Archive for Thursday, September 29, 2005

Cold cash handy in emergencies

September 29, 2005

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During one of my regular online discussions at www.washingtonpost.com, I received many questions that I didn't have time to answer. Here are a few:

Q: The situation on the Gulf Coast has really opened my eyes about having a good contingency (evacuation) plan, during natural or man-made disasters. I am currently re-evaluating my contingency plan and was wondering about the issue of having money in case I have to leave my home. How much money should you have on hand to cover temporary expenses while evacuating from your community?

A: Some people think it's enough to just have a bank debit card or credit card handy in case of an emergency. But what if power is knocked out and the electronic banking systems go down? During Hurricane Isabel a couple years ago, the power went out in my area for several days. If we wanted to eat at a restaurant, get gasoline or groceries, we had to use cash.

Obviously you don't want to keep a great deal of cash in your home. Keep enough to get you through two or three days. Have enough to fill up your gas tank, buy food, water and basic necessities.

Q: I'm sick of my husband's lack of interest in charitable giving. I have had it. My frustration has come to a head after Hurricane Katrina. This is a man with a net worth over $1 million, albeit with a low cash flow for this particular year. My mother raised eight of us on a nurse's salary and was always on the lookout to help someone in need. His parents, solidly middle class and raising two children with no loss of paycheck, ever, always seemed to need to calculate why they would even give to the church that they only sparsely attended. How do I not get angry at my husband for not being generous of spirit in this especially difficult time?

A: Your husband would do well to follow what Winston Churchill said: "We make a living by what we get, but we make a life by what we give.''

It would be easy to dismiss his lack of generosity as miserly. Instead be generous with your understanding. Talk it out. Explore why your husband is so hostile to giving. Perhaps his home life as a child wasn't as financially secure as you think. Maybe he's scared that money donated to others won't be there when your family needs it. Often people don't give out of fear. Agree to cut other unnecessary expenses if this is important to you. Share your feelings about why you think it's important to be charitable. If he's the practical type, remind him that your donations can be tax deductible.

However, if you really are married to a miser who says idiotic things such as "people need to pull themselves up by their own bootstraps," then at the very least try to get him to devote a mutually agreed upon amount of money from your family budget every year for charitable giving. If he's not at all interested in how the money is distributed, then you can decide how it is donated.

And pass along to your husband this Punjabi proverb: "When a sparrow sips in the river, the water doesn't recede. Giving charity does not deplete wealth.''

Q: I have two credit cards - one that carries a balance of $2,000 with a 13 percent fixed rate and another that has a balance of $8,000 with a 2.9 percent fixed rate. Should I transfer the balances of both cards to one card that has a special offer of zero percent interest until August 2006? I've never made a late payment, but I'm also guessing my credit score isn't so great because of my high debt. Will switching to a new card and canceling my current cards (or just one of them) hurt my credit rating/score?

A: First, stop guessing about your credit score. Find out. If you're going to be applying for major credit - to buy a house, for example - then get all three of your credit scores. It will cost you about $45. Go to www.myfico.com. If you're not going to apply for new credit and just want a general idea of your creditworthiness, then get just one score from any one of the three major credit bureaus.

As far as transferring all your debt to one card, there's a plus and minus to this strategy. The minus - piling up debt on one credit card can hurt your credit score if your balance amounts to more than 50 percent of the available credit limit on the new card. The plus - if you're not going to apply for new credit any time soon, you save money by getting rid of the 13 percent and 2.9 percent finance rates. That may be worth a temporary ding to your score. Another caution: Don't cancel the two credit cards if you've had them for a long time. One of the major factors contributing to a good score is having a long history with a creditor.

Michelle Singletary is a columnist for The Washington Post.

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