WASHINGTON -- I need to make a clarification on a column I wrote recently on determining your net worth. I had substituted the word “equity” when I meant to say “value” in calculating how much of an asset you have in your house. Your net worth is determined by adding up all your assets and deducting all your liabilities. With your house -- the greatest source of many people's wealth -- you deduct the amount you owe on your mortgage (liability) from the approximate fair market value of the property. If the resulting number shows your house is worth more than you owe, then that equity in the home becomes an asset.
    
It's important to clarify this point because a lot of people have never calculated their net worth, either because they don't know how to do it or they're scared to face the fact that their debts outweigh their net wealth. There's also another reason to get this calculation right. When you take the time to list your assets, the exercise helps you see just where you might be able to find extra money should you lose or quit your job.
    
Where would you get the money to sustain your household during a time of unemployment?  That's what one reader, Carol, wanted to know. She wrote: “I am 45 years old and between jobs. I need some money for a few months. There are two places I have money, two CDs and the other a Roth IRA. Which would be the best place to withdraw the money first?''
    
I asked Ernest Burley Jr., a Maryland-based certified financial planner, to help answer Carol's question. It may seem obvious, but Burley said to first use money you have in any regular savings, money market or checking account. If you have a cash emergency fund, this is the time to tap that asset. After all, isn't that why you saved it in the first place? There are no penalties or consequences for using your cash, although you might end up with some banking charges if you have an account that requires you to keep a certain monthly minimum balance.

 
    
The next place to look for money would be any cash you've built up in a life insurance policy, Burley said. However, before withdrawing this money, carefully read your policy to check for any stipulations. If you don't have any cash savings or cash value life insurance, then it's time to cash in any certificates of deposits. Of course, if you close a CD before the maturity date, you'll likely be accessed a penalty. The penalty depends on the institution and the length of the CD.
    
For example, if you open a six-month CD and have to withdraw the money early, you may lose 90 days worth of interest. On a CD with a 12-month or longer maturity date, you may forfeit six months of interest. If the account hasn't been open long enough to earn interest, the penalty could be deducted from your principal. OK, so you don't have any cash, CDs or cash-value life insurance. At this point you may be forced to tap into a home equity line of credit. You shouldn't draw down on this money first because if you're unemployed, you need to limit any new debts.
    
“Every homeowner should have a home equity line of credit in case of emergencies,'' Burley says. “Get it while your credit is good and your income is stable for the best offer. It just sits there as a free safety net until used.''
    
If there is no other source of money you can tap, then -- and only then -- should you consider withdrawing money from a Roth IRA, 401(k) or other similar tax-advantaged retirement account. If you do find yourself in dire straits and eyeing this pot of money, there's still a pecking order on which account to withdraw from. Let's say you have money in a Roth IRA and a 401(k). Take the money out of the Roth first, Burley advises.
    
Because Roth contributions are made with after-tax dollars, you can withdraw your original investment (principal) without a penalty. In other words, your contributions -- not earnings -- are not subject to taxation or the 10 percent penalty the IRS assesses on early withdrawals from other retirement savings accounts. Pre-taxed money contributed to a 401(k) is subject to taxes and a penalty for early withdrawal.
    
Whether you have funds in a Roth or a 401(k), withdrawals from these accounts should be your last resort. Yes, you can replace the money but you can't make up the time in which those funds could have earned a return.
    
“Always take money from non-tax-qualified areas first,” Burley said.
    
The time to plan for an emergency, such as a job loss, is when you're not in the middle of the crisis. Some of the tips Burley gives require forethought. Maybe if you determined your net worth, you would realize you don't have much at all to tap should you lose your job. Perhaps that will motivate you to create more net wealth.

Listen to Michelle Singletary discuss personal finance every Tuesday on NPR's “Day to Day.'' To hear her reports online go to www.npr.org. Readers can write to her c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Her e-mail address is singletarym@washpost.com. Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.
    
(c) 2006, Washington Post Writers Group