In the U.S., as many as 46% of people can’t afford to cover rainy day expenses during emergencies. Many of us will likely face the effects of a global financial crisis or unexpected personal circumstances like a sickness. Despite your financial problems, having an emergency plan in place can help you weather the storm.
Managing a financial crisis is a very stressful time, but it’s possible to come out strong through planning and determination. You may have to alter your way of life for a certain time, but it’ll be worth it in the long run.
If you’re facing a financial crisis, follow our tips below to start getting back on track.
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Avoid Taking on New Debt
Though easier said than done, it’s important to avoid debt while you’re going through a financial crisis. Credit cards are some of the biggest contributors to U.S. consumer debt, and the average household has more than $8,000 in credit card debt.
If you already have credit card debt, you should prioritize your payments even while you’re going through a financial crisis. Otherwise, your credit can take a big hit can cause lasting financial problems.
Limit your credit card use so you don’t incur even more debt. It might be tempting to pay for things on credit while you’re trying to spend less, but you’ll just rack up more and more debt.
Consider cutting up your credit cards or freezing them to limit using them for the time being. You can always get a replacement card when you need it again, and removing it from your life will help you focus on budgeting with the money you already have.
Make a Budget You Can Stick With
As soon as you’re starting to experience financial stress, take a look at your budget. You may have to make some big changes, but keep in mind that it will all be temporary.
Cut back on any areas that you can. Some non-necessities include entertainment and some types of personal care. You may also be surprised at the amount of money you can save by canceling subscriptions you don’t need anymore for streaming, music, magazines and more.
To stick with your budget, consider going cash only. Even using a debit card can psychologically lead you to spend more since you don’t see the money physically leaving. Whenever you go shopping, create a list ahead of time and stick to it so you don’t spend on anything you don’t need.
Save as Much As Possible
Though it might seem difficult while you’re pressed for cash, it’s important to continue saving during an emergency. Having some money set aside can keep you protected if your financial crisis lasts longer than you anticipate.
To save more money, you may need to find new forms of income. Consider some ways you can make extra money online without a specific skill set, including completing surveys and testing websites. If you have the time, you may also consider picking up a weekend job.
While it’s hard to sacrifice free time, always keep in mind that a financial crisis is temporary. Especially if you’re focused on saving, you may be able to pull yourself out of the hole much quicker than you think.
Protect Your Retirement Funds
When dealing with a financial crisis, you should protect your long-term funds at all costs. Though it might seem tempting to cash out retirement funds, hold off as long as you can.
By protecting your retirement assets, you’re investing in your future. Money in a 401(k) or IRA also has the opportunity to grow over time, so it’s a great way to make passive income.
Protecting your retirement funds can safeguard you from another financial crisis in the future.
Communicate With Creditors and Lenders
If you’re in an extremely tight spot and can’t afford to pay certain bills or debts, it’s always important to know your rights. You have the option to communicate with your creditors to see if you have any options. Depending on your situation, you may be surprised at how willing some creditors are to work with you.
Especially if your affected by a global or nationwide financial crisis, the debt collector may be able to put your payments on hold for a matter of months. If that isn’t an option, they may at least limit penalties for late payments during a certain period.
Especially if you’re dealing with credit card debt, you might also be able to negotiate a lower interest rate or lower minimum payment to make your debt more manageable.
When you’re talking with creditors and debt collectors, come to the table with as much information as possible. Show them proof of how your finances have been affected and remain calm and open to any options.
Take Advantage of Non-Cash Assets
Outside of trying to increase your income and minimize bills, you may also have non-cash options. Consider different types of rewards you may be able to take advantage of.
Does your credit card have a cash-back policy you can redeem? If you need to travel, you might have frequent flyer miles you haven’t redeemed yet as well.
There’s also the option of selling personal assets to generate more money. These days, you can go beyond a yard sale and make even more money by selling online. Getting rid of things can be overwhelming sometimes, but you’ll probably be surprised at how much stuff you have that you don’t use or need.
Weathering a Financial Crisis With Planning
Financial crisis management is never easy, but it’s entirely possible. Debt and financial stress have a huge impact on mental health and overall wellbeing, so it’s important to stay strong throughout this time.
With proper planning, you can remove much of the uncertainty that comes from a financial crisis. Knowing how much money you have to cover your needs will help you feel safe while you work toward more stability.
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