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If You Don’t Know What a Fiduciary Is… NOW Is the Time to Find Out

Standards Are On The Rise

If you have money and plan on retiring comfortably then it is imperative that you know what a fiduciary is. The number one reason: it can save you big bucks.

And the Labor Department thinks so, too.

 That’s why come April 10 all financial advisors who give retirement advice will be held to a fiduciary standard.1

In a nutshell, this means that your advisor is legally bound to give you advice that’s in YOUR best interest… not theirs.

According to the Labor Department, this new rule will save people $40 billion over the next decade.2

April 10 Rings in a New Era for Advisors… And Clients

Basically, all of those high commissions will have to be forfeited in favor of helping people secure their retirement investments. Many financial advisors will be forced, like it or not, to put their needs – and wallet, after their clients.

That’s why it’s imperative you ask before you give your hard-earned money to someone who isn’t committed to these ethical standards.

“The Big Dogs Must Be The Best”

Don’t assume just because your advisor works for a mega bank (or is associated with one) he or she actually has your best interests at heart. This is a rookie mistake – and one you definitely don’t want to learn the hard way.

There are many small, respectable, top-notch fiduciary firms that score As across the board in performance, customer relationships and ethical standards. 

Keep this in mind when you start looking for an advisor to build a relationship with.

 

Because most people have one shot at getting their retirement right (i.e. they don’t have unlimited funds for expensive mistakes), it’s crucial to ask tough questions before you decide on a financial advisor.

The Department of Labor put together a thorough list of questions they recommend posing to a prospective advisor. You are trusting this person with more than money – but with peace of mind, as well.

Questions to ask a prospective advisor, according to the (Department of Labor)3

  1. Do you consider yourself a fiduciary?
    • If not, why not?
  2. Are you willing to act as a fiduciary with a duty to act solely on my behalf?
  3. Are you willing to disclose to me any conflicts of interest that may interfere with your acting solely on my behalf?
  4. Are you willing to put this commitment in writing?
  5. How are you compensated?
  6. Do you earn fees or commissions based on the number of products that I buy or the size of my investment?
  7. Will you earn a higher fee or other type of compensation if I invest in certain products you recommend or will you receive fees for services related to specific investment products?
  8. Will you provide a list of the fees and commissions you receive either directly from me or from other sources in writing?
  9. Are you a licensed or registered investment adviser?
  10. Are you registered with the State, U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or the Certified Financial Planner Board of Standards, Inc. (CFP Board)?
    • For how long?
  11. What is your experience?
  12. Who supervises you, or, are you a sole practitioner?
    • If a sole practitioner, do you have professional liability insurance?
  13. Have you (or your firm) ever been disciplined?
    • If so, for what?

 

1http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/03/19/is-your-financial-advisor-a-fiduciary
2http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/2016-04-27/what-will-the-new-fiduciary-rule-mean-for-you
3https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/fsfiduciaryoutreachconsumers.pdf

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How to Save and Plan in Your 20s, 30s, 40s and 50s

Your Quick Guide to Getting Money Wise At Every Age

Each period in life comes with its own, unique set of priorities, challenges and benefits. When you’re young, you don’t have much money to save – but you do have time. The reverse is true as you get older: you’re making more money, but you have fewer years to build up your nest egg.

The key is to balance your needs, throughout your life, with healthy savings habits. Let’s take a look at the common issues we face in each decade and how we can handle those things, while still strategically saving for our future.

20s

As you transition from high school and college into the workforce, the top-of-mind worries tend to be finding an apartment, a reliable car and a fun place to meet people on the weekends. It’s usually not retirement. Thinking of retiring – just as you start working – is like planning your summer wardrobe in the dead of winter… it’s not going to happen.

But, there are two compelling words that might inspire you to start saving now: compound interest. If you’re not familiar with this concept, then get ready to be impressed.

Here’s how it works: If you save $3000 in 2017 and earn 3 percent interest, you’ll have $3090.00. If that money continues to earn interest at that rate, in 2018, you will earn interest on your original investment — $3000 – plus on your extra $90. This keeps happening over and over, year after year. You are earning interest on interest on interest.
If you add $3000 to this account each year – with a steady rate of 3 percent, you will have $235,989.89 in 40 years. That’s almost $116,000 in interest.
GET A HEAD-START ON SAVING!

