One crisis away from bankruptcy
The New York Times published a very interesting article today on how more Americans than ever before are living at the brink of disaster. Many people (possibly even most people) are one job loss/major illness/divorce/hurricane/what have you from losing everything they own.
That is some scary business.
The article profiled several different people and identified the circumstances that brought them to bankruptcy and/or foreclosure. You can read the article for yourself; many of the factors that led to each crisis profiled were avoidable (fired for sending inappropriate emails at work? Good God.), but what I wondered after reading the article was this: If one crisis can bring you to your knees, what can you do to protect yourself?
As I mentioned elsewhere, sometimes I make up disaster scenarios and deconstruct them. Part of the reason for doing this is because it makes fear less paralyzing. In addition, this exercise aslo forces me to look at my mitigation plan and figure out where the weaknesses are so I can shore them up. I find this to be an incredibly valuable exercise because it's helped me prepare for a variety of disaster scenarios. (This was a helpful tool to have when I was watching the World Trade Center burn on 9/11.)
Here are some of the scenarios I've worked through:
| Crisis | Mitigation Plan |
| Natural Disaster or Terrorist Attack | 1. Carry adequate homeowner's insurance 2. Keep emergency contact numbers in my cellphone 3. Keep charged up flashlight batteries and large Brita filter full 4. Keep physically fit (because if I have to walk out of town, it might be a long trip) Things I'm doing wrong: I should have more cash on me at any given time than I usually do. During a natural event or a terrorist attack, how likely is it that ATM machines will continue to work? |
| Pandemic | Nothing. With my immune system, I'll be dead in the first wave. |
| Catastrophic Illness | 1. Keep physically fit: Good general health helps ward off a multitude of problems 2. Go to the dentist twice a year: Poor dental health contributes to poor overall health and may cause or aggravate specific conditions, like heart disease 3. Carry adequate health insurance with catastrophic illness coverage, accidental death and dismemberment, and long term care coverage 4. Eat sensibly and in moderation Things I'm doing wrong: I never get enough sleep and I drink way too much coffee. I also give in to my sugar jones too often |
| Job Loss | 1. Give my all at work and then some 2. Network constantly Keep my skill set and knowledge current 5. Understand the business and look for opportunities to contribute new ideas that will either save the company money or help the company make more money 6. Share the credit: There is no "I" in "Team" 7. Stay plugged in to office politics, but only play when absolutely necessary 8. Always keep an eye out for newer and better opportunties elsewhere Things I'm doing wrong: I network a lot within my organization, but not nearly enough outside of it |
| For everything: | 1. Never, ever carry consumer debt 2. Always keep a healthy emergency fund 3. Save, save, and then save some more so that I have the maximum flexibility possible at all times |
No matter how good anyone's mitigation plans are, you can certainly see from mine that there's always room for improvement. The key point I'm trying to make is that if you step up and become the master of your immediate circumstances, you have a better chance of surviving the bad things that life throws your way and coming out to thrive on the other end.
What would you change about my risks and related mitigation strategies? What does your own plan look like?
5 retorts. What say you?
i love your list! i agree with pretty much everything on there, the only thing i would add on my own make believe list would be under the "natural disaster or terrorist attack" category--
1. keep a landline and an emergency old school no-plug phone. during both 9/11 and the blackout cell phones were jammed and i couldn't call anyone to tell them i was okay
2. have a bike with a bike pump. same deal, during 9/11 and the blackout i was in and out of neighborhoods easily with my bike, and could bike out of the city if nec.
3. never leave the car parked without a full tank. gas stations ran out of gas the last blackout, the last thing you want to do is try to leave the city in panicked traffic on a half tank of gas
but of course, you could probably just jog out of the city, i'd drop dead after mile three...
piggybankblues - Very, very good additions. Thanks so much.
Jog out of the city? Ha. I huffed through 6.5 miles last night and it nearly killed me.
Nigel - Please. Don't advertise in my comments.
Awesome tips, F.Z. and piggybankblues. One other one I can think of is short-term disability insurance. For singles, I think it's absolutely key, even moreso than accidental death ins. Unfortunately, my employer fails to offer it, which bugs me to no end, but word is they may come around soon...
m - Very, very good point. I have that through work but I didn't think to put it on the list when I wrote the post. For anyone who doesn't have it, m is right: if you can only pick one, short-term disability is far more important than AD&D.
FZ,
for natural desasters/terrorist attacks, you will also want a radio that runs on batteries or a handcrank to catch important public safety announcements. This tip comes courtesy of a booklet which the Emergencies and Desasters section of the Irish Department of the Environment sent to all households in Ireland some time last year. Much glee was had with that advice, on national radio of all places, but once I mulled it over, I realised how appropriate it was. I then applied a 10 Dollar coupon I had for LL Bean towards their handcrank radio and two handcrank flashlights, one for my home and one for my car. I would trust handcrank over batteries, as you never know the state of the battery when you need it.
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