A discussion of what you need to know to get through a major financial crisis.
The effects of a personal financial crisis are often profound. Research has shown that losing a job, for example, generates a level of grief in some people that’s similar to the loss of a treasured relationship - or even a death.
That’s because we often lose more than material wealth when we suffer such a setback – we may lose part of our identity, or our conception of ourselves as a “successful person.” Even if the reduced circumstances are through no real fault of our own, the psychological effects may be devastating.
Which makes it all the more critical to have a plan in place to negotiate the aftermath of a financial crisis.
So let’s discuss what you need to know to get through a major financial crisis.
Don’t Give In To Despair
There’s no way around it: A financial crisis will test your mettle. In the face of such disaster, your first instinct may not involve seeing the positive in any situation, or reflecting on the good things that remain. You’ll probably cycle through feelings of stress, fear, anxiety and depression.
And that’s entirely natural. But, it’s critical to make sure you don’t allow such feelings to overwhelm you, or undermine your efforts to recover. Human beings are amazingly resilient creatures, with an innate capacity to bounce back from even the bleakest outcomes.
It may take a few days for you to regain your bearings and restore equilibrium. A positive attitude is essential if you want to successfully weather a financial crisis.
Get In Touch With Your Creditors
A financial crisis will generally limit your ability to pay bills. This, in turn, can make the crisis even worse by plunging you deeper in debt.
Before that happens, contact your credit card issuers, your utility providers, your mortgage holder etc. Explain what happened and explore ways in which your creditors can work with you. Some may offer programs from which you may benefit. The important thing is to act quickly before things start to spiral out of control.
Explore Student Loan Repayment Options
If you’re experiencing a financial crisis while holding significant student loan debt, consider temporarily deferring your payments or placing your loans in forbearance. Sure, the interest may keep accruing, but you’ll avoid the disastrous implications of outright default.
Break Out The Budget Scalpel
In times of financial crisis, budgetary cutbacks are a given. Before doing so, take a rigorous inventory of your expenses. Because many of us fail to account strictly for all of the money we spend, you might be surprised how much fat can be trimmed.
Take Action To Avoid Serious Losses
If you’re in danger of losing your home, consider taking a home equity loan. Or, if you’re a renter in danger of breaking the terms of your lease, consider taking a loan from your retirement account.
While these actions aren’t always advisable in normal circumstances, they may help you avoid the stress of losing your primary residence.
Review Available Insurance Options
While money is important, you can’t put a price on health. If you’ve lost your employer-based insurance coverage, check into COBRA, a government program that allows you to extend your coverage on a temporary basis. You may also qualify for a subsidy on one of the new state or federal health insurance exchanges.
The Bottom Line
Surviving a financial crisis isn’t easy. You may have to draw upon reserves of strength, will and resiliency you didn’t realize you possessed.
By following the steps outlined above, you improve your odds of emerging from this financial crucible unscathed - and, perhaps, even healthier and stronger.