What to Do When You Have a Financial Emergency

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Author of Be Ready for Anything and Bloom Where You’re Planted online course

Have you ever had a sudden financial emergency?

Maybe you lost your job. Maybe your car broke down and requires an expensive repair. Maybe one of the family has had a medical emergency with large, out-of-pocket expenses.

Whatever the reason, the steps you should take are basically the same.  While I hope that you have an emergency fund to cushion the blow, even if you don’t, there are things you can do.

Begin a total spending freeze for a couple of days.

One of the biggest mistakes people make when faced