Finding yourself with more bills than money can be overwhelming. Regrettably, it is more common than you may think. A financial crisis can be the result of different reasons such as bankruptcy, joblessness, medical bills etc. I’m sure you are feeling stress, confusion, loss of confidence and control. If you are dealing with a financial crisis, it’s important to stay calm and take some steps to re-establish yourself.
Do not procrastinate: Do not waste any time. There are many people who want to believe that keeping themselves distracted from their money problems allows them to overcome stress. This probably makes it worse. It is important to remain focused on the problem at hand so you can effectively tackle it. Keep in mind that your financial crisis cannot be resolved overnight – hence, you should carefully plan and budget your expenses.
Stop the bleeding – start the breathing: Remember back in basic training? When you came across injured persons, the first thing to do was ensure you stopped the blood loss – stop the bleeding. And then make sure they were able to breathe – start the breathing. The same philosophy applies with your money. For the immediate future, stop spending money.
Prioritize your bills: Sit down at a table and prioritize your bills. Make the list of all your bills for the month (yes, you must include the $11/month for Netflix, and the $4/day Starbucks habit!). You know you must pay for groceries, utilities, and rent. Make sure you always pay these bills first. Then what? Each family is going to be a bit different for this. One family may have car payment and gas next if they don’t have access to public transportation. Another may have medicine and child care. Be honest with yourself.
Stop using credit cards: You must know how you are spending your money in order to control it. Using credit cards encourages easy spending. While this is not a permanent solution, it will give you some time to think about better options for getting out of the financial crisis.
Identify what you can afford each month: Once you make the list of bills and the amount you can afford, then comes the hard part. You are going to have to make difficult choices. For example, you may identify that you need a car – but do you need a BMW? Trade in your BMW for a Ford Focus. Shut off cable. Get your spending under control.
Plan strategically: Carefully devise a plan to meet your immediate problem. The foremost tip is to stop using credit cards or spending money on unnecessary things. Whether your crisis is due to crushing debts or a medical emergency, plan strategically to deal with it.
Take action: The best way of dealing with stress caused due to bad finances is to keep yourself focused on resolving the problem. For instance, if your financial crisis is due to personal debts, consider selling some things. Stop spending money on Starbucks coffee or lunch out. You can then use this money to pay off your debts. It is important to take immediate action to deal with the problem.
Mary Sprague, NAAV Senior Financial Advisor