NEW YORK (MainStreet) – It can be as small as the timing belt on your car failing or as big as a recession, but there are big economic obstacles ahead for just about everyone.

It's how you prepare for those setbacks that will determine your financial health going forward.

Susan Tiffany, a spokeswoman and counselor with the Credit Union National Association, advises against speculation and suggests that folks consider the actual cost of potential setbacks. She recommends a series of stress tests that can give you an idea of just how much some of your most-feared events can cost you. For example:

Gas costs $5 a gallon: OK. How many miles do you typically drive each year? How many cars are in your family? How can you modify your driving to reduce miles traveled? What's your fuel efficiency like? Do you have access to public transportation, and how much will that cost? If you usually drive 13,500 miles a year, get about 20 miles to the gallon and have been paying $3.50 a gallon for gas, your costs will go from $2,363 a year to $3,375 — a little more than $1,000 a year or $85 a month.

Your employer stops contributing to your 401(k): Is it temporary or permanent? If the latter, can you increase your own contribution to pick up the slack? What budget adjustments will you make to allow you to do that? Are other obligations — your child's college fund, for example — in good shape? What else can you divert to that college fund?

You lose overtime pay: Did you use OT pay for extras, or basic living expenses? How much debt do you have, and can you do without OT if it's low? Can you refinance a loan — such as your first mortgage or car loan — to recoup lost income?

Kevin Murphy, senior financial services consultant at McGraw-Hill Employees Federal Credit Union in East Windsor, N.J., suggests considering the basics first that when thinking about those worst-case scenarios. Consider the cost of keeping the rent or mortgage paid, the gas and electric on and the family fed and throw as many discretionary items out of the equation as possible.

“When I sit with a member, one of the first things I mention is preparing for the unexpected. Sometimes it's really as simple as consolidating existing debt, creating additional cash flow and putting some funds away — we say putting three to six months in reserve.”

That kind of saving is easy to verbalize, but often difficult to maintain. To prepare for that, Tiffany advises setting a goal for your savings by ranking all the things you're looking to accomplish financially and keeping the end result specific, measurable, attainable, realistic and timely. Once you've made that decision, automate it by using direct deposit, making automated transfers from checking to savings to build an emergency fund and using online bill payment so you pay all bills on time every time. Finally, she advises slowing down spending by literally putting a night's sleep between yourself and a big splurge.

“Less is more: That is the kernel of my personal finance mantra and the core of the advice I give people generally,” she says. “Very oversimplified, but if people do those things consistently, I really believe that they are going to make progress.”

If you really want to tighten the safety net a bit, Murphy suggests making some of the financial resources more liquid for future use. For homeowners, that means making home equity available before it's too late.

“If a member owns a home and they have some equity there, a great tool for preparing for the unexpected is setting up a line of credit,” he says. “You want to set this up when you don't need it, because usually when you need it something has already happened and, odds are, you're not going to be approved for it.”

Murphy notes that there's no cost to open a home equity line of credit and that you won't be paying for it even if you don't use it. He also notes that this is a particularly useful tool for retirees, whose options are a bit more limited than their working counterparts.

Most importantly, however, Tiffany says it's important to get the full picture of your financial situation if you want to stay out of trouble and make progress on your financial goals. That's really not such a hard thing to do, especially if you set a schedule. She suggests monitoring your checking account balance once a week to curb your spending, checking your credit card and checking account statements once a month to prevent inaccuracies and to calculate your net worth and figure out your debt-to-income ratio once a year so you're in good shape if you ever need an emergency loan.

If your situation seems more daunting than that, Tiffany and Murphy suggest forging a long-term relationship with an advisor you trust. Make sure you see eye to eye on your goals and that your personalities don't come into conflict. And even if you form a great relationship with one advisor, Murphy suggests bringing in another every so often for a second opinion just to keep your advisor honest. In any case, an advisor can help fill gaps in your financial knowledge and cover bases you can't.

“Everybody starts from zero,” Tiffany says. “You're not born knowing these things, you're not born having this skill set and you're not born having self-confidence about managing your finances ... If you really don't know where to start, all you need is someone to give you a template.”

— Written by Jason Notte in Portland, Ore., for MainStreet

To follow the writer on Twitter, go to http://twitter.com/notteham.

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

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