Keys to Surviving a Personal Financial Disaster

It may have already happened to you. You lost your job. You went through a divorce. Someone in your family was seriously ill. You were in an accident. You experienced a flood that damaged your home. I hope it didn’t happen to you and never will. But…what if it happened? Have you ever considered what you would do? How you would cope? The stress, the worry, the pain, and then there’s the financial disaster that usually comes along with it. What would you do?

Keys to Surviving a Personal Financial Disaster

Reality is this: these kinds of things happen to people every single day. I don’t want to scare or depress you, but common sense says that some part of you must be prepared to deal with a crisis if and when it happens. It may be you and your family that go through it or not. But being prepared for it is a way to cope, deal, and survive.

So to prepare way in advance you must have some “go to” ideas just like you do when a blizzard is forecasted. Get the shovel out, buy the salt, shop for groceries, and find the flashlights and batteries. It may be awhile before things clear up!

Have an Emergency Plan

Everyone should have a financial emergency plan in mind. You should have an account set up that you never touch and is for the sole purpose of helping you and yours when disaster occurs. A six month supply for your household expenses is what I recommend. That number will vary for everyone depending on their lifestyle, but it should cover all of your necessities—food, shelter, and utilities. When disaster strikes, no matter what type, you don’t know when normalcy will return, if ever. If you don’t have an emergency fund in place, start one immediately!

Along with your emergency savings, it’s good to have an emergency budget prepared as well. This is your “bare bones” budget including only what you absolutely need to get by. Think ahead about what you can do without if disaster strikes, and then you’ll know exactly how far your emergency fund will last in that type of situation.

Use Your Insurance Coverage

When you become an adult, you must have some forms of insurance as your safety net in case of disaster. Yes, I know it’s like betting that you’re going to lose your health, your house, car or even your life but it’s something you need to have especially if you have a spouse and/or kids. The money you spend on the policies will help you more than you know right now. It will relieve any stress this subject is weighing on you when you know that there is financial help you can count on as a backup. If you don’t have the coverage you need, now is the time to seek an expert who can advise you. Comparison shop when you do as the numbers are not always the same from broker to broker. Insurance types to consider include healthcare, homeowner’s or renter’s, auto, disability, and life.

Before a disaster occurs, read through the policy to understand exactly what is covered. When you file an insurance claim, be sure to submit all the information required and if the claim is denied, find out what’s necessary to appeal the decision.

What happens when money just isn’t there?

When a disaster hits and lack of money is the problem, then use these straightforward strategies:

1. Stop the spending

Think of your life as a big boat with a severe leak below the water line. The only way to begin to recover is to patch the leak and in this case it means to stop any spending on things that don’t fall under necessities…food, shelter, and utilities. Hide away the credit cards and carry only the cash you need to use for your required daily tasks like transportation to and from work, for example.

2. Use what you have

Before you buy anything, go through your pantry, freezer, and cabinets and start using the things you find instead. You may have to eat a few meals that aren’t your favorites, but postpone any spending on new items that you can. This includes wearing the clothing you already own rather than buying new items.

3. Sell some of your things to raise cash

Now’s the time to look through your old stuff—furniture, clothes, electronics, household goods, knick knacks and collectibles—to sell at the flea market or on Craigslist. It isn’t doing you any good to hold on to things when you can’t pay your bills so bite the bullet and start turning stuff into cash right now.

4. Talk to someone

Trust in your family members and your best friends for advice. I’m not telling you to beg for help, but advice and support are things that others can give freely and it may have a stress relieving effect if you talk with someone who has been through what you are dealing with. Their suggestions may be your solution.

5. Get help from agencies

Pride should not be an obstacle when you need help. Everywhere you turn there may be assistance just waiting for you. There are food banks, social services, shelters, medical clinics, and so on that people can use when they are in desperate mode. If you are in such a plight, it’s no badge of honor to ignore the help that these agencies want to provide. Before an emergency, look up where and what they are and file your list so you can find it when needed.

Let me add one final thought. In order to deal with emergency issues, it becomes even more important for you (or whomever is heading the recovery process) to remain healthy. That means getting rest, eating properly, and getting help and guidance from experts so that you remain clear-headed and calm. If you’re in panic mode, you’re not going to be a leader and make good decisions.

All of this isn’t easy, or pleasant, but it is necessary. So thinking about it way in advance is a good way to enable you and yours to be prepared when and if you are ever faced with such a financial disaster.

Have you thought about your own preparation for financial disaster? What have you done to prepare? Do you have advice based upon your life experiences that can help others?

