5 Steps Essential to Surviving a Financial Crisis
Follow these 5 steps and you will be on your way towards getting through any financial curve ball that life throws at you.
Last week a client of mine asked me to create a "how to survive a crisis" script and to record it as a sample podcast for a project that they are working on. And the turnaround time was 24 hours! Here is the script that I created on the fly. And you can listen to the audio file here!
"Hello and welcome to the podcast. Today I am going to share with you the five steps that are essential to surviving a financial crisis. Despite how well we try to manage our financial households day to day, sometimes life throws us a major curve ball – whether it be a medical emergency or a layoff or some other financial disaster – and we must do our best to get past it. Follow these five steps to get back on your feet:
1. Focus your spending on what’s most important for the time being
When a financial crisis hits you need to make sure that your basic needs are met, including food, shelter, transportation and protection. Identify your costs for rent or mortgage as well as utilities, your food and medicine, transportation if you need it to get to a job, and required insurances such a car and health. These are the bedrock of your budget that you need to plan for. Make a list of these necessary monthly costs that you need to cover - other expenses can be put on hold temporarily.
2. Negotiate with your lenders to make your debt payments more manageable
If you have had a sudden drop in income and you are in threat of not being able to pay your mortgage, student loans, medical bills or credit cards, you need to call your lenders today! While it can feel nerve-wracking to pick up the phone, remember that it is in the best interest of your lender to make sure that you can pay your debt obligations. If you reach out to them before you are in arrears, they will have more options to help your rearrange your debt.
3. Identify your liquid assets
The next step in weathering a financial storm is to take stock in what you money currently have. Do you have a savings account or keep extra funds in your checking account? Do you have money stored in a secret location in your home? (Don't worry, I won't tell anyone where you stashed it!) Are there personal items that you could sell quickly on Craigslist? Do a thorough inventory of what cash you have on hand and what items you can quickly convert to cash – this is going to help you get through for the time being if there is no money coming in.
4. Access benefits that you qualify for
Many people who find themselves in a financial crisis for the first time may not know what benefits they are eligible for. If you lost your job you may be eligible for unemployment compensation or COBRA benefits to help pay for your health insurance. If you experience a serious loss of income you might qualify for food assistance or help in paying your utilities. But in order to receive these benefits you have to look for and apply for them. The United Ways in various communities operate a 211 System that can link you to providers of various public and community benefits.
5. Take care of yourself and let others support you
The best way that you can take care of yourself while you are going through a financial crisis is through the big three: eating a healthy diet and drinking lots of water, getting some daily exercise, and getting a good night’s sleep. A financial crisis is extremely stressful and these three activities will help you to keep up your resilience in the long run. Also consider talking about your financial crisis with someone you trust. Because of our culture’s taboo around talking about money, many Americans never let anyone know what they are going through, instead trying to keep up appearances that everything is fine. When you are going through a financial crisis everything is NOT fine, and by opening up to someone you trust may relieve the pressure to keep spending to keep up with the Jones’s, and you may even find out how supportive your family and friends really are.
Thank you for joining the podcast!"