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Do you recall watching the News during the 35-day American Government shutdown earlier this year?
You probably saw that about 800,000 Federal employees were affected and did not receive pay during this period.
In January alone, more than $400 million dollars of mortgage payments were owed by these furloughed employees.
Do you have a plan in place in case you’re faced with your own financial crisis?
What would you do if you lost a job, became ill or disabled, or face a sudden financial emergency?
Maybe now is a good time to come up with one?
Here are some great tips on surviving a financial crisis:
1. Start Early
Start before there’s even a financial emergency happening. There are several things you can do ahead of time, such as:
- Having an Emergency Fund – Frugal for Less has emphasized how important this is and how to create one. This will lessen the chance of going into further debt.
- Having Health Insurance – Have health insurance for the top-earners in the household. Medical bills account for 41% of working adults debts.
- Having Disability Insurance – Getting disability insurance will help financially for those times you cannot work due to illness or disability – for temporary, short-term, or long-term incidents.
Having these in place offers peace of mind that things will “be taken care of” if and when something does happen.
2. Start Cutting Back
When your financial crisis hits, start going through your budget and start cutting and saving as soon as possible. Don’t assume that it’ll either be a short setback or won’t impact your family as hard.
Here are a few places to cut back, for starters:
- Eating out – cut back on drive-thus, deliveries and eating out.
- Entertainment – cut back on outings, going to movies, and social events (unless they’re free).
- Subscriptions – Cable, newspapers, monthly boxes, memberships, etc.
- Grocery List – Start couponing, buying generic and other shopping savers.
The more you can cut back, the more money you can stretch during your tight money period.
3. Apply for Assistance
I listed this early on the list as these applications can take up to 30 days to be approved and start receiving benefits. Some households may qualify for emergency SNAP, which can be received in 7 days.
if you’re within a certain income bracket and you’re struggling, there is money available to help you with a variety of needs:
- Unemployment Insurance – Apply for unemployment insurance if you became unemployed through no fault of your own. The amount you’ll receive depends on the length of work and your previous income.
- Social Security and Disability – Not just for retirement, but also receive Supplemental Security Income and Social Security Disability Insurance when you are still of working age and cannot earn a regular income.
- Federal Worker’s Compensation – If you got injured at work or suffer from an occupational disease you can claim Worker’s Compensation.
- Food Assistance – Many states offer 3 kinds of food assistance, Supplemental Nutrition Assistance Program(SNAP) or food stamps, Women, Infant and Children (WIC), and the National School Lunch Program.
- Child Care Assistance – Financial assistance to pay for childcare bills so more of your income can go towards other monthly expenses.
- Temporary Assistance for Needy Families (TANF) – For families experiencing financial hardships, you may receive food, child care, housing assistance, and much more.
- Low Income Home Energy Assistance – One-time utility assistance to pay your utility bills.
I know this option can be a hard choice to accept for some, but it’s there for you.
4. Find Work
If you received news that you’ve been let go or furloughed from your job, had your hours or wages reduced, or some other reason that results in less income coming in each month – you’ll need to find work.
What kind of job will depend on whether you need a new full-time job, or a second job working nights and weekends, or whether it’s a temporary situation until they call you back in.
Job hunting can be a stressful and sometimes emotional endeavor, but learning how to hunt proficiently and ace those interviews can be easily acquired.
To get started:
- Update your resume – Redo your resume for today’s market. What worked 15 (or even 5) years ago won’t work these days.
- Join Online Networks – Join online job boards such as indeed, Monster, Careerbuilder, and others and upload your resume for more headhunting prospects.
- Open a LinkedIn Account – LinkedIn is a great site for presenting your resume and finding potential employers and companies to contact.
- Start Walking – Go around to various companies in your field of work and inquire if they are hiring, fill out applications, drop off resumes, and network with them.
- Search Online – Search online job boards and other online sites for jobs.
Hunting for full-time work really should be a full-time job in itself. If this is for a temporary situation, then you should not be particular in what positions you accept. Working at McDonald’s for a month until your furlough is over is still a job and its helping to pay the bills.
5. Work from Home
Let’s say it’s not work-related why you no longer are employed – maybe an illness or a disability has now prevented you from working outside the home, or at least not on a steady, dependable schedule.
If this experience is still fresh for you, you may believe that it’s impossible to work with an illness or disability, but I can reassure you it is possible.
Otherwise, you may just choose to work from home for yourself instead. There are so many ways to work from home, some of these are:
- Teach Online
- Complete Tasks
- Online Business
6. Start a Spending Freeze
Now would be a good time to start a spending freeze. You’ll need to save as much money as you can because you don’t know how long it will take to find another job, or when you will be called back in.
