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?
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 publicdomainpictures.net (with changes)