“I see a bad moon a-rising. I see trouble on the way.” That’s a lyric from the classic song by Creedence Clearwater Revival released in 1973. Here, in newly minted 2019, many of our fellow Americans are adjusting this lyric to the bad moon has risen and the trouble is here. Due to the protracted, partial government shutdown, 800,000+ federal government workers are working without pay or furloughed without pay. Contractors, service industries and local communities feel the ripple effects of unpaid workers and undone government functions.
It’s not just the government shutdown. Job loss, employer layoffs, a significant decrease in work hours, commissions or sales that fall through, health issues, divorce–these all happen–and when they do they can wreck the financial stability you’ve been trying to build.
What to do in times of financial crisis:
- Lean In. Dig into your finances and create a cash flow plan for the new, hopefully temporary, normal. How much is in the emergency fund? How much income will come into the household and when? How much and when are the must pay bills due?
- Reduce Expenses: Pay your must-pay bills and reduce your “discretionary” expenses as much as possible. Must-pays include your food, mortgage, utilities, insurances, and transportation. Reduce your payments on credit cards and other debts to the minimum. Communicate with creditors and ask what helps they may provide.
- Delay Expenses: Delay planned events and other expenses until the crisis is over.
- Increase Income: Explore part-time work inside or outside of your career path. If you are married, can your spouse increase income through starting work or working overtime? Do you have unused items of value? This would be a great time to sell.
- Increase use of Safety Net programs: There are many government and non-profit programs meant to assist people in financial crisis. Dial 2-1-1 is available in most areas of the United States. “The 211 center’s referral specialists receive requests from callers, access databases of resources available from private and public health and human service agencies, match the callers’ needs to available resources, and link or refer them directly to an agency or organization that can help.” https://www.fcc.gov/consumers/guides/dial-211-essential-community-services. Your local faith community may offer assistance.
- Use your Emergency Fund. A financial crisis is the Emergency Fund’s moment to shine. If you’ve saved this money (EXCELLENT!), but use 1) to 5) above as needed to maximize how long your emergency fund will last in a crisis.
Keep your eye towards the future.
- Remember the the financial system punishes certain behaviors. Make all your payments ON TIME, even if you are just paying the minimum. This will help preserve your credit score and avoid late payment fees and penalty rates that may spring to life when there is a late payment.
- Avoid running up debt in order to keep your former lifestyle while you’re in a crisis. Reduced and delayed debt payments will have to be made up in the future, with interest.
- When you exit the crisis, make building or rebuilding your emergency fund a priority.
Remember, bad news does not get better with time, so dig in and create a proactive plan for getting through a financial crisis.
If you’d like assistance digging into your personal financial situation or with creating a proactive plan to weather a financial crisis, consider working with one of the Better Financial Counseling Network Financial Counselors. Meet us at: http://www.betterfinancialcounseling.com/about/