The best time to prepare for a financial emergency is before it happens, the second best time to prepare for a financial emergency is RIGHT NOW! If you like many people have found yourself in an unplanned state of financial emergency, as a result of the Corona virus outbreak, do not despair. We are all very likely to face many financial crisis in our lifetimes, but there are steps we can all take, even if we are in the middle of a financial disaster to get out of it or at the very least keep our heads above water until it passes.
First and foremost there are three key things I need you to know. These are three truths, that if you know and believe them at your very core will help you get through any hard time.
Three truths to remember during hard times:
#1 – This too shall pass. This is temporary, it is not forever and how you act and think during this time will have such an impact on your future, so stay positive.
#2 – Action is the antidote to anxiety. By taking action towards an issue, even a small step, will help you feel better.
#3 – I can get through hard things. And so can you.
So now for the practical and tactical steps, on what to do when a financial emergency hits.
Don’t make any major financial decisions. If you’re going through some sort of crisis, it is likely that you have blinkers on and are not seeing the bigger picture. It is also likely that you don’t yet know how things will pan out. Hold off on making any big money decisions while you are panicked or upset. Do not cash out of any investments or pensions. Even if the markets have all taken a nose dive, you have not actually lost any money unless you lock in your losses and cash out. Leave your investments alone. You can stop putting more money in to them but do not cash out.
Consider if now is the time to dip into your emergency fund. Calculate your burn down rate too. For example, if I have €2,000 euro saved, and I need to withdraw €500 per month, this will get me through 4 months.
Find out what government assistance may be available to you. If you suffer a cut in income, you may be entitled to income support from the government. Check out their website or contact your local Social Welfare office for more info.
Follow advice and stay informed. I strongly advocate protecting your mental and physical health as well as avoiding scare mongering and listening to sensationalists. It is also extremely important to stay informed and follow advice from trusted, reliable sources.
Make a plan to get out of it and to prepare for the next one.
I said it at the start of this post and I’ll say it again. The best time to prepare for a financial emergency is before it happens. Don’t get caught out again. Make a financial crisis plan for you and your family. It should include things like adequate insurance, an emergency fund and an emergency budget for different scenarios like you or your partner/spouse (or both of you) losing your jobs. Read my post about emergency funds here.
Pause your debt pay-off whether that be debt snowball or debt avalanche. Do continue to meet your minimum or contractually obligated payments. In an emergency cash is king.
Cut non-essential spending. You will need to redirect money from discretionary to necessity. This will feel painful but it is temporary and it is necessary. Get a page and draw a line down the middle. Call the left hand column ‘essential’ and the right hand column ‘non-essential. Classify all of your expenses in to one of the two categories and adjust your budget accordingly. Again, this is not forever, it’s only for now.
Meal plan and meal prep like it’s your job. :)
During a financial crisis, it is likely that you will mostly be eating at home. A number of our bills are fixed, but groceries is an area where we can exert a huge amount of financial control and save big. I have a FREE 16-page meal planning guide, you can get it by signing up for my email list here. It include step by step instructions on how to meal plan, tonnes of tips and strategies AND two free printables. It will save you hundreds. There are tonnes of great meal planning and meal prep resources online. If you’re looking for some inspiration try pinterest.com as a starting place.
Find cheap or free activities for indoors and outdoors. Being in a state of financial emergency does not mean you can’t have fun or joy in your life. Take care of your physical and mental health. It will help you stay strong during this time and make good decisions for you and your family. A lot of communities have Facebook pages that are filled with activities and outings that won’t cost you much if anything. Get creative with fun indoor activities.
Trade goods and services with friends and family. Not everything has to be traded with money. Think of different ways you could barter with friends and family so it’s a win-win all round. Your cousin is a hairdresser and you need a cut and colour? Great, offer to do ironing, babysitting, mow the grass, bake a cake, help with her accounts or to set up her website or Facebook page. Trade clothes especially with kids clothes or maternity clothes. Car pool. The possibilities are endless.
A Final Word…
Remember: this too shall pass, you can do hard things and action is the antidote to anxiety. You will get through this.