Lately, I’ve been having more conversations with people grappling with credit card debt due to job loss. Today, I want to talk to you about the real way to be prepared for emergencies.
Over the years, I have assisted many in managing the financial aftermath of job loss. I’ve guided clients in preparing for potential job loss scenarios and have navigated this personally within my own household multiple times.
The reality is, that everyone will likely face an event that negatively impacts their income—whether it’s a job loss, health issues, or other unforeseen circumstances.
The key question becomes: How can you manage these situations without jeopardizing your finances?
I want to share what has worked for me and my clients when faced with such challenges.
I’ve successfully used this method with clients for years. Recently, I applied it to my own family’s finances when my husband’s position was eliminated, cutting his income in half.
This approach is effective with or without an emergency fund. In fact, many have used it without ever touching their emergency funds.
Know Your Numbers
Emotions can cloud judgment during tough times, making wise financial decisions challenging. Having a plan in place beforehand reduces both financial and emotional stress.
I help my clients develop a detailed Emergency Spending Plan proactively, before financial hardship strikes. (If you missed my last email about spending plans, you can read the blog version here.)
When creating your Emergency Spending Plan, consider:
- Which expenses will you pay no matter what?
- Which expenses are more optional and would you cut in an emergency?
- Will you need to pay for health insurance?
The goal is to determine how much money it takes to run your household in an emergency.
Most people don’t know this number. Knowing exactly how much money you need to support your family takes the panic out of the situation. You won’t be left wondering if or how you will survive. Instead, you’ll know exactly what it takes to support your family and the steps you need to take. Having a pre-determined plan removes much of the emotion from the situation. It’s a game changer!
You’ll follow this plan until your circumstances change.
Prioritize Wisely
Often, people prioritize debt payments over essential expenses to protect their credit scores. This can increase financial stress. Here’s how to prioritize wisely:
- Food: Ensure you have enough to eat. Prioritize groceries and basic necessities over dining out.
- Housing and Utilities: Keep a roof over your head and the lights on. Pay your rent or mortgage, electricity, water, heating bills, insurance, property taxes, and HOA fees.
- Medication: Health is paramount. Make sure you can afford necessary medications and healthcare costs.
- Transportation: Maintain your ability to get to work or job interviews. Pay for essential transportation costs, such as car payments, gas, insurance, routine maintenance, or public transit fares.
Make minimum payments on your debts, and communicate early with creditors if you can’t make payments.
Adjust Your Lifestyle
One of the biggest mistakes I see people make is not adjusting their spending to their new financial reality.
Many continue living at their previous income level, relying on credit cards to fund their life.
The first time my husband and I experienced a job loss, we did exactly that, leading to massive amounts of credit card debt.
It’s crucial to align your spending with your new financial reality. This goes hand-in-hand with the Emergency Spending Plan.
Be Intentional
Whether relying on unemployment benefits, emergency funds, or assistance from family, be deliberate in how you use these resources.
Stretch every dollar as far as possible by cutting non-essential expenses like dining out or unnecessary shopping.
Look for ways to bring in additional income. This could be through part-time work, freelancing, or gig economy jobs. Every bit of extra income helps bridge the gap.
Remember, controlling what you can and planning ahead are critical steps.
Take Action Today: Create Your Emergency Spending Plan
Start preparing for a financial emergency today by creating your own Emergency Spending Plan.
Use the information in this email to craft a plan that will help you survive a financial emergency without jeopardizing your finances.
Save this email for future reference because you’ll likely need it again.
By taking these steps, you’ll have a clearer picture of your financial needs and be better prepared to handle any unexpected challenges.
Let’s take proactive steps together to safeguard your financial future. Whether you’re facing financial challenges now or want to plan ahead for peace of mind, I’m here to help. Reach out today, and let’s create a solid strategy tailored to your needs.
I look forward to empowering you on your financial journey!
P.S. Imagine being ready for financially challenging times before they happen! I can help you with that! If you’re ready to work on your finances, I’m here for you. Schedule a complimentary call HERE.
