You don't need statistics to tell you that Americans are anxious about their finances. Keep the worry out of mortgages by following these three suggestions.

Americans are worried. According to a recent report by the Rockefeller Foundation, 93 percent of households suffered a minimum of one "substantial economic shock" between March 2008 and September 2009. And, in the summer of 2010, more than 70 percent of Americans were worried about losing their jobs.

The only way to stop worry from ruining your daily life is to make sure that you're fully protected from financial catastrophe. Here are three tips to protect yourself from a mortgage meltdown.

Create an emergency fund

Protect yourself from the anxiety of potential lost income by making sure that you have savings to cover your expenses, including your mortgage payment, in case you lose your job or are unable to work. Financial advisors recommend setting aside three to six months of living expenses in a liquid account to cover this possibility. Obviously, the more money you can sock away, the better position you'll be in if something unexpected occurs. This money should be in a liquid account, like a money market or bank savings account. Don't put it in the stock market, where a down cycle could wipe out a significant percentage of these funds.

Choose an affordable mortgage

One of the major lessons learned during the current mortgage meltdown was that you shouldn't take on more mortgage than you can afford. Many homeowners overextended themselves by taking adjustable-rate mortgages (ARMs) with low teaser rates, assuming that they could refinance when these rates expired. These people were shocked when home values dropped and mortgage loan money became harder to access. As a result, many of them lost their homes to foreclosure. If you know you can afford your mortgage from the get-go, you'll avoid this unpleasant scenario.

Tread carefully with second mortgages

If you have accumulated equity in your home, it's often recommended to tap into it in the form of a home equity line of credit (HELOC). It's not a bad idea, because you'll have an extra cushion in case you run into financial problems. However, be careful not to abuse it. Avoid using it for lavish vacations, or to consolidate debt, or to buy things that you really can't afford. If you do, your credit line may no longer be there when you really need it.

There's no need to worry about your mortgage payments if you have things under control. Choose a mortgage that you can comfortably pay for the term of the loan. Save like crazy for an emergency fund that you can draw from if you have a financial setback. Open a HELOC as a last resort credit line, but withdraw money only if you have to.

With these lifelines in place, you can join the minority of Americans who aren't worrying about their finances, and enjoy a worry-free life.

Published on December 23, 2010