So, if you haven’t begun saving yet, start now. For people early in their careers and not making much money, you can start small. There are two benefits of this:

  1. You’re still saving – and every little bit counts!
  2. By committing to saving and your financial future, you’re creating a very valuable habit.

30s

By the time many people reach their 30s, their big priority is buying a house. According to Zillow, the average age of first-time homebuyers is 33.1

Because houses require large down payments and come with a ton of smaller – but multiple – little expenses (fix the leaky sink, buy homeowner’s insurance, replace the roof), most people at this age are not putting retirement at the top of their list of stuff to spend money on.

Couple this with having a family, paying for child care and health insurance – and saving for retirement suddenly sounds like a luxury expense.

Hope is not lost. You can pay your bills and still think about the future. It just might take a little discipline and planning. Here are three things you should do in your 30s.

  1. First, take advantage of employer-sponsored retirement plans, like 401ks. When you use pre-tax money to fund your account, you get to make interest off that money – so it’s kind of like turbo-charging your savings. Sure, you’ll have to pay taxes on your 401k when you withdraw money from it (after you turn 59 ½), but you don’t have to pay back the money you made off of those taxes.
  1. Second, now’s the time to pay off debt. Get rid of high-interest loans and credit card bills first. Next, pay off student loans and any low-interest loans. By getting rid of debt, you’ll free up money you can use to invest in your 401k or IRA.
  1. Finally, pay yourself first. Before you fund your kids’ college accounts, splurge on a vacation or buy a new car – set aside money for retirement. Your future self will thank you.

40s

With about two decades of work experience – and hopefully some retirement savings in the bank, you are probably making more money now than ever before. This is a great time to set some retirement goals. You might want to create an age target and set up a strategy to make sure you’re on course to meet that goal.

If you’re lucky enough to have disposable income, now’s the time to dispose of it in a 401k or IRA account.

If you make enough money to max out your 401k for the year – which is $18,0002, you can invest additional money in a tax deductible or Roth IRA.

  • Set up a time to talk with a professional. Make sure you choose one who is certified, a fiduciary and comes with high recommendations.

Explain your goals and make sure he or she is willing to take an active role in achieving those goals. What that means is you probably don’t want someone who forgets about you until you call them five years later.

50s

Hoorah! You are at the home stretch. This can be an exciting – or very scary – time, depending on how you have managed your finances. If you haven’t done a great job so far, don’t worry – you still have time to avert disaster.

If you have paid off your house, try not to accrue any more debt. Don’t be tempted by a second mortgage to help you finance a kitchen remodel. Your house should be sacred as you near retirement. A paid-off house is doubly blessed as you don’t have to worry about big monthly mortgage payments – or where you’re going to live should you run low on money.

Clearly, you want to sock away as much as you can – so keep your eye on the prize, and cut out any unnecessary spending.

For those who have done a good job saving, be sure to meet with a professional at least once a year. If you need help or are looking for a second opinion, we can help with that. Why? We believe that as you near retirement, you should adjust your savings to decrease your exposure to the market.

When you’re in your 20s you can afford taking risks because you have time to recover. In your 50s, however, we believe that you should protect your principal and be more conservative with your money.

Now that you have a guide for handling your money at every age, pass it on. Share this information with your friends, children, parents and spouses. Getting money confident begins with knowledge and ends with good habits that put ideas into action.

 

1http://zillow.mediaroom.com/2015-08-17-Todays-First-Time-Homebuyers-Older-More-Often-Single
2https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits

 

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Money Confidence for Nurses: Take Control in 5 Easy Steps

When it comes to being tough, smart and capable, female nurses (and women, in general) have proven they can be all three–and then some. Women are more likely than men to have a college degree1, women outlive men2  and women bring less credit card debt into relationships3.

But despite these powerful tendencies, women get tripped up when it comes to retirement planning.

Nurses Can Tackle Medical Emergencies, So Why Not Finances?

According to a recent survey “Money FIT Nurses Study” by Fidelity Investments, more than half of nurses lack the confidence to make financial decisions4. Given that about 90 percent of nurses are women5, it’s safe to assume that the people without financial grit are mostly female.

Women aren’t scared of money – in fact, 80 percent of household-buying decisions are made by women.6

Women are savvy with getting deals, they price compare, clip coupons and frequent discount websites to save a few dollars. So why do so many women – and nurses, in particular, have a hard time dealing with their financial future?

