Resist Borrowing from Your Future

It seems like everyone does it: cities, states, the U.S. government, large corporations and small businesses. If they don’t have cash but need it now, in many cases they borrow it from the future—the promise of future earnings or tax revenues.

They’re not the only ones. Some individuals are turning to drastic measures to cover today’s expenses and are bankrupting their futures in the process.

People who are desperate for cash are selling their life-insurance policies for a fraction of the full policy or are taking one-time payouts for personal-injury settlements that would have been worth more over a long time period. Predatory companies are ready to make a quick buck by charging hidden fees and set-up costs for these products.

Other people are borrowing against the value of their home or are taking early withdrawals from their retirement savings.

Such strategies might get you the cash you need today, but they could cost you more in the long run. Consider these practices for keeping your nest egg intact:

• Focus on the future. Rainy days are inevitable. Have a plan for how much money you want to save for your retirement or other goals and how you’ll make that happen. Save as much as you can now so you’ll be prepared for the future.

• Keep a cash cushion. It’s a good idea to keep anywhere from three to six months of living expenses in an easily accessible account. Consider setting up a recurring transfer from your checking account to a dedicated emergency account to ensure some money is put away every month. You can use the cash on hand without worrying about going into debt.

• Cut back on spending. Take a look at your lifestyle and see if you can make any changes to free up the necessary cash, whether it’s taking small steps such as eating out less and conserving energy or even downsizing to live within your means. Consider selling non-essential items, such as a boat or extra vehicles.

Plenty of options abound for getting cash, and fast, but you should think about these methods only as last resorts.

Spend some time to plan what you would do if unexpected expenses come up and you need the cash to pay for them today. If that time comes, you won’t be as tempted to turn to a quick fix.