Stock market crash is another “fire” if you have your non-retirement money invested: would you need to sell, would you have enough in cash/CDs, if you have to sell after the crash, will you still be OK?

@joruva: “I have a conservative bonds equal my age strategy”
One thing to keep in mind is that bonds aren’t the same as CDs. As badmoneyadvice recently mentioned, it depends what bonds you are talking about. Junk bonds carry as much risk as stocks. Investment grade corporate bonds carry default risk as well as interest rate risk.

For some reason when people talk of diversification, they only think stocks and bonds (as in bond index comprised of a whole bunch of corporate bonds). There are other asset classes out there – real estate, commodities, individual treasury notes and bonds, I-bond, TIPs, CDs and cash. As with everything you get lower return with lower risk, but surely if you want to diversify you need to at least think of other asset classes.

Having the financial fire drill means you’re being pro-active, not reactive. That’s the way it should be.

My wife always remarks that we should “live in the present” and stop worrying about the future. Well, IMO this isn’t worrying–it’s simply planning for something that might happen–which ironically, removes most of the worry.

I’ll be getting started writing a few of my own plans later this afternoon!

However, for me, getting fired wasn’t a blow. It was a relief! It was literally like having a weight lifted. I didn’t know that phrase related to an actual feeling until then. I would have been better off to have had a plan in place at the time…but I have learned quite a lot since then.

Thanks for all your great work!

Also, I’m a teacher and we have had SO MANY fire drills this year. Plus, we just had the “intruder in the building” drill as well.

The whole point of random fire drills is the hope that in the event of a real fire, people will assume that it’s a drill and leave in an orderly fashion instead of panicking. Preannouncing is just plain stupid.

“No one panicked because we always assumed it was a drill, even when it wasn’t. (which puzzles me why all of my employers pre-announced rare fire drills)”

This is because we can trust 8 year olds to not panic and do what they are supposed to do during a fire drill; we can’t trust Average Joe Adult to do the same these days, unfortunately. There’s always someone that takes “I’m an adult, you can’t tell me what to do” way too far and would end up endangering others because they didn’t do what they were supposed to do (or panicked) during a drill. Talk about liability.

I’m going to take a look at my finances tonight and see what a fire drill will tell me.

This certainly has gotten my blood flowing and my brain ticking away. I still have debts and still trying to build my emergency fund, but I could be fired tomorrow… What do I do then?

Good article, Jim!

Planning for the unexpected and being ready helps save a lot of time, stress and money. Great post!

My response plan is a tax loss harvesting (TLH) strategy for many of my index funds should we head for Recession 2.0. For example, I could sell exchange shares of Vanguard S&P500 (VFINX) into Vanguard Total Stock Market (VTSMX). After 31 days I would exchange back. Since the funds are highly correlated I would have roughly the same diversification. And if the market were to make a quick recovery I would still be invested.

It doesn’t work out perfectly for every fund, but it does reduce my investment fears. Unfortunately you can’t TLH in 401k or Roth IRA, but at least those funds have 40+ years before the funds are needed.