During one of my recent grocery shopping trip, while standing in the billing queue, I heard a man complaining to someone that his family hasn’t been able to cope well with the nationwide lockdown. He mentioned that after being laid off from the job that paid him well, he had been going through a huge financial blow and was having trouble making ends meet. The last thing I heard before he left was that he regretted having not saved enough money for tough times like these.
Needless to say, this wasn’t the only story to have hit my ears in the recent times. I have come across many people who have been struggling to deal with the financial blow posed by the current world situation. Whether it’s the sudden job loss, medical expenses, an unexpected home/car repair or a pandemic, it’s hard to deal with the stress of these unanticipated financial emergencies especially when your finances aren’t in the pink of health.
Financial well-being is that one thing we always keep striving for, more so because the world is full of uncertainties. Even if we have a cushion of savings to finance all our long-term goals, we may still not be willing to throw away the desire to secure more of our financial needs. It’s human nature to account for all the financial emergencies that can find their way into our lives. No matter how optimistic we are, we like to be prepared for every financial blow that life might throw our way.
No matter how big the financial blow, your basic necessities need to be paid for – food, water, electricity, house rent. The unexpected challenges that come with a financial blow are often hard to deal with, more so because it is beyond your control to reverse it immediately. But there’s still hope in knowing that you can brace yourself up to deal with it to the best of your ability.
So if you’ve recently been hit by an unanticipated financial blow, here are 10 steps that can help you deal with it:
1. Evaluate The Damage – I understand that it would be totally impractical of me to suggest you not to stress over the situation. While going through a personal finance crisis, stress is something that you can’t fully avoid. But what you can certainly do is take time out to assess the situation you are in.
Even if your mind is just too stressed to feel optimistic, just remember that at one point of time, you have to sit down and think about what drove you in this financial emergency. Did you suffer a sudden job loss or a pay cut? Have you been spending too much on things you don’t need? Or did you suffer a medical emergency or some financial loss in your business?
There can be many reasons for you to be stuck in this situation and in order to come out of it, you need to know what actually caused it to happen. It will help you avoid a similar situation from happening in future besides making you think about the possible solutions.
2. Minimize Your Expenses – The next obvious step for you to take control of your finances is to cut down on your monthly expenses. In the current financial situation, your spending habits need to be in control and your bills need to be as low as possible. If possible, cut the cable cord, do away with the expensive cell phone plans, stop eating out for a while and unsubscribe from any service that you can do without.
Here are some other articles that can help you minimize your monthly expenses:
- How to control impulse buying to improve your finances
- Some real ways to cut your electricity bill
- How to save money on your food bill
- Some ridiculous things that you are wasting money on
3. Set A Budget – I can’t stress enough upon how important it is to always have a budget. It’s something that helps you keep a check on your monthly expenses besides helping you build your savings. I follow the 50/30/20 rule of budgeting that requires me to save 20% of my savings, spend a maximum of 50% on the household needs and the remaining 30% can be spent on things like entertainment, travel and eating out.
Budget is one of the best tools to manage your finances in the short term. It’s exactly what you need to know if you are living below your means and what all expenses you can do away with to improve your finances.
4. Bring In Your Own Assets – In extreme personal finance crisis, your financial assets can come to your rescue (which is why it’s always important to have some). These financial assets will be your weapons for the fight against a financial blow and can pay for some of your necessities while you work on picking yourself up. You assets can also serve as a mortgage if you need to borrow some money.
Recently, a quick assessment of my assets gave me an understanding of how prepared I am for an unexpected financial setback. I realized that I have a few stock market investments, a small emergency fund, and some savings to cushion me against any uncertain event. What I also happened to learn is that I need to open more avenues to bring in some extra money, which is something I have started working on.
Remember that your assets is the single most important resource that can help you mitigate losses besides paying your bills.
5. Work Out Your Debt Repayment Plan – A financial emergency can look more severe if you have an outstanding debt to repay in the near term which is why it is important to work out a proper debt repayment plan. If you can negotiate the terms of repayment, call your lenders now and convince them to make some allowance. Ask them to give you some more time or maybe lower the interest rate for the next two installments. Be sure to act on time before the situation starts getting out of hand.
6. Ask For A Raise – While working on my day job, I came across a woman who was struggling with her finances and badly wanted a way out. An experienced colleague of mine suggested her to politely ask for a raise by quoting some of her good work in the last few months. To her surprise, the manager agreed without much insistence which helped her overcome some of her problems. That incidence made me learn that you need to know your worth in the organization you are working for, and it’s your right to demand a raise if you think that you deserve it.
7. Find Ways To Earn Some Extra Money – While going through a big financial setback, any money that comes in can be valuable enough to pay for your next meal. Put your hidden talent to use by freelancing or engaging in a side hustle. Another alternate is to sell some of your unimportant possessions or to take up some extra project in the office that can pay you some money above your regular salary.
8. Ask For Outside Help – In extreme cases, you can simply ask for some financial help from your close friends and acquaintances. It sure isn’t easy, and not everyone can do it but asking for help can sometimes be your only option. If you choose to do so, make sure that you work towards repaying the money at the soonest.
9. Start Building An Emergency Fund – Overcoming a financial crisis won’t be of any use if it doesn’t teach you the importance of being prepared for in future. Building an emergency fund should always be one of your financial goals in the short term. An emergency fund is what can help feed you and your family in a big financial blow and I can certainly tell you that it isn’t hard to build one. Here’s an article that can help you build an emergency fund real quick.
I know that it’s easier said than done. And I might not be the best person to tell you how to cope with a bad financial situation. But I take the liberty to tell you that it’s not permanent. With the right mindset and a bit of carefulness, you can make the best out of the ongoing situation. No financial blow can be huge enough to suck hope out of you to find your way to the other side of it.