Advice on How to Prepare for the Worst

Economic downturns make people feel vulnerable. Tough times remind us how precarious our financial security can be.

You think of the horrible possibilities: You could lose your job. You could get sick with little or no health insurance. You could be forced to tap retirement saving, permanently hurting your standard of living in later years. And even if you hold on to all that, you could see the value of your investments tank.

Amid all the gloom and doom (which I noted in a post this morning), how can you protect yourself? There are a lot of useful suggestions in a BusinessWeek online special report, “Defending Your Money.”

Here are a few highlights:

1. How to cut your property taxes. Writes Will Andrews: After remodeling his house and adding a new kitchen and 20% more square feet to the home’s size, “Our happiness was boundless until we got a letter from the town assessor’s office stating the assessed value of our property had been hiked 37%—and that our property taxes were going to rise nearly 40% based on our new assessment.”

2. David Bogoslaw wrote on positioning your investment portfolio. Among the tips: “The single biggest mistake investors make is over-reliance on their own company’s stock,” according to one source.

3. Ricky McRoskey explains 10 ways to protect that portfolio: cash, Treasuries, TIPS, foreign government bonds, shorter-maturity bonds, options, short-market funds, consumer staples and dividend-paying stocks, corporate bonds and preferred stocks.

4. Karyn McCormack examines the pros and cons of low-cost, limited health insurance, and whether you should buy your health coverage from a TV infomercial star who otherwise sells cleaning products.

5. How you should prepare your finances for the possibility you’ll be laid off or other fiscal disasters. “Financial planners always advise keeping at least six months’ worth of expenses in a liquid account, like a money-market—advice astonishingly few Americans take,” Beth Piskora writes.

6. If you get laid off, Carl Winfield has some tips on how to get the best severance package. And this video has some advice on negotiating a package, as well as useful strategies for holding onto a job.

7. One way to prepare for the worst is to save more, I wrote here. A slideshow lists 25 specific suggestions for trimming spending.

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