Experiencing unexpected life events can lead to personal financial crises, disrupting the stability you once had. The death of a spouse, loss of income, sudden illness, or other unfortunate circumstances can wreak havoc on your financial well-being without warning. Many people are unprepared for such downturns.
During a crisis, the financial aspect of your life is often impacted the most and the fastest. While dealing with the personal hardships of difficult times, such as grief, misery, depression, and pain, you also need to focus on maintaining your financial affairs, which must continue functioning regardless of your situation. Bills still need to be paid on time.
In the face of a financial crisis, it's crucial to assert your control and proactively manage the situation rather than allowing it to dictate your life. By taking charge, you can navigate through the challenges and work… Click To TweetHANDPICKED RELATED CONTENT:
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To navigate through the storm, it is crucial to develop a financial crisis plan and adhere to it diligently until you regain stability.
Steps to Include in Your Financial Crisis Plan
When a disaster strikes, an emergency fund must kick in. If you don’t have an emergency fund, start one immediately as soon as you get back on your feet.
1. Assess your expenses and income.
Shelter:
If you’ve experienced a loss of income as a couple, evaluate your remaining income and determine how much you must allocate to cover necessary expenses like shelter, food, clothing, transportation, and communication. Consider downsizing your living arrangements if necessary. Moving to a more affordable place can strengthen your financial position during uncertain times.
Food:
Whether you’re single or part of a couple, temporarily pause entertainment expenses such as take-out and dining out. Follow these steps to control your grocery shopping:
- Create a weekly meal plan and strictly follow it.
- Make a shopping list based on your weekly menu and avoid purchasing anything not on the list.
- Avoid grocery shopping on an empty stomach to prevent impulse buying.
Clothing:
Avoid buying new clothes from department stores, even during sales. Instead, consider shopping at local second-hand stores. To save money, opt for clothing in one or two versatile colors that can be mixed and matched easily.
Transportation:
Only purchase a car if it’s necessary for commuting to work. If public transportation is a viable option, use it instead. If you already own a car, explore opportunities to generate extra income by joining ridesharing companies, weighing the pros and cons before making a decision.
Communication:
Having access to a phone for emergency calls is essential. If you’re currently on an expensive monthly mobile plan, consider switching to pay-as-you-go or prepaid phone options to save money. These plans allow you to pay only for the minutes you use, offering a cost-effective alternative.
2. Review your necessary expenses.
Create a comprehensive list of all your expenses, whether using computer software or pen and paper. Ensure you have a clear understanding of your financial obligations.
Download “Budgeting Spreadsheet”
Budgeting-sheet.xlsx – Downloaded 15 times – 87.73 KBWhile most necessary expenses will remain fixed, pay special attention to reducing or eliminating unnecessary expenses. If you’re in the middle of a lease that might incur hefty penalties for breaking it, speak with your apartment management office to explore possible solutions.
3. Eliminate unnecessary expenses.
Once you have your expense list, identify which expenses are fixed and which are unnecessary. You can significantly reduce or eliminate unnecessary expenses, including:
- TV cable subscriptions and streaming services (~$150 savings per month).
- Internet subscriptions, considering free access at local libraries (~$100 savings per month).
- Gym memberships, opting for outdoor exercises instead (up to $250 savings per month depending on the membership).
- Utilizing local commercial laundromats instead of doing laundry at home, reducing electricity costs by $5-$10 per month or more.
- Utilizing manufacturer and store coupons when shopping for groceries and household items.
- Learning budgeting techniques.
- Temporarily pausing visits to beauty salons and spas.
- Selling household and clothing items you no longer need to generate extra cash.
- Seeking a second job to boost your income.
- Establishing an emergency fund as soon as you regain stability.
Download “Budgeting Spreadsheet”
Budgeting-sheet.xlsx – Downloaded 15 times – 87.73 KBHANDPICKED RELATED CONTENT:
Budgeting
Simple and Compound Interest
Remember, navigating a financial crisis requires resilience, adaptability, and proactive decision-making. Stay focused, seek support when needed, and keep working towards regaining financial stability.
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