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How to Avoid a Financial Disaster

Introduction to the week's theme "How to Avoid a Financial Disaster".

Monopoly Bankruptcy Cartoon

How do you go bankrupt?

Two ways: Gradually, then suddenly.

That inspired bit of wisdom comes straight from Ernest Hemingway's novel "The Sun Also Rises." It's a beautifully simple and accurate distillation of the process by which financial disasters occur.

Sometimes we fall victim to larger forces outside our control, like a job loss or medical catastrophe. Often these financial disasters are, at least in part, problems of our own making. Had we read the warning signs, we would have seen the danger and obvious red flags.

That's what this week's theme is about: personal financial disasters and how to avoid them. We're going to discuss how to identify the "gradual" means by which we create "sudden" disasters.

We'll also discuss some of the most obvious warning signs that you're headed down a path of potential penury. We'll cover some of the basic "dos" and "don’ts" of financial planning. We'll discuss the vitally important role insurance plays in safeguarding your assets - and the financial future of the ones you love. We'll also take a look at student loans and how to press pause on your payments.

Finally, we'll talk about what to do if the worst-case scenario comes true, and financial disaster strikes. We go over some basic principles to work with when beginning the long, slow climb back from the brink. We'll also talk about how the experience can reveal untapped reservoirs of strength and resilience.

Most of us can't exert total control over our financial futures. Even if you're relatively well off, there are few guarantees when it comes to health and wealth.

What we can do is work to put ourselves in the best possible position to avoid financial calamity. And, fortunately, many of these strategies are available to anyone, regardless of your financial situation.

Financial misfortune can cause profound pain. It can fundamentally challenge our own identity and self-belief.

That's why it's critically important to explore the subject from a variety of relevant angles.