Managing your Finances during a Crisis: Tips for Financial Stability
Any kind of crisis is a very unwelcomed phenomenon yet a very inevitable one. While there can be measures one can take to prevent and even be ready for a critical situation, one can never cushion against all aspects or be fully ready. The least one can do is to be financially stable so the blow doesn’t hit as much. Being financially stable during a crisis helps you cover your basics no matter how bad things become, cater for times in case a regular income comes to halt, prepares for unexpected expenses and provides a certain level of mental peace.
Mentioned below are some tips that can financially help you deal with situations of crisis.
Create a Budget
The first thing you need to do to achieve financial stability in any situation, especially during a crisis, is creating a budget. To do this, the first step is to roughly gauge your income and expenses, foresee any major changes in the future and come up with an estimate of a budget. Since times of crisis are pretty much uncertain, don’t worry if you do not get a fixed amount. Having a rough idea can also help you if you keep a margin for a slight increase.
Identify the unavoidable Expenses
While it is important to cut out as many expenses as you can during a crisis, there are some expenses which support survival and just cannot be avoided. Expenses like food, basic utilities and healthcare cannot be avoided at any cost which is why they need to be identified and given utmost importance so they can be managed in the limited resources. Healthcare expenses is the kind of an expense which can be decreased by taking good care of your health and all the preventive measures so a major emergency is avoided, however, there still has to be a certain amount reserved for any unforeseen medical situation. The bottom line is that the necessary expenses should be at the top of your priority list in any situation.
Cut down unnecessary Expenses
When you are categorizing your expenses to perform the step mentioned above, you will come across many expenses which can be easily avoided in the time of crisis. Dining out, going on vacations and shopping are all examples of expenses which one can cut down on and don’t serve a purpose in times of a crisis. The resources which are allotted to these activities can be used to fulfill the essential needs instead and the limited budget can be used more efficiently for day-to-day needs.
Create an Emergency Reserve
While this may be a difficult step for you to take when you are making ends meet for your daily expenses, building an emergency fund should be on your priority list. Medical emergencies or a loss of income are pretty much a reality of life and are often uncalled for. An emergency reserve is likely to be of help in such times before things return back to normal and the bad times pass. Ideally, the reserve should hold resources worth 3-6 months of your expenses which strictly should not be allocated for any other purpose.
Explore Financial Assistance Options
In times of crisis, you could always take help from various financial assistance programs. It is recommended that you first look for such programs initiated by the government which exist to match your situation and are directed towards individuals as well as families. Other than government initiatives, you could look for aids and other resources from the government, a private aid program or specifically directed financial assistance program e.g., for military families or retired persons. Once you have checked your eligibility and filtered out options, then you can decide which option suits you the best.
Negotiate with your Creditors
If you have taken a loan and your payments are due, it is not a favorable situation in times of crisis. However, you can still decrease the damage by communicating with your creditors. You can start by explaining your situation to your creditors and request for a payment plan which is not heavy on your new budget plan. This may lead to your creditors to revise the repayment structure or bring down the interest rates. Even if the mentioned changes are made temporarily, it can be a great help in times of crisis as the same resources can be used for more essential purposes.
Stay away from Borrowing
The last thing that you want to do in times of crisis is taking on new debt, though you may be tempted to do so. A sudden inflow of funds might seem like the right thing to do but it is not recommended in the longer run as it will just add in to the financial burden and take your condition far from achieving financial stability. Instead of straining your budget with more debt, try to focus on saving from the existing means.
During a crisis, it is important to keep yourself informed and updated with all the relevant information. The information we’re talking about here refers to all the information regarding the crisis you’re in as well as the actions the government is undertaking to decrease the effects of the crisis. Moreover, you could inform yourself on the economic aftermath of the crisis and financial assistance programs. All these factors will help to plan your budget better and give you a clear insight of what the near future holds so you can prepare accordingly.
Take Professional Help
When you’re in the middle of a crisis, paying for professional help might initially seem like an unnecessary expense and worth cutting down. However, believe us when we say this that it might be one of the essentials. Chances are that you would face difficulties while managing your finances in the limited resources. Taking the help of a finance professional will help you come up with a plan to reach financial stability, provide you constant guidance on dealing with the finances and will also help you stay on track with the new tangent of your latest budget.
While the crisis will eventually pass by, it is important to focus on decreasing its impact which is pretty much doable if you keep these factors in mind and do your research. By following these basic tips, one can plan ahead and prepare for most kinds of unforeseen circumstances.