Transcripts

"Money File"-Financial Plan 911

SUSIE GHARIB: In the money file tonight, now is the time to get your financial emergency plan in order. Here's Terri Cullen, personal finance columnist at the "Wall Street Journal."

TERRI CULLEN, COLUMNIST, THE WALL STREET JOURNAL: Turmoil on Wall Street and fears about layoffs are keeping more Americans awake at night. Rather than fearing the worst, plan for it by shoring up your financial safety nets. If you don't have an emergency savings account, now is the time to get one started. Link your checking account to a high-yielding savings account and then set it to automatically transfer a set amount to your savings account with each paycheck.

How much should you save? Start with a goal of a minimum of three months of income. Sure, it sounds like a lot of money, but once you start saving you'll be surprised how quickly it adds up. After that comes the hard part: resist the urge to spend it. Also consider opening a home equity line of credit, if you don't already have one. Opening a credit line now makes sense even if you don't need to borrow money. The stalling economy means more layoffs to come and getting credit when you're out of work can be difficult or even impossible. Though if you have very little equity in your home or you have bad credit score, you'll have a tough time getting credit even if you do have a job.

With a home-equity line of credit, you can borrow any amount up to a specified limit, just like a credit card. You can borrow as little or as much as you need. Generally you're not penalized if you never borrow against the line, and you only pay interest on any amount that you do borrow. More good news: many credit unions charge no fees to open or maintain credit lines. The combined safety net of a home equity line of credit and a sizable emergency savings account can help you and your family weather a financial crisis in the future and help you sleep easier tonight. I'm Terri Cullen.