Emergency fund can buffer job loss
By DAVID UFFINGTON

Do you consider yourself to be hands-on when it comes to managing your finances? How long could you live on the cash you currently have?

The 4th Annual Quicken Financial Fitness survey reveals that:

+ More than half (56 percent) of those polled consider themselves to be managing their personal finances when they view their bank balances online.

+ 31 percent said they currently have credit-card debt of more than $8,500.

+ Nearly half (48 percent) didn't know their credit score.

+ 60 percent said that they could live for less than three months if they lost their job tomorrow, while 31 percent said they could live longer than six months.

+ Nearly half of those surveyed (49 percent) did NOT have money stashed away in an emergency fund.

Conventional wisdom says that we should have three to six months of living expenses salted away in an easily accessible account in case of emergency. But given the number of people who find themselves out of work for long periods, perhaps that isn't enough. "Emergency" covers more ground than just your normal living expenses - such as mortgage, utilities and food - if you should lose your job. Car repairs, a roof leak and unexpected medical bills need to be included, in addition to living expenses.

Here are two ways to get started on building an emergency fund:

Rolling one-month CD - Once you've saved two months of living expenses, take one month of that and put it into a two-month CD. When you've saved another month's worth of expenses, do the same. At any given time you'll have a month's worth of money on hand and a like amount coming due in a CD. Once you build up your fund, consider investing in a six-month CD.

HELOC - If you're nervous about not having enough in an emergency fund, and if you have equity in your home, consider a Home Equity Line of Credit. Look for one with no annual fees. A HELOC works like a credit card: You don't pay anything until you use it. Depending on the amount of equity in your home, a HELOC could be an untapped source of cash while you're building up your emergency fund.

David Uffington regrets that he cannot personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL32853-6475 or send e-mail to letters.kfws@hearstsc.com.

(c) 2007 King Features Synd., Inc.