When Financial Crisis Strikes…

What do you do when a financial crisis hits? Do you run and hide? Rack up more debt? Or do you face it, budget in hand, ready to tackle whatever comes next?

Often times, financial issues can attack back-to-back-to-back, and it can be difficult to navigate what appropriate steps to take. In these times, it is necessary to have a budget to refer back to. If you don’t have one, check out this post with our free budget planner. We have many resources to help you get started.

The Budget

When it comes to financials, the budget is the go-to guide for our money – what is being spent, how it is being spent, and what can be afforded in the family income. During financial crisis, it is best to first refer to the budget. Determine what areas of spending are necessary, and which are superfluous. From there, you can make the first round of budgeting cuts.

The Crises

After evaluating the budget, evaluate the crises at hand. How many are there? We recommend making a list of all the items needing to be taken care of, and then prioritize them from most important (needing action right away) to least important (can wait several months). Once prioritizing is complete, you can move on to how you will address each one.

The Plan

From the list of priorities, you can determine what will be done, and when it will be done by. For instance, priority number one would be paying for surgery, and replacing the broken refrigerator. Depending on your budget, you may have a home warranty to pull from, a medical fund, etc. You should also have an emergency fund of at least $1000. This prevents you from going into debt with situations such as these.

Each item on the list will need to have a corresponding method of payment. Blown tire, comes from emergency fund. Surgery bill comes from the medical savings. New refrigerator will come from the household fund, and so on. Items later on down the list, such as new furniture, cosmetic procedures, etc. – those you have determined can wait – will still need an associated payment method, but plan for them being later in the future.

Our only caveat at this point is to not incur any new debt during these time frames. It may be tempting, but it will only set you back in the long run. Try to utilize savings in your budget areas, no-interest payment plan options, and delaying gratification. Some things will have to wait until they can be paid for.

There you have it! Our simple method to tackling financial crises. Start with the budget, list and prioritize the crises, and then determine where funding will come from. It sounds much easier than it is, but when you put in the hard work, it will be worth it.