Very few people plan for a financial crisis, which is why so many crises happen unexpectedly and feel devastating in the moment. If this happens to you, take a moment to evaluate the situation and prioritize the assets you have in place. Then create a financial plan to deal with the immediate problem. If you aren’t currently in a crisis state, now is the perfect time to begin preparing yourself against future difficulties.
Evaluate and Prioritize
When people are faced with a large unexpected expense it can create a financial crisis. While one’s first instinct may be to panic, this will not provide actionable steps towards a solution. Instead, take the time to evaluate what led to the problem and what solutions you readily have access to.
The next step is to prioritize any upcoming payments. Money, which is needed to prevent home foreclosure or ensure medical care, is more of a priority than a cable bill or a gym membership. While it may be painful to make certain cuts, it may be necessary. Prioritization is an effective method of differentiating between a necessity and a luxury expense and allows you to reallocate dedicated funds to cover the crisis.
Create a Financial Plan
The first thing you must do is contact the lenders on your list and determine if it is possible to delay or reduce your monthly payment in one or more areas to free up cash needed for your emergency. Many are more than willing to help their customers make arrangements to make payments rather than risk the account going into default and receiving no payment at all. Mortgage companies and credit card companies may be able to place a temporary halt on payments based on hardship.
If negotiating with lenders doesn’t provide enough money to deal with the financial crisis it may be necessary to ask friends and family for assistance. If that isn’t an option, quick installment loans may provide the immediate relief you need. These are alternatives to payday loans that can be paid back in installments over a period of time rather than being due all at once.
Start Preparing Now
Creating an emergency fund is one of the best things you can do to prepare for unexpected expenses. The first step is to evaluate your budget and look for any areas where money can be saved. One of the easiest things to trim initially is entertainment and food budgets. Cutting subscription services (like Netflix) and shopping sales or using coupons can result in a significant amount of extra money each month that can be placed into savings.
Look for ways to build your fund throughout the year. Bonuses at work, cash gifts, and tax returns can all be placed into savings until you have enough money set aside to comfortably handle any financial emergency that should arise. Set a goal and begin setting aside money for your savings account with the same amount of determination and promptness given to other debts.
Facing unexpected expenses doesn’t have to feel like a financial crisis. There are numerous ways to pull money from your budget to redirect towards the situation. When that isn’t enough, there are companies that specialize in helping people regain their financial footing. To ensure a crisis never emerges again, begin building an emergency fund today.