How to Survive a Financial Crisis
It is possible that many of us will experience some type of financial crisis in our lifetime. These steps will help prepare you for a financial crisis.
How to prepare for a crisis
- Save Cash. Ensure you have the cash reserves necessary to survive a financial crisis. You should have 3-6 months’ worth of expenses saved in cash specifically for this purpose. Start saving now to build up cash reserves.
- Pay off Debts. Carrying debt will only exacerbate a financial crisis because cash flow will likely be quite tight. Make sure you are addressing your debt situation within the bounds of your current cash flow and taking positive steps each month to rid yourself of that debt.
- Insuring your income is the most important thing you can do. The odds of becoming disabled prior to age 65, as compared with many other common risks, are significantly higher: Dying: 1 in 106; House Fire: 1 in 88; Auto Accident: 1 in 70; Disability: 1 in 7*. Long Term Disability Insurance may provide income during a disability that is due to accident, sickness or injury. In most cases the coverage provided by an employer is not enough, and is also considered taxable income. There is a great need to supplement this type of coverage to maximize your income in the event of a disability.
What to do at the start of a crisis
Losing a job due to an accident, sickness or injury; a death prior to life expectancy; or the need for chronic nursing care.
- Stay as calm as possible.
- Communicate with your spouse and family members for emotional support.
- Assess the situation. Write down your finanical situation moving forward.
- Add up all your savings: include the emergency fund you have built up, savings and any other income including disability income, severence pay or unemployment income.
- Add up all your monthly bills and expenses.
- Compare your current financial situation. What other resources might be available?
- if you are unsure of local resources, call 211. Utilizing the help of local resources can help guide you and your family toward creating a step-by-step plan that will be the key to successfully overcoming the crisis. The last thing you want is for a crisis to snowball.
*Statistics derived from OJM Group
Written by dvdscttbckr on Tuesday October 20, 2015