The best laid plans can and will go astray. Even if you’re on top of your emergency fund, debt payments, credit cards etc. you still have a chance of taking a big hit should you run into a situation where you can’t work, you’ve not saved enough for when the stuff of life happens.
Most financial advice is about planning for such events, but what happens in the midst of an event? What do you do when it seems there’s no end in site?
1. Pull together an honest assessment
When you’re suffering through medical expenses or are staring at the invoice for thousands of dollars worth of home repair bills, it’s easy to feel overwhelmed. In these moments our minds often jump to conclusions and assess our financial picture by how we feel rather than the nuts and bolts of what we owe and what we have.
It’s important to sit down, look at the costs and understand how much debt you’re about to bring on yourself or what costs are actually sitting before you.
2. Understand the timeline
Many financial emergencies are accompanied by a timeline in that you’re given some structure for when payments need to be made or at least a payment plan established. Figure this out. Call the companies or individuals you owe and ask when they’ll need you to get things prepared for them. This might be a good time to admit you’re struggling and will need as much time as they can give you.
Write it down.
Create a calendar for yourself with specific costs. Once it’s in front of you the mysterious monster of your financial crisis that was once smoke and mirrors now has a form that you can attack.
3. List Your Priorities
If the sink just exploded in your kitchen and the neighbor found out your fence was built on the wrong line and you’ve hit a water pipe, you may feel the need to fix every problem at once. What you need to do is list out the costs as much as they can be divided:
- Fix the pipes
- Fix the sink
- Repair the damaged tile
- Rebuild the fence
Each of these will probably need to happen in a reasonable amount of time but it’s also likely that you can wait at least a month or so before you rebuild the fence, even if it means finding a temporary situation for your dog in the backyard. Understand your priorities so when you’re needing to figure out how to spend the $1500 in your emergency fund that can’t cover everything, you have a clear plan for where it will end up first.
4. Let people know
We would never suggest shouting out your financial problems immediately to anyone who will listen. There’s a pretty negative reaction to people who do that and we wouldn’t wish it on you. However, letting trusted friends and family know what’s happening to you is a surefire way to find a little help. Maybe your friend realizes they have a perfect backyard to house the dog for a while, or they know a friend of a friend who can help fix the fence for a lot less than the estimate you were given. Maybe they even know of someone who needs help with a project that will provide you some quick extra income.
When you wallow in your individual financial crisis without letting others in, you run the risk of missing out on the best your community has to offer.
If nothing else, letting people know you’re struggling financially will clue them into your stress level, allowing them to give you space, grace or both as you sort through your situation.
5. Make a plan
Now that you understand the costs, have a timeline, have made a list of priorities and have let people know you’re struggling, gather every resource you have together and figure out how you’re going to make this work. Create strategies, find costs that can be cut for a few months (i.e. gym memberships that can be frozen, the ‘extra’ fund that isn’t essential to your emergency situation) and make as much wiggle room in your budget as possible.
It’s never going to be easy when you’re going through a financial crisis. You’ll likely feel angry, stressed and incredibly overwhelmed by the task of paying for emergencies you weren’t ready for. Not to mention all the emotions that accompany whatever emergency you face.
Ignoring the problem will not make it go away and in the case of your finances, will definitely make the problem grow. Don’t wait to get started, wait to tell people, or wait to take control. It’s the moments when we don’t respond or stop being active with our financial priorities that we slip back into a lifestyle of emotional and uninformed spending that creates a lifelong financial crisis.
Have you dealt with a financial crisis? What steps did you take to regain control?