As I never advise clients to do, I am now telling them if they have fear of losing a job, have little money saved and own a home, consider draining the equity in your house FAST. While you have a job, apply for a mortgage, close and sock the money away. I say this after receiving five phone calls last week from friends freaking out about the possibility of losing their jobs.

 

Here is the deal:

·        8 out of 10 people fear of still losing their jobs

·        4 of those people might

·        7 out of 10 people do not have enough money to live for the next year

·        6 out of 10 people have a house

·        3 of those people have equity in their homes that they can tap into

Okay, I made all those numbers up, but they sound about right. Sad but true, if you might lose your job and cannot carry yourself for the next year, you have to face reality and make a plan.  How much money do you have socked away and how long will it last covering your expenses?  If you do not have enough liquidity, and have some equity in a home, grab it while you can.  You might not be able to find second mortgage nowadays, but you can try to refinance and pull the equity out.  If you can tap into it, then do it now and take the cash and put it in a money market fund, in case you need it. You can always take the cash later and pay down your mortgage. Yes, you have to pay it back monthly, but this will be part of your monthly expenses. Just note, this goes against everything I believe in as far as being lean in debt, but these are scary times ahead. So, while you have a job, apply for a loan because after you lose it is too late.

FYI:  if you have a HELOC, do not think that it is safe. Many lenders are freezing the lines of credit and people cannot pull it out when they want it. I got a call from a friend and client that had his line with Chase decreased last week.  He was shocked because he lives in a very affluent town, which the bank deemed as “declining in value” and lowered the available credit.  He has a good job with a very prestigious company, but there are no bonuses this year and let’s face it, everybody is expendable now! He should have drained the available line left and put the money in the bank. The lender could not have lowered it if it was used up, and could not ask for it back.  So, he is going to another lender to get a new line and pulling all the money out to keep on the side. Just in case.

Are you ready for your just in case?

Dale Siegel