Sometimes, despite the best-laid plans and intentions, financial setbacks or financial stress can happen to anyone. It is rightly said, “Man proposes and God disposes”! Life events are unexpected and occurrences such as job loss, ill health, accidents or PANDEMICS – can quickly derail your financial stability and leave you struggling to manage your finances. Many people at one point or another, will deal with an unexpected event that has financial implications. For instance, the current crisis caused by COVID-19 has created circumstances beyond our control. Businesses, big or small, have borne the brunt of the lockdowns imposed to curb the spread of the virus. If you find yourself facing a similar unexpected situation, here are five steps to help you regain your financial footing and confidence:
- Assess the situation thoroughly for realistic decision making
Identify your areas of financial stress and be realistic with yourself. Burying the problem or putting it off will only cause more long-term pain. Discuss your financial situation with friends, partners, experts so you can be aptly guided and advised. If you have a partner, being honest and open with her/him is necessary to help you to remain on the same page and work together towards your goals.
2. Give yourself permission to dip into your emergency fund.
It can be extremely difficult to spend your hard-earned savings, even when you are facing unexpected bills. Remind yourself that the point of having money set aside is to handle unplanned costs with as minimal impact to your usual spending as possible. If you need to use it all – and do so without any guilt. Remember, you are fortunate to have an ‘emergency fund’ to help you deal with a financial crisis, and given an opportunity, you will re-build it again.
3. Craft a financial strategy to combat the expenses.
If the costs are more than your emergency fund can cover, take the time to plan out how to address them. Your strategy may include writing down your short and long-term goals to help your focus on them, having a budget in place and revisiting it regularly to see if there are ways you can reduce spending or redirect funds towards paying off debts.
4. Check your insurance.
Insurance is there as a safety net to help you if an unexpected event occurs. Covid-19 has accelerated insurance awareness in India. People are making sure that they have an appropriate level of cover for their businesses, cars, private health, and homes. Along with business insurances, personal insurances such as life insurance and income protection plans too have gained prominence. In some cases, insurance money is helping people tide over the financial crisis they are facing. Having an insurance safety net has never been more important.
5. Find out your options.
It is rightly said, “If one door closes, another opens up”. There is always ‘another’ option – if one solution does not seem to be working in your favour, try looking for another one! If you are struggling to meet minimum repayments or have overdue bills you simply can’t pay, contact your creditors and billers as soon as possible to discuss payment options. The sooner you do this the better, before you run out of options.
So, don’t lose hope if you are in the midst of a financial crisis – look deeper and a solution will be awaiting you. Remember, being in control of your finances is a great stress reliever; take a cue and keep stress at bay!