I used one of my Visa checks to pay it off. I wrote my check just after the Visa bill closing date (Dec. 6), so it didn’t even show up on my December bill. I won’t accrue any interest charges if I again pay it in full by Jan. 30. This juggling is a pain to keep up with, but at least I’m holding on to my cash and managing to avoid some of those finance charges!!

2. HEALTH INSURANCE: This one I was definitely NOT prepared for. To carry the basic COBRA coverage for our family of 4 (excluding the dental plan) was $582/month (payable 3-months in advance)!! Although we’re all in great health, I was just not comfortable taking the risk of going without some kind of insurance. I figured I’d just shop around and find a plan of my own–maybe something basic to cover catastrophes, high deductible, etc… ABSOLUTELY NOT…at least in the State of NY!! I contacted 17 different insurers, all of which offer health coverage to families/individuals, as long as you live in ANY state EXCEPT NY. Apparently the law in NY says that you cannot be denied insurance coverage, so in essence a person who is sick is eligible for the same insurance coverage as someone who is healthy. Great for those who are sick and have lots of medical bills…not so great for those of us who are healthy. My searching did finally pay off and I found ONE insurer to give me the kind of coverage I was looking for…$2,500 deductible, catastrophic type coverage for $229/month.

The one thing I’ve been able to take comfort in throughout this whole nightmare is my frugality. My expenses were already cut to the bare minimum, so we haven’t had to make major lifestyle adjustments (yet, anyway!). My pantry and freezer are stocked, so I’ve just been restocking where necessary. My food expenses so far this month have been around $20. My DH used to joke that we could live for a couple years on what I’ve got stockpiled. (He’s not picking on me so much these days

Most importantly, having the safety net and the frugal mindset are affording us CHOICES! We like where we’re living and don’t want to sell our house, so we’ve got some time to ride out this situation and wait for the tide to turn. Some days it’s very frustrating, but at least we don’t have to jump into a move or a not-so-great job just to stay afloat.

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