When a financial crisis hits your family it is essential that you make logical and well-planned money moves to guarantee that your family is safeguarded during this uncertain time.
A financial crisis can be anything from a pandemic that is impacting everyone to a personal financial crisis such as losing your job or the death of an income earner in your home. Every situation is different but there are a few money moves to make during a financial crisis to help protect yourself and your family.
Make These 4 Money Moves During a Crisis
Review Your Emergency Fund
An emergency fund is essential whether you are in good financial standing or not. This is your safety net against the world when something is to happen.
Many people believe that $1,000 is a great starter emergency fund but unfortunately many are learning this is not the case at all. $1,000 won’t cover the mortgage or rent for most people – let alone cover them for an extended period of time.
Now, it is the perfect time to review your emergency fund. Do you have adequate savings or do you have work to do?
3 to 6 months’ worth of expenses is a great goal for your emergency fund.
If You Have An Emergency Fund
If you currently have an emergency fund you will want to compare the amount of money you have in the bank to your current budget. Is this enough money to last you 1 month? 3 months? 6 months? longer?
You may need to adjust how much money in the bank based on your current spending patterns and how long you expect your financial crisis to last for. If you are unsure of the longevity of the crisis you will want to keep as much money liquid as possible to help safeguard you through the next serval months.
If You Do Not Have an Emergency Fund
If you do not have an emergency fund – don’t panic. It is understandable that you may not be in the best financial position currently.
You will want to review your current expenses and how much money you expect to come in over the next several months. This will help you come up with a game plan moving forward. If you do have some income that is expected start setting some aside now to pad your savings account.
Depending on the type of emergency you may also need to look at cashing out investments to cover your monthly expenses (please consult with a tax or investment professional before doing this), apply for unemployment if it is available to you or see if there are resources available in your community for your specific situation.
There may be more financial help than you believe.
Review Your Budget and Make Cuts if Necessary
You need to review your budget and make cuts to help you through this financial crisis. This is one the fastest ways to free up cash to help you get through this time of uncertainty.
If you do not currently have a budget made now is the best time to make one. A budget is having a plan for your money and will help you make wise decisions with your money.
Things to Reevaluate in Your Budget
- cut cable and internet
- cancel subscription services such as Netflix and Hulu
- cancel gym memberships
- reduce data on your cell phone plan
- cut or reduce extracurricular activities for kids
- stop eating out
- cut personal expenses such as hair cuts, nails, massages etc.
- shop around for homeowners and auto insurance
- clothes and shoes
- extra groceries and miscellaneous spending
There are many areas of our budget that can be reduced or eliminated altogether when faced with a financial crisis. The decisions are not easy to make but you want your money to last as long as possible during this uncertain time.
Call Your Credit Card Issuer and Loan Servicers to Ask for Help
One of the best money moves to make during a financial crisis is working with your credit card issuers and loan service providers. When you explain the situation to anyone you have a loan with they may be able to lower your interest rate, defer payments for a certain period of time, or allow a reduced payment.
Each company has different policies so you will want to read the fine print very carefully to fully understand what will happen with your accounts. However, most companies will be willing to work with you so you do not default.
Don’t Panic if You are Experiencing a Financial Crisis
I understand how stressful it can be when you are in crisis mode. Now is not the time to panic. You want to make smart and informed decisions because they can and will impact you for an extended period of time. These 4 money moves to make during a financial crisis will help set you to continue to make informed decisions as you move forward.