September 15th, 2020
Making Your Money Last During a Financial Crisis
It is easy to put off prepping for a financial emergency...until it happens.
Regardless of the income you earn, savings you have amassed, or financial expertise under your belt, you will undoubtedly experience a crisis at one point. Consider the economic rollercoaster our country endured as a result of the COVID-19 pandemic or the housing crisis of 2007-2009 or the chaos on Black Monday.
The bottom line is as follows: No one is exempt from being blindsided with a financial disaster. So, how can we stay afloat when faced with one?
The first priority in any financial decision should be to review your current balance sheet and spending. Obtain a clear picture of your income, savings, and any debts. Then go through your budget and look for any areas where you can reduce spending to extend the life of your emergency fund.
Frivolous expenses and discretionary purchases are the easiest things to cut back on. The next step is to look for opportunities to refinance debts, such as student loans or your mortgage, to make the payments more manageable. Just be very cautious of any scenarios that would result in a balloon payment or drastic increase in cost at the expiration of a promotional or deferment period.
If you are facing joblessness, look for other outlets to earn fast cash. A good first step is to sell any items you no longer use. Old clothes taking up too much room in your closet? Sell it through an online retailer. Take up some odd-jobs? This could be anything from becoming a food delivery driver to a dog walker. These simple tasks can bring in additional income to prevent you from running the emergency fund dry.
Finally, ensure you are looking at the big picture. This has particular relevance to the stock market. While it is tempting to sell investments as you see your portfolio plummet, keep in mind this will have a huge negative impact on the long-term earnings potential of your portfolio. Think in the long-term and avoid rash decisions that will cause financial distress later on.
Financial emergencies are unexpected, yet unavoidable. While you may have no control over the situation at hand, you do have control over how you tackle it. Practice the steps above to ensure you remain financially stable in the time you need it most.