by Moe Zilla

Created on: March 15, 2009   Last Updated: September 18, 2009

It may be a medical emergency, an unusually large dental bill, or even a sudden surprising car repair, but sooner or later, there's going to be that one extra, unexpected bill. All of these things can destroy your careful budget, and financial safety requires more than simply earning enough to pay all your bills each month. If you're not prepared, disasters could wipe you out financially. But fortunately, there's some easy ways you can prepare yourself. Here's how...

1. Plan for a Medical Emergency
Half of all bankruptcies are caused by medical bills, according to MSNBC. It's the one unexpected expense that can grow indefinitely, until it's consumed every penny you've ever saved. For this reason, every good financial planner always advises health insurance - and if you're laid off, bite the bullet and pay for COBRA continuing coverage. (After being laid off, you're usually eligible for COBRA for another year and a half!) If you don't have enough insurance to cover medical bills, there are some additional options. Medical emergencies meet the federal guidelines making you eligible for "hardship withdrawals" from a 401K.

2. Save for a Rainy Day
So how can you build up your 401K? Contributions can often be deducted automatically from employee paychecks - and studies have shown that these "automatic deductions" dramatically increase the savings level. Financial planners urge the same strategy on their clients - setting up automatic paycheck deductions to fund college funds for their children, ongoing financial investments, and especially "emergency funds." One trick is to route the money to a separate bank account, which reduces the temptation to spend it. And since the money will be left untouched for years, you can park it in a high-interest savings account - which will increase its value still more.

3. Manage Credit Card Debt
Emergencies are the best reason to maintain a healthy credit rating. In an emergency, it's possible to get a line of credit to cover your immediate bills. This is the first step down the road of debt, so make sure you've got a solid plan for paying it off, and work out a monthly budget. One way to plan for an emergency is to simply pay off your monthly bills on time before they become overdue. In time, your credit rating will reflect your timely payments - and in an emergency, they'll be willing to lend you the money you need.

4. Secret Equity
Many people simply pay off their home mortgages, thinking of it as the ultimate form of security. In an emergency, they can simply refinance their mortgage to extract a little of the cash that they've already paid off. But not everyone realizes that the same trick applies to car loans - if you've paid off a good piece of it, you can sometimes refinance the balance and walk away with extra cash!

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