Transcripts

"Reviving the Economy: Jobs," -Taking Charge of Your Finances

SUSIE GHARIB: With job losses on the rise, more Americans are focusing on their personal finances. So tonight's "Money File" has some advice on preparing your bank account if you're worried about getting laid off. As we continue our month-long series, "Reviving the Economy: Jobs," here's Gail Marks Jarvis, personal finance columnist at the "Chicago Tribune."

GAIL MARKS JARVIS, PERSONAL FINANCE COLUMNIST, CHICAGO TRIBUNE: In these unprecedented times, even rules of thumb about planning for a potential job loss have changed. In the old days, when it was more likely you could find a job quickly if you lost yours, the rule of thumb was to keep at least three months of living expenses in an emergency fund. Now many advisers are suggesting a full year. In the old days, advisers always said to pay off credit card debt, making that a priority even over amassing an emergency fund. Now with banks and credit card companies yanking away credit, people could find themselves unemployed and without credit cards as a source of a back up. So advisers are saying to build up an emergency fund first while making minimal payments on credit cards. Of course, the best way to build up an emergency fund is to cut out the extras, things you don't really need -- maybe extra phone service or extra cable, maybe dinners out or sell the car that you already can't afford and buy a clunker instead. If you are putting money into a child's college fund or into a 401(k), you could stop doing that temporarily. Instead, put the money into an emergency fund. For flexibility, try putting it into a Roth IRA. These accounts can be used for college without a penalty and if you lose your job, just remove your contributions. There's no penalty. This is Gail Marks Jarvis.