Murphy’s law situations can appear out of nowhere. For those who do not know what Murphy Law is, it states that anything that can go wrong will go wrong. Under this sort of circumstances, your budget can be stretched to or beyond its limits.
Whenever you are dealing with a financial emergency, it can be a challenging obstacle to jump over. Sometimes, things such as taking your pet to the vet or losing your job can put you on a desperate journey for more cash on hand.
Those who are financially literate know the importance of having an emergency fund when a rainy day strikes. However, only a small group of people recognises this. The majority of the population failed to acquire financial education in their early days, and consequently, fall into the trap of keeping up with the Joneses and fulfil their need to obtain instant gratification, they inflate their lifestyles by swiping their credit cards mindlessly.
Speaking of credit cards, I am very aware that some people dread them because once a credit card lands on their hands, it takes lots of self-discipline not to use it to stay away from financial trouble. I totally agree with that reasoning. However, when an emergency pops up, you may wish that you had one.
That begs the question: what must be done in order to cope with a financial crisis?
1. Put your emergency fund to use.
If you are reading this, please do your future self a favour by saving money for emergencies. I have written an article highlighting why one should have an emergency fund and where to get started. You should not wait until your pay raise and then get started. Now is the time to build one.
If not, read on and I urge you to emphasise emergency savings as quickly as possible.
2. Stay calm. Stay positive.
It is pointless to panic and feel desperate when you are suddenly caught in the middle of financial hardship. You are getting nowhere if your stress levels are off the roof. Hence, you need to keep your composure and your emotions under control.
You will need to evaluate the entire situation before deciding on your next moves. Do your best to have a sense of what it will take to sort out the financial mess. If you have insufficient funds on hand to settle the situation, figure out how and where you can get financial assistance.
If you have money on hand, but it was earmarked for another purchase category, use it regardless. When you are in a financial emergency, you need to take care of it first before it gets worse.
When you are trapped in the middle of a financial emergency, you will come to find that your funds can get dried up quickly. To get yourself out of it swiftly, you need to prioritise what you spend. You must promise yourself that the first order of business you need to address when it comes to expenditures is securing essentials such as food, clothing, and shelter.
With the knowledge that you have enough essentials to keep yourself afloat, only then can you think about how you will pay for utilities and transportation costs. In addition, if you have liabilities such as student debt or a home mortgage, settle them first before addressing your credit card debts.
4. Reduce your expenditures by cutting down on unnecessary spending.
This is not rocket science. If you have had a financial emergency, chances are, you have learned a painful lesson. You need to cut down on your spending not just until you have escaped from this emergency but until you have an emergency fund that you believe is of suitable size. Everyone’s emergency fund is different from each other due to various, but as a rule of thumb, it is worth building an emergency fund that can cover at least six months’ worth of expenses.
This is where a well-thought-out budget will come in handy. Putting in place a budget can guide your decision-making when you are prioritising your expenses and helps you in stopping unnecessary spending.
5. Generate more income.
If you are desperate to find more money to free yourself from financial hardship, this is likely the best thing that you can do. Taking an additional part-time job can be a wise decision when you try to release yourself from the shackles of financial emergency. Putting more money into your pockets can shorten the amount of time it will take to rid yourself of all your financial worries.
6. When it becomes too overwhelming, seek help.
When you have done all that you can but are still unable to put a given financial emergency to rest, do not silence yourself. You can always reach out to your family members or friends for help. Of course, nobody is in favour of doing this, but in an emergency, it may be your only option. Just be sure to repay them in full so that you do not add unnecessary strain on the relationship between you and the lender.
Final 2¢: You can avoid the next financial crisis
Life is unpredictable, but if there is anything you can do to avoid a financial crisis, it is to be prepared and vigilant. Invest in yourself by spending the time to improve your financial literacy. Periodically analyse your personal financial statement and see how you can expand your emergency fund if needed. With the proper preparation, you can turn an unwanted financial problem into one you enjoy dealing with.