Image courtesy of George Hodan at (with changes)


  1. Two big things that can help you are a cash saving and your network. Family, friends, professional contacts. Depending on the nature of your emergency that can come to your aid. So important to be there for them in their time of need, so that can return the favor. A cash saving can instantly reduce stress out of a situation. I found this two to be my biggest allies when I lost a job.

  2. I think the older I get, the more I realise that I could experience a financial disaster, even though I’m not in debt anymore. One of my biggest fears at the moment is something happening to my rental property which is mortgaged up to the hilt. It’s currently unoccupied and I do worry about the insurance on it, that it will cover properly should it get vandalised or flooded etc. This is a good reminder to put more checks in place and get more cash savings behind me.

    1. When it comes to the rental property, it would be good to review periodically the insurance coverage you have for a good reason. Property values can change with the local real estate trends and you may need to either increase or decrease coverage based on what you find. It’s not paranoia to worry about these things, but it’s better to worry about it before it happens so you don’t have to worry about it when it does.

  3. Liz

    My husband and I have been through personal financial disasters several times, and the #1 thing that kept me feeling secure was our emergency fund. Even though it’s pretty small, I knew it would get us by for a month or two, and take care of any little issue we may have. I cannot stress the e-fund enough!

  4. There are several hospitals in New Jersey that have charities associated with them. I had a physical done at one for a cruise ship when I didn’t have insurance and I had no idea why they are asking me all sorts of questions about my income level until the bills came and then the charity ward called and said I was approved to be covered for most of them based on my income. It’s worth looking into if you have a lot of upcoming medical procedures and little or no insurance.

  5. I agree about the network; too many people try to hide bad news but when people know you legitimately need help, they are often glad to give it. Maybe Grandma doesn’t want to take on babysitting on a regular basis but would do after school care for a couple of months to save that expense. If people know you need a job, they can let you know how things are where they work etc.

    1. RAnn, the networking thing is really helpful. In fact, at one time I took part in a group of people who met weekly to discuss job opportunities when I was in between jobs. I found so many people willing to give you leads and advice. That’s a great way to try to recover and it doesn’t cost anything except your time.

  6. Mrs. CTC

    These are the things nobody really wants to think about, almost as if it’s bad luck to consider any form of disaster that may occur. Truth is, when bad things do happen the last thing you want to worry about is money. And every penny you have in an emergency fund is one less penny to worry about when the going gets tough.

    I also like Brian’s suggestion about the network, that is incredibly important. I don’t know where we would have been without our friends and family after becoming jobless. Not because they made any monetary contributions (I would feel terribly uncomfortable), but because they made sure we had a laugh.

    1. Mrs. CTC, there’s no time like the present to start thinking about the what if’s when it comes to financial matters. Even though you may never need to resort to your emergency funds or plans, it helps you sleep at night when you know you have something prepared just in case. The networking part is also a real plus, and it doesn’t cost anything to get advice or a good laugh.

  7. Jayson @ Monster Piggy Bank

    When I was in a financial disaster, the first thing I did was to change my budget plan to fit my situation needs. Then, I asked help from my parents, who lent me money I needed to pay for my debt. This was my first option; then if not enough, I would have resorted to my last option: getting a loan from a financial institution.

    1. Jayson, excellent that you adjusted your budget to help cope with financial problems. That’s probably the first thing you need to do to deal with it. Asking your parents for a loan probably gives you the best chance of getting good terms. Borrowing from a bank, although it may be the last resort, will definitely cost more. Glad you were able to recover from your tough situation.

  8. Nicole

    My hubby has just lost his job. We had plenty of notice so have managed to get a plan together in advance. I do regret not preparing for disaster long ago though. Once he’s back to work we will definitely be putting his salary aside for a while until we have a much cosier security blanket. In the meantime we will do everything we can to make my income work for us.

  9. Thank you for this, Gary. I have a tangential tip regarding insurance – don’t let the people who have the most to gain determine whether you have damage after a severe storm. We’ve had hail storms the past few years resulting in damaged roofs. But the damage has been far less than some are claiming. Roofing companies and even property managers are convincing homeowners to replace roofs. Insurance often covers this and people don’t realize they’re being scammed. Then insurance premiums end up ring for everyone due to false or unnecessary claims. Better to hire an independent inspector to assess the damage. My insurance broker told me that once an adjustor is called in on behalf of the insurance co, your premium will go up, whether you make a claim or not.

  10. Great points, Gary. Bad things happen to everyone throughout life; smart people are prepared for this. And it makes those tough times easier to bear. I agree that having an emergency plan as well as savings is huge. We have non-emergency vs. emergency expenses mapped out in our annual budget, so we know exactly what we’d cut if needed.

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