First Responders

Dennis Friedman

MY DOCTOR TOLD ME that my white blood cell count has been trending lower for the past five years. He was concerned there was something going on with my immune system and wanted me to see an oncologist.

The oncologist performed a number of tests and couldn’t find anything that would have caused my condition. He wasn’t concerned about my ability to fight off infections because my absolute neutrophil count was in an acceptable range. He went on to explain that neutrophils are one of the most important types of white blood cell, because they’re a first responder to any infection. They can travel through the walls of blood vessels and tissue to combat injury and illness.

That got me thinking about other parts of my life—and I realized there are financial neutrophils, which also act like first responders. They come in different forms: a financial asset, an insurance policy, your spouse, a best friend. Their job is to combat those unexpected expenses that threaten your financial security. To do this, they need to be readily available, so you can deploy them at a moment’s notice.

According to a 2015 report by the Pew Charitable Trusts, 60% of households experienced one or more financial shocks over the prior 12 months, with the most expensive shock typically costing $2,000. Pew defines a financial shock as an unexpected expense, such as a job loss, injury, illness, death, or a major auto or home expense.

The best first responder against a job loss, as well as an unexpected household or auto expense, would be a six-month cash emergency fund that would cover your living expenses. This would allow you time to find another job and pay for any major repairs. If necessary, you can also use money from a Roth IRA, because you can withdraw your contributions at any time without paying taxes or penalties.

The Kaiser Family Foundation found that 26% of U.S. adults had difficulty paying their medical bills over the prior 12 months. This number includes people who have health insurance. High medical expenses can lead to financial bankruptcy. The best first responders against an injury or illness would be a combination of health insurance, a health savings account, disability insurance and a six-month cash emergency fund.

Here are some other first responders you might deploy when unexpected expenses hit:

  • Term life insurance offers low-cost financial protection, should your spouse or significant other die.
  • Home and auto insurance can help protect you from natural disasters, such as floods, fire, earthquakes, hurricanes and tornadoes.
  • A personal umbrella liability policy provides added protection against legal claims made against you.
  • A home equity line of credit and a credit card with an available balance can help cover major expenses when you’re short on cash.

And don’t forget family and friends. They can be a valuable resource in protecting you from unexpected costs. According to a Wall Street Journal article, “an estimated 34.2 million people provide unpaid care to those 50 and older. These caregivers, about 95% family, and long the backbone of the nation’s long-term care system, provide an estimated $500 billion worth of free care annually.” Having family and friends nearby, who are willing to provide assistance at times of need, can save you thousands of dollars.

First responders are not intended to grow your portfolio, as a stock would.  Instead, they protect you from sacrificing your financial future for an unexpected major expense. They can also help you avoid bankruptcy. They make you feel safe and secure, offering invaluable peace of mind.

Dennis Friedman retired at age 58 from Boeing Aerospace Company. He enjoys reading and writing about personal finance. His previous articles include Truth Be ToldMind Games and Looking Forward.

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