A Big Problem, With Even Bigger Consequences

The bottom line: there’s no one-size-fits-all answer. For some women, financial decisions might be left to their husbands, while others blindly trust their financial advisers – often too scared to ask questions or be proactive with their money.

For nurses, taking care of financial business can be tricky. Many nurses report not having the time to devote to retirement planning. After all, who wants to sit down in front of a spreadsheet filled with numbers on a day off? Not many people.

But, if you devote some time to understanding your finances, you can change the outcome of your retirement drastically. In short, it’s worth the challenge, because the reward is huge.

Let’s take a look at how you can get a grip on your retirement investments in 5 easy steps.

STEP 1: SET A RETIREMENT AGE GOAL

The first step in retirement planning is knowing when you can retire. The operative word here is “can” because some people may need to work longer due to limited financial resources.

  • The earlier you begin saving for your retirement, the better off you’ll be.

As you get closer to retirement age, adjust your exposure to risk.

  • If you have more than 30 years until retirement, then you can afford to gamble with riskier retirement vehicles – since you have the time to grow your money.
  • Those who are nearing retirement want to focus on safer instruments so that they won’t have a disruptive impact on your savings. 

STEP 2: MAKE A BUDGET

A thoughtful budget is your spending blueprint for retirement. Here’s where you’ll figure out how much money you need for:

  • Fixed expenses (mortgage, health insurance, car payment, loans)
  • Variable expenses (food, gas, entertainment).

Your fixed expenses usually don’t fluctuate from month to month, whereas variable expenses can change.

TIP: Be practical with your budget – don’t underestimate your spending, otherwise you might find yourself in a pickle after you retire.

STEP 3: UNDERSTAND YOUR RATES OF RETURN

If you want to live off your retirement savings, then you have to understand rates of return. Seriously. Although the sound of “rates of return” is enough to put you in a deep sleep, it’s important to get a basic idea of what this means.

  • In today’s market, a reasonable rate of return for a 30-year Treasury bond is just 3 percent. This means if you have $1 million invested in bonds, your yield will be about $30,000 per year. 7

STEP 4: SEEK HELP FROM A RETIREMENT INCOME PROFESSIONAL

Now that you’re equipped with the building blocks of your retirement plan, it’s time to talk to a pro. A retirement income professional will help you come up with a sound strategy for executing your retirement plan. Like any other profession, not all are created equal. Some will be proactive and invested in your financial health, while others will operate on autopilot. You don’t want the latter.

What to watch out for in a financial advisor:
  • If an advisor promises sky-high returns, a red flag should raise.
  • Is your financial advisor a fiduciary? It means he or she has pledged to operate to the highest ethical standards. Much like the nurse’s “Nightingale Pledge,” fiduciaries have a “duty to care” about their clients’ investments, which includes monitoring their financial situation along with investments.
  • Finally, you can find out if your adviser has had any rulings against him or her through a simple SEC search. This will take just a few minutes and can save you a lot of time and headache down the road. 

STEP 5: DO A YEARLY CHECK-UP

Like your patients, you’ll want to make sure your investments are on track each year. As you get older, it’s smart to check on the following:

  • Asset allocations: Are they still on target for your retirement goals?
  • Risk analysis: As the seasons change, so does your risk tolerance level. It’s important to assess your risk tolerance yearly, and shape your retirement income strategy accordingly.
  • Ensure your beneficiaries are up to date

Keeping track of your retirement accounts is part of your financial health. Even if you have a great financial advisor, ultimately the responsibility is on you to make sure everything is running smoothly and heading toward your goal: a happy and healthy retirement!

 

 

1http://blogs.census.gov/2015/10/07/women-now-at-the-head-of-the-class-lead-men-in-college-attainment/?cid=RS23
2http://www.bbc.com/future/story/20151001-why-women-live-longer-than-men
3https://www.nerdwallet.com/blog/credit-cards/debt-and-relationships/
4https://www.fidelity.com/about-fidelity/individual-investing/more-than-half-of-nurses-lack-confidence-in-making-financial-decisions
5http://nurse.org/articles/161/Male-Nurses-And-The-Profession/
6https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/empowering-women.pdf
7http://money.cnn.com/data/bonds/

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Retirement Planning for Nurses: By the Numbers

As nurses are earning more than ever before, they’re also working past retirement age. Here we explore why nurses are facing a financially shaky future and how they can change their course.