A spending freeze is where you stop all unnecessary spending and only pay the mortgage or rent, the utilities, debts, basic groceries (milk, bread, meat, produce), and necessities like medication and gas for work. Everything else like buying take-out, snacks, canned goods, entertainment, shopping, and such is stopped.
Depending on how much you stop paying and the length, you can save a pretty amount of money to help during your financial crisis. One family of 3 saved around $540 in a month, now this was during a regular working period, imagine how much this could help when you have no paycheck coming in.
7. Sell Stuff
We know during hard times we need to find money wherever we can. But the first and easiest place to find cash is already in your home.
It’s time to start going through each room of your house and declutter and reduce our accumulated collections.
A list of questions to ask yourself when cleaning can be:
- Have I used or worn this in the past year?
- Will I use it sometime this year?
- If I was shopping right now, would I buy this again?
- If it’s broken, is it worth fixing?
- If I moved to a new place, would I pack this?
- Does this do a better job than something similar I already own?
If you answered “NO” to any of these questions, it’s time to get rid of it. When I say get rid of it, I mean place it into 1 of 3 piles – Trash, Donate, or Sell. Hopefully your Sell pile is the largest and you can make extra money from your stuff to go towards your monetary needs for the month.
8. Negotiate your Bills
If it’s uncertain how long you’ll be fighting this money battle, it’s a good time to go to all your creditors and negotiate your bills.
First, try reducing the services with your current provider to a smaller package, this is usually the easiest to accomplish. Next, ask them if there’s any discounts or deductions you can take advantage of.
If you’re not satisfied, you can tell them you’ll start looking elsewhere, this sometimes gets them to give you what you need just stay with them. If your current provider isn’t budging or doesn’t offer something that makes a considerable difference, you’ll need to shop around for a cheaper service.
Consider consolidating all your credit cards onto one 0% interest card, you’ll save a lot on interest payments and have only one bill to deal with then.
Go to your creditors – loans, mortgages, and such and see if you can renegotiate your monthly payment, restructure the terms (add years to the end), or refinance with a new loan altogether.
During the recent government shutdown, many banks and credit unions and others waived their fees and offered services to help those federal employees save money.
Lastly, know how to deal with debt collectors and negotiate in your favor.
This section is a bit different from selling your household stuff. Downsizing is a bit more drastic to take on and probably left as a last resort.
When things get pretty tight financially, you and your family may need to consider downscaling everything you own. I’ve ordered the list from small steps to do at the beginning, down to serious lifestyle changes, let’s look at the list:
- Sell your amenities – Sell your recreation vehicles, ATVs, Boats, Motorcycles, etc.
- Sell your investments – If you have investments such as stocks and bonds, it’s time to sell those off as the cash will help you more now. If you have extra properties that are not making money – timeshares, cottage, and such, it’s time to sell those off now.
- Get a smaller car – If you’re a 2-car family, you can sell 1 car. If you have just the 1 car, you can sell it and get a smaller car. Not only will you have some extra money in the price difference, but you’ll save on gasoline and car insurance.
- Get a smaller place – Lastly, if the money crunch is lasting a long time, you may need to consider moving to a smaller place. You’ll make some money on the price difference as well as smaller mortgage payments, lower property taxes, and lower home insurance.
As times get desperate it’s time to ask serious questions about the things in your life and decide what’s important – your family and surviving, or having “nice things”.
Experiencing a financial crisis is not the end of the world – even though it may feel like that. Try and remember a few pointers:
- Don’t panic – Worrying does not make money magically appear. Instead, take action and address the problems early.
- Keep an open mind – Now’s not the time to be picky, if there’s a well-paying janitorial job open then go for it. You need cash – that job provides it, period.
- Explore and learn – Use this time to explore your talents and to improve your marketable skills. Maybe you like writing? Apply to be an online blogger (or start your own blog).
- Don’t fall for vices – You may feel you need a “crutch” to help you cope with your financial situation, but this will just make things worse – family, job and money-wise.
- Don’t dread asking for help – Asking your family and friends for help shouldn’t be a shameful thing. Many times our family and friends don’t want you and your family suffering and will help any way they can.
Yes, a financial crisis can be a scary time, but with the right mindset and positive steps to ensure you and your family undergo it with as little impact as possible, it won’t seem so bad.
Here are some great reads for different financial situations:
- Moving On: New Life After Job Loss – A Guide to Picking Yourself Up, Shaking Off the Dirt, and Getting Your Life Back in Order
- Surviving Separation And Divorce: Regaining Control, Building Strength and Conficence, Securing a Financial Future
- Financial Strategies for Today’s Widow: Coping with the Economic Challenges of Losing a Spouse
- The Family Guide to Disability and Personal Finances