When Money Setbacks Happen: How To Handle A Financial Disaster
Unexpected financial disasters can happen anytime–a medical emergency, your car breaks down, your home needs urgent repairs. Instead of panicking and hunting for money under every rock, the key is to be prepared.
Financial Disaster Preparation Tips
–Save For A Rainy Day: “Don’t spend all of your money. Set something aside each payday for emergencies,” financial coach Ozeme J. Bonnette of Tri-Quest Investment Advisors told MadameNoire via email.
Financial educator Tonya Rapley, founder of My Fab Finance, agrees and suggests setting up a “Financial Disaster Fund.”
“Calculate how much your life costs you including all of your needs and save at least three times that amount,” she explains. “This account is for emergencies so once you reach the goal amount, set up another savings account so that you don’t dip into this one.”
–Make A Budget, And Stick To It: “Control your spending. You don’t have to live like you are experiencing a disaster, but be conscious of your spending and question each purchase. This will help you save more and will soften the lifestyle blow should a financial disaster occur,” says Rapley. Don’t buy things you don’t need. “Cut back on unnecessary expenses so that a financial disaster is easier to deal with if it were to arise,” advises Bonnette.
–Diversify Your Income Streams. Get a side hustle and try to have money coming in from different avenues. Maybe your hobby could generate extra cash. “Get resourceful and tap into your creative abilities. Create side hustles so that your survival does not depend on an employer. It could remain a side hustle or it could turn into a full-fledged business,” notes Rapely. “You’d be surprised at the ways people are creatively funding their lives.”
–Get Organized: Have all your financial papers in one place and in order. “In a disaster, it can be hard to think straight. Have everything in one place so that it is easier for you (or someone else) to manage,” says Bonnette.
What To Do When Financial Disaster Hits
–Reexamine Your Spending: “Redefine your needs, wants and desires. In a disaster, there are some things that become less important. Rather than moving ‘as usual,’ reconsider what your true needs are and focus on meeting those,” says Bonnette, also founder of the The Christian Money Coach.
–Look for areas of your life you can downsize.”Contact utility companies and find out if you can reduce your cost by taking advantage of promotions or downgrading your package. Eliminate unnecessary bills and reduce your spending to needs not wants,” says Rapely, adding “Sorry to tell you but weekly manicures and dry cleaning services are not needs.”
–Speak Up: Need more time to pay? Ask for it. “Communicate. Many people do not realize how flexible and accommodating companies can be, especially if you have had great payment history,” Rapely points out. “Reach out to your creditors, explain your situation, and find out if they have a hardship program that you would qualify for.”
–Ask For Help: If you haven’t saved for such a situation, you will need to seek assistance. “There are services and programs that can help for a short period of time until things settle down. Don’t be too proud to ask for help. There are local, national, governmental, and church organizations that can help,” says Bonnette.
–Say No To Payday Loans: Be careful where you turn for money. “Don’t allow companies to take advantage of your situation. Pawn shops and check cashing companies are often more predatory than helpful,” says Bonnette. “The fees involved are astronomical, and do not help when in a tough spot. It only appears to help initially, but does not in the long run. Seek other options before turning to these.”