You Need a Plan

Unless you’re independently wealthy, you probably need an emergency fund. It can be hard to believe that a job loss might happen, or that your car might soon need an expensive repair, or that you might face a costly health issue, but these things do happen.

One rule of thumb is to have three to six months’ worth of living expenses available, such as in savings accounts, money market accounts or certificates of deposit (CDs). If you think it might take a long time to find a new job, consider socking away a few more months’ worth. You may not earn much interest on these types of accounts, but the money will be there when you need it. (Visit Bankrate.com to find the best available rates.)

Your emergency plan might feature some unconventional strategies, too. If you have little credit card debt, you could plan to charge emergency expenses on your credit card, up to a certain amount. Don’t make it a large or unlimited sum, though, as this is potentially very dangerous. If you’re charged a steep interest rate on a large balance, a bad situation can get much worse quickly.

You might be able to borrow money temporarily from family members or friends.

Alternatively, you might borrow what you need from your brokerage, on margin, with your portfolio as collateral. People usually borrow on margin to buy additional stock, but you can borrow for pretty much any purpose. But note: If you borrow a lot and your stocks suddenly plunge in value, you’ll be hit with a “margin call” and may end up losing some of your stocks. Use margin sparingly, if you use it at all.

As a last resort, you might be able to take out a home equity loan or borrow against your 401(k) account at work.

Unconventional alternatives can help you avoid keeping a sizable chunk of money tied up where it’s not earning much for you. But a more conventional approach, such as investing in CDs and money market accounts, is safer and can help you sleep better.