4,011,911 Professionally Active Nurses in the US Today1

There are more than 4 million working nurses in the United States today. That’s almost twice the amount of lawyers and doctors combined. On the front line of patient care, nurses are expected to be compassionate, strong, smart and in control every second they’re on the clock. Lives depend on their abilities.

Average Salary of Registered Nurses: $71,0002

But what happens when it’s time to retire? Who is watching out for their well-being and security?

The answer is not black and white. While many nurses have access to retirement products through their employers – like 401ks and pensions, they don’t always have the time to understand them.

56% of Nurses Report Not Being Confident in Investing Their Money3

An eye-opening report by Fidelity showed that 56 percent of 356 nurses surveyed claimed they lacked confidence when it came to investing their money because they didn’t have the time to learn about it.

Although it seems like a no-brainer to make time for your future financial security, this is easier said than done.

Imagine, for a moment, going on your twelfth straight day of working 10-hour shifts. You have to be alert and on your feet. You’re dealing with sick, hurt and suffering people. You get home late, eat whatever’s around, go to bed and repeat. By the time you have a day off, your laundry is piled up, you have unanswered mail and your spouse barely recognizes you. The last thing you want to do is pore over a bunch of numbers that won’t matter to you for a few more years. This is the life of so many nurses.

The big problem with this, however, is that nurses are pushing back retirement at a higher rate than ever before. Today, 74 percent of nurses are working at age 62 and 24 percent are still working at 69. The median age for retirement, according to a recent Gallup poll, is 66.

Likelihood Of Divorce: 33%4

Compound the problem of busy schedules with other problems, like divorce – the divorce rate for nurses is 33 percent – and it creates a dismal picture for a financially secure future.

How Can Nurses Secure Their Future?

The future does not have to be so bleak. Nurses can enjoy a fulfilling, financially secure retirement – but they must take an active role in their investments and savings.

Four Key Steps In Smart Retirement Planning:

  1. SET RETIREMENT GOALS

Before you do anything, figure out when you would LIKE to retire and how you want to spend your retirement. You have worked hard, you deserve a secure retirement at an age that suits you. In order to get this, you need a strategy – which begins with a goal.

Once you have your retirement age settled and how you want to spend your retirement – i.e. do you want to travel, shop and spend money or will you be happy living more modestly, go on to step #2.

  1. MAKE TIME TO REVIEW AND UNDERSTAND RETIREMENT OPTIONS

This might mean setting up a 401k through your employer or digging deeper into what you already have saved – which brings us to number 2.

  1. TALK TO A RETIREMENT INCOME PROFESSIONAL

Get professional feedback on where you are with your retirement savings and next steps for meeting your goal (your retirement age).

  1. SCHEDULE A YEARLY CHECK-UP

Just like you get your annual medical check-up, you need to get a retirement check-up. Meet with your retirement income professional every 12 months to make sure you’re on the right trajectory to hit your target.

As you near retirement age, you want to reduce exposure to risk and secure your nest egg. A retirement income advisor will make sure this is happening. A bad one won’t even notice if it is or isn’t – meaning, your investments are on autopilot. Be proactive and stay on top of your retirement savings.

1http://kff.org/other/state-indicator/total-registered-nurses/?currentTimeframe=0
2https://www.bls.gov/ooh/healthcare/registered-nurses.htm#tab-5
3https://www.fidelity.com/about-fidelity/individual-investing/more-than-half-of-nurses-lack-confidence-in-making-financial-decisions
4http://www.bmj.com/content/350/bmj.h706

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Surviving Financially When You’re Unemployed

What is it?

When you lose your job, you may have to put yourself on a financial diet. Just as losing weight is simple if you eat less (and exercise more), staying afloat financially is simple if you spend less. Is this process going to be easy? No, of course not. But it can be done with a little self-discipline, some creativity, and a lot of planning.

Plan for a six-month period of unemployment

It’s hard to know how long you’ll be unemployed. You may find a new job within a matter of weeks, or it may take you months. However, it’s best to plan for a worst-case scenario, probably six months. Most likely, you’ll find a job sooner, and you can throw the rest of your plan in the trash. But, if you don’t find a job quickly, at least you’ll be prepared.

Follow the plan

When you’ve come up with a financial plan, stick to it. Like any diet, you’ll be tempted to cheat by spending a little more money than you should. You may even find that as time goes by, you want to change your plan a bit. That’s OK. Your plan is designed to be flexible so that you don’t feel too burdened by something that seems unworkable.

