Have you just been blindsided by an an unexpected financial emergency and don’t know what to do? Whether it’s a job loss, medical expenses, or an emergency home repair, an unexpected change in your financial situation can be incredibly stressful.
The bills still need to be paid, the utilities need to stay on, and you need to put food on the table, so how should you cope with a financial crisis?
Evaluate the situation
Take a moment to sit down and carefully evaluate your situation.
Running around in panic won’t solve anything and only lead to additional stress. Understandably, you probably have a million things running through your head and being cool and collected is the last thing on your mind, but the ability to carefully evaluate your situation will ensure you make the right choices.
Not all expenses are created equal. There are certain bills that need to be paid before others. Some of the most important items to put at the top of your list should be food and shelter.
Carefully examine all of your expenses and determine which are the most important. Once you’ve established which bills are the most important, you can begin looking for expenses to cut out of your budget.
While it might not be much fun to cut out some of the things you’re used to, it might be what’s necessary to keep you from slipping into an even deeper financial hole.
Find extra money
Ideally, you want to have some money set aside in an emergency fund to help pay for any unexpected expenses, but this isn’t always possible. Where do you turn when you’ve exhausted your savings account?
While borrowing money can provide quick access to cash, it can also come with high-interest rates and a new monthly payment. If you’re experiencing a financial hardship for an extended period of time, you may find yourself in a downward spiral that is nearly impossible to recover from.
Another option could be to check with friends and family. Nobody likes to ask for money, but a little bit of help from a loved one might be all that you need to get through the rough patch. Of course, this can also put a strain on some relationships, so proceed with caution.
Take advantage of available assistance
When it comes to a financial hardship, there may be assistance out there for you. In the event of a job loss, you may be entitled to unemployment benefits.
In addition, when it comes to a job loss, make sure you check in your local community for resources to help you get back to work. You may be able to find workshops or classes that can assist in putting your resume together, polishing your interview skills, and even do some networking to possibly find work.
Planning for the next financial emergency
If you’ve made it through difficult times in the past and want to minimize the impact in the future, there are a few things you can do to prepare. Start with an emergency fund. This is exactly why they are called emergency funds. A good rule of thumb is to have a few months worth of expenses set aside in the bank to help pay for unexpected expenses or pay the bills if you lose your job. Obviously, the more you have saved, the better off you’ll be. But even a month or two worth of expenses saved up can buy you some time while you get things back on track.
You also want to consider insurance. Most forms of insurance are a safety net to cover expenses. If you’re in an accident with your car, you’d want to have auto insurance. When you get sick or injured, you want to have health insurance. And when there’s a fire in your home, hopefully, you have homeowners insurance. But there are even more ways you can protect yourself financially. Disability insurance can help if you become disabled and unable to work. And life insurance can provide for your spouse or children in the event of your untimely death.
Having a plan in place before a financial crisis strikes will take a lot of weight off of your shoulders. Knowing what expenses you have and how you’ll pay for them will make a stressful situation that much easier to cope with.
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