Don't let a financial catastrophe derail your finances. Photo: Louise Docker via Flickr.

Financial disasters can be crippling. If you're unprepared, they can lead you to lose your home, declare bankruptcy, or spend retirement barely scraping by. Fortunately, they can usually be avoided with a little planning and action. Here are three critical disasters to avoid.

Having no emergency fund when disaster strikes

It's easy to skip merrily along in life -- going to work, paying your bills, enjoying time with family and friends. And if you have a few thousand dollars in the bank, too, you might think you're all set. You're probably not, though, because as is the case with many of us, you could be just one catastrophe away from financial ruin. Imagine, for example, losing your job and finding that it takes you a long time to get another one. Imagine that you experience a medical crisis or an accident that has you unable to work for a long time -- or that such a development happens to a loved one and you become a caregiver, unable to keep up with your own job. Even a sudden huge car-repair bill can trigger a dangerous chain of events, especially if you have to charge it on a credit card and then find yourself facing 20% interest rates on a growing debt load.

All of us need to have some emergency plan, which often takes the form of an emergency fund stocked with enough money to keep you afloat for at least three months or, preferably, six to nine months. (It's helpful here to think of how long you might be out of work, how quickly you tend to find new jobs, etc.) The fund should be able to cover mortgage or rent expenses, food, insurance, transportation, and other necessities. Keep that money accessible by putting it in short-term CDs or a savings account. Parked in stocks, it might grow faster, but it might also temporarily plunge in value just before you need it. 

Life insurance is just one of many kinds of insurance you probably need.

Having no insurance when disaster strikes

Buying or maintaining insurance can be an easy thing to put off, but you do so at your financial peril. Hard as it is to imagine, you or your spouse really could die at an early age, leaving the other to take care of your home and/or dependents. If anyone depends on you financially -- your partner, children, parents, or even nephews or nieces -- you need life insurance. It can be a relatively inexpensive term policy, too, rather than a multimillion-dollar whole-life policy.

By maintaining your insurance, I mean reviewing it regularly and optimizing it. For example, don't go several years without checking to see that your home insurance is still sufficient. If building costs have skyrocketed, the protection you're paying for might not be enough to rebuild your home if it burns down. If you comparison-shop for home insurance, don't just take the lowest quote if it's offering you less protection than you really need. And continue to shop around even once you have coverage. If you make a few calls to different insurers whenever it's time to renew an insurance policy, you may find that switching to a different company can save you hundreds of dollars for the same coverage. This happens more frequently than you might imagine.

Comfortable retirements don't usually just happen. You need to plan them.

Having insufficient retirement savings

Another devastating financial disaster is arriving at retirement with insufficient funds. Social Security is great, but it currently pays retirees an average of about $16,000 per year, which is hardly enough for most of us to live on. Thus most of us need to be saving and investing for our golden years throughout our working lives -- and doing so aggressively if we start late, as many do. That old rule of thumb that you should sock away 10% of your income may not suffice, and many people would do better to save 15% or even 20% if possible. If you somehow end up with more than you need, your retirement will be extra-comfortable, or perhaps your heirs will rejoice.

Don't leave yourself vulnerable. Build up your emergency fund, fully protect yourself with insurance, and keep your retirement plan on track.