Adjust your expectations

No, finding a new job is not going to be easy

First, despite the number of appealing job ads you see in the Sunday paper, finding a new job is not going to be easy. Even if you’re one of the lucky few that’s working in an occupation that’s in high demand, finding a new job is probably going to take at least a few weeks and maybe months. Your job search may look something like this:

  • Week One: Send out ten resumes, and wait for the phone to ring.
  • Week Two: Send out ten more resumes, and wait some more.
  • Week Three: Send out five resumes for jobs you really want and five for jobs that you really don’t want. The phone rings. It’s your mother.
  • Week Four: The phone rings. Then it rings again. You line up two job interviews. You send out three more resumes.
  • Week Five: You have two interviews, and send out five more resumes. You’re called for a second interview at one of the jobs.
  • Week Six: Good news! You’re hired! Bad news: You can’t start for two more weeks.

As you can see, even a successful job search can take a while, even if you’re a good candidate in a good job market. Prepare yourself for this by drawing up a financial plan as soon as you lose your job.

Expect that life is going to change

When you lose your job, you probably won’t be able to live the same way you lived when you had a job. If you try to live the same way, there’s a good chance you won’t survive financially. If you’re unemployed for only a few weeks, your life might not change radically. Perhaps you’ll only need to spend a little less on groceries, go out to eat once every two weeks instead of once a week, and then dip into your savings account. But if you’re unemployed for months, or if your basic living expenses are high, you’re going to have to take a more radical approach to survive. You may have to sell your house, your car, or take a temporary job. Prepare yourself mentally for this.

Map out your priorities

How desperate are you?

Desperation can trick you. Things that you once said that you’d never do, seem more and more appealing as time passes and you can’t find a new job. When you started your job search, maybe you said “I’ll do anything to survive, but I won’t sell my Jeep!” Four months late, you’re saying, “OK, maybe the Jeep has to go, but I’ll never disconnect my cable.” Hopefully, you’ll never reach the point where you say, “I’ll declare bankruptcy, but only Chapter 13, not Chapter 7!” After all, you do have some pride, don’t you? What are the things you will and won’t do, will or won’t sell to survive financially? At this point, do yourself a favor and map them out.

Remember, diets (even financial ones) don’t last forever

Keep in mind as you plan for unemployment that even though you’re on a financial diet, no diet lasts forever. At some point, you’ll find another job and the crisis will pass. Therefore, you want to be especially careful that the decisions you make now aren’t shortsighted. Do what you can to survive, but only do what you really have to.

Example(s): When Jeff was feeling especially desperate one day, he sold his lawn mower at a garage sale for $75. Two weeks later, he landed a job at a software company, and his lawn had grown six inches. Jeff was forced to spend $350 for a new mower.

Draft a survival budget

The next step is to draft a survival budget. If you currently have a budget, use that as a guide. If you don’t, you’ll have to start from scratch by listing all your income and expenses. A survival budget is a bare-bones version of a regular budget. What you want to end up with is an idea of what income you need to actually survive. Start by listing your expenses and your post-employment income. Remember to include only expenses that are necessary; eliminate any items that are luxuries or that you could reasonably do without.

Find ways to increase your income

There are many ways to increase your income while you look for a new job, some of which you should look into immediately, and others only when you are truly desperate.

Unemployment insurance

One of the first places you should look for income when you lose your job is your state’s employment office. However, you can only receive unemployment benefits if you meet certain eligibility criteria. Mainly, you must be involuntarily unemployed. This means that if you’ve quit your job, you have no chance of receiving unemployment benefits, but if you’ve been laid off or fired (but not for misconduct), you should definitely check into it. Benefits and regulations vary from state to state, so it’s hard to say how much you’ll get. But if your application is approved, you should begin receiving benefits quickly, often within a week or two.

Severance pay

You may be eligible for severance pay if you are laid off. How much you receive will depend upon your employer’s policy. You may have the option of receiving a lump-sum payment or a continuation of salary. If you take a lump-sum payment, you’ll have immediate control over your money, but you may lose your employee benefits. If you take a continuation of salary, you may keep your benefits, but you’ll have to trust the company that laid you off in the first place to stay financially sound.

