Money can’t buy you happiness, but it sure as hell can buy you peace of mind. There is a distinct difference between happiness and peace of mind, and many people confuse the two. We all wish we could have all the money in the world to pay for our utility bills, rent, mortgage, or whatever expenses we might have, but having the money to pay for it all isn’t happiness is peace of mind. Instead, it’s taking away the stress that finances almost always bring with them, which is excellent, and on the flip side, nothing is worse than dealing with a financial crisis.
Whether an unexpected medical bill, car repair, or broken pipe in your house hits you, nothing will strip you of any peace of mind faster than a financial crisis. It’s all you’ll think and worry about until you can solve the problem. But how do you prepare for a financial crisis?
Dealing with a Financial Crisis
Step 1: What’s the problem?
The first step in dealing with a financial crisis is identifying what the problem is. What is causing you all of your stress? Sometimes it’s super easy to identify, like an unexpected bill. Other times it can be a little more subtle. For example, maybe you weren’t paying attention to your spending and went over your monthly budget in one of your categories, and now you are short on rent or car insurance. Whatever the problem is, identify it.
Step 2: Looking at your budgeting
I’ve written about budgets before and how great they are as tools, but I’ll touch on them briefly again. A budget isn’t something that will automatically stop you from bad spending habits, but it is a tool that will allow you to take control and understand where your money is going.
Step 3: Make the most of what you have.
Budgeting is so important because if you find yourself short on cash, you need to figure out where you are wasting your money and where you can cut and save for the future. It’s all about redirecting your money to where it needs to go. You may not be able to cut one of your expenses so that you are now saving $300 a month, but maybe if you cut $10 here and $20 there, you can figure something out. It’s a slow process but better to start later than never.
Step 4: Build an emergency fund.
Building an emergency fund is something everyone should do the second they have any disposable income. It’s so nice to think that once you get a well-paying job, you can go out and adventure now, but hold off on that for a while and save. An emergency fund is there to help you deal with an unexpected financial crisis. But, unfortunately, not everyone has the liquid cash to pay for medical bills or new car tires, even with well-paying jobs.
An emergency fund should be able to cover six months of your living expenses so that if you were to lose your job, you could still pay your rent and for your car while you look for a new job.
Step 5: Make a plan to deal with debt.
One of the biggest financial stressors is credit card debt. Opening up an app and seeing an insane number can be overwhelming at times, but how do you eat an elephant? One bite at a time. Tackling credit card debt, or any type of debt is all about making a plan and sticking to it. If you can do that, then it will help deal with the stress of the unexpected.
To keep in mind with debt, while it can be overwhelming, you need to check your progress in overcoming it. If you feel like you aren’t making progress, you think you should be. Then maybe it’s time to look for help. Try looking for it from the National Foundation for Credit Counseling. They do some awesome stuff when it comes to helping people manage debt.
Finances are usually never fixed in one night, but the stress can eat away at us. When a financial crisis hits and we aren’t prepared for it, it can feel like we are drowning. Up until recently, it has been so easy to think that nothing too crazy would happen to you, so why worry about the unexpected things? If COVID has taught us anything, anything can happen, so best to be prepared for it. If you can prepare and plan, you will buy yourself that peace of mind I discussed earlier. So do yourself the biggest favor you can and plan.