Savings

If you’ve planned ahead, you may have an emergency fund set up that’s equal to three to six months of living expenses from which you can borrow when you need to supplement your income. This is a great source of income … if you have it. Many people don’t, and are surprised to see how fast a savings account can be depleted when it’s used as a source of funds for everyday expenses.

Credit insurance

You probably don’t have credit insurance that will make your bill payments when you’re unemployed. However, if you have any doubt, call your mortgage company, or credit card companies to find out or check your billing statements. Perhaps you inadvertently signed up for such protection, which adds a few dollars to your payment every month. However, you may have to wait for a while before receiving benefits.

Part-time or temporary job

If you get a little more desperate, you should think about taking a part-time or temporary job to supplement your income. This may be a good idea for two reasons. First, you’ll feel less stress if you know that you have at least some regular income coming in. Second, you may even be able to parlay a part-time or temporary job into a full-time job, or gain experience that will help you in your job search. Third, you’ll be able to schedule interviews relatively easily, if you can decide where or when you want to work (as you can with many temporary assignments). Even if you take a job that you feel doesn’t have career potential, you’ll feel better just doing something besides sitting around the house worrying.

Have a yard sale

Depending upon what you have to sell, having a yard sale can be quite lucrative. If you look around your house, you’ll be surprised at how much you own that you really don’t need. Make a list of things you want to get rid of, and list them in order of priority. If you’re really desperate or if you don’t care about an item, price it accordingly. If you don’t want to sell it unless you get a good price, keep that in mind as well. Also consider consigning items at a shop if you have specific things to sell.

Sell your house, or rent it

As a last-ditch attempt to remain solvent, selling your house can be advantageous if you can raise a lot of cash this way and if you want to reduce your monthly cash outlay over the long-term. It’s not a good short-term way to raise cash because it will take time to implement, and it has long-term consequences. After you accept an offer on your house, you could have trouble if you change your mind, and the impact on your family will be far-reaching. If you want to temporarily reduce what you pay for housing, however, you may want to consider moving to an apartment (or cheaper housing) and renting out your home for a year or two.

However, any decisions you make in this area should be made carefully, and only after considering the true cost of your decision and how much you can actually get out of the deal.

Withdraw money from your tax-deferred retirement account

Withdrawing money from your tax-deferred retirement account (e.g., an IRA or employer-sponsored retirement plan) is an option you should consider only as a last resort to avoid bankruptcy. In general, any money you withdraw from a tax-deferred retirement account will be taxed as ordinary income for the year in which you make the withdrawal. In addition, you may have to pay a 10 percent penalty tax for early withdrawal if you’re under age 591/2. The IRS allows exceptions to the penalty tax under certain conditions, however.

Tip: If you are considering taking funds from your IRA or retirement plan, you should consult a tax advisor regarding the specific tax treatment of your withdrawal, because not all of it will necessarily be taxable. For example, if you have ever made nondeductible contributions to your traditional IRA or after-tax contributions to your employer’s plan, a portion of your withdrawal may not be subject to tax. Also, qualifying withdrawals from a Roth IRA are totally tax free, and even nonqualifying withdrawals may not be fully taxable (since Roth IRAs are funded only with after-tax contributions).

Borrow from the cash value of your life insurance policy

If you have a life insurance policy with cash value, consider borrowing the cash reserves. You’ll have to repay the money, but not right away.

Borrow from relatives

Borrowing from relatives can be difficult. Not only will you have to put aside your pride, but you’ll also have to contend with the consequences. Your relatives may be generous, but there’s a chance that their generosity will backfire. What if you can’t pay the money back? What if you eat out one night? Will they secretly (or vocally) hold this against you? If you do borrow from a relative, clearly outline the terms of the loan in writing, if necessary. That way, you’ll reduce the chance for a future conflict.

Reduce expenses

Increase deductibles on auto insurance

Check with your insurance company to find out how much you could save per month on your auto insurance premium if you increased your deductible. However, remember that if you get into an accident, you’ll have to pay the deductible out of pocket. Will you be able to come up with a large amount of cash while you’re unemployed? Balance the risk with the benefits.

Sell your car

While many people consider a car to be a necessity, you may be able to dramatically reduce your monthly expenses by selling yours–they are expensive to drive and maintain. Not only do you have to pay for gas and upkeep, but in many cases, you also have to pay insurance premiums and monthly car payments. This can add up to several hundred dollars per month–money you could really use when you’re unemployed. Keep in mind, however, that if you have a loan on your car, you might owe more than your car is worth; if you sell your car for less than the loan balance, you’ll still have to make payments until the balance is paid off (or take out another loan to pay off the car loan balance). Also, if you get another job, you may need to buy another car, and many lenders require a certain length of employment before they give you a loan. Investigate your options thoroughly before you sell your car.

Selling your car may also be a good way to raise a large amount of cash quickly. This will depend, of course, on whether you own your car, whether you have a loan for it, and what your car is worth. Again, this is a decision to make carefully. If you have a loan, call your bank to find out the procedure to follow, because until your bank releases the title, you don’t really own the car. They can also tell you the book value of your car and your loan balance. If you own your car outright, research its value at the library or on the Internet, and decide what price to charge.

Negotiate with your creditors

If you find that you’re having trouble paying all your bills, seriously consider negotiating with your creditors. Assuming that you have good credit, you may find it relatively easy to reduce the interest rates on your credit cards, skip a payment or two on your car loan, or reduce your monthly payments temporarily. To do this, you’ll have to put aside your pride and admit that you’re having financial difficulties. You’ll be in a much better negotiating position, however, if you call your creditors before you get into financial trouble. Some creditors will turn you down, but most will negotiate with you. If you wait until you’ve already missed more than one payment and the creditors are calling you, you’ll have more trouble making your case. If you need help negotiating with your creditors or managing your debt, you may want to call a nonprofit credit counseling organization, such as the Consumer Credit Counseling Service (CCCS). For further information on CCCS, call (800) 388-CCCS.

Caution: If your creditor agrees to let you skip payments or pay reduced amounts, honor the terms of your agreement, and keep in close contact with your creditor’s representative. Otherwise, your good credit may be ruined.

Discontinue discretionary expenses

You probably pay for a lot of things you don’t really need. For instance, think about canceling magazine subscriptions, extra phone services, credit cards you don’t use that have an annual fee, health club memberships (if possible without incurring a large cancellation fee), auto club memberships, cable television, and Internet service (although this can help you find a job). You may even save a few dollars a month by switching banks if you currently pay monthly checking fees. Every little bit helps.

Tip: If you’re billed annually for some of these things, you won’t save any money unless you cancel them at renewal because you won’t ordinarily get a refund.

Limit long-distance calls

If your long-distance bills are high, put yourself on a phone budget. Vow to spend no more than a certain amount (say $25 a month) on long-distance. To keep track of your calls, keep a notebook next to your phone so that you can easily see when you’ve reached your limit.

Strategies to consider if you have more time to prepare

Often you lose your job with little warning. However, if you’re being laid off or plan to quit your job, you may have time to save money for unemployment by using the following strategies.

Establish a home equity line of credit

If you have enough time, consider establishing a home equity line of credit, if you have enough equity in your house (20 percent is often the minimum), and if you can find a bank that will loan you money without charging you closing costs. With a home equity line of credit, you’ll pay interest only on the portion you use. However, the bank may charge you an annual fee or require that you take a certain draw on the line up front. You may even be able to use the line to pay off credit cards or loans that carry a higher interest rate, and consolidate your debt. You’ll still have to make a monthly payment, however, so make sure you’ll be able to afford it before you put your house on the line. In addition, beware when lenders claim that your home equity line of credit will be tax deductible. Although this may be true in many cases, you should consult your tax advisor to find out whether it will be true in your case.

Caution: Use caution when using your house as a debt management tool. If you can’t pay your loan back, you may lose your house.

Reduce contributions to retirement or education funds

Once you know you are going to lose your job, stop contributing to any savings plans that you’ll have trouble accessing, or that aren’t necessary. These include retirement funds, education funds, and Christmas club accounts.

Decrease your withholding

Consider increasing your withholding allowances to reduce the amount that is taken out of your paycheck. Deposit this extra money in a savings account. Of course, be careful that you don’t claim more allowances than you are entitled to. When you get a new job, you should look at your tax liability for the year. It’s possible at that time that you’ll have to increase your withholding to make up the difference.

Plan a financial strategy

Once you’ve mapped out your priorities and drafted a bare-bones budget, you’re ready to come up with your own six-month financial strategy. After you’ve formulated your own strategy, post it somewhere (maybe on the refrigerator) where you can use it everyday to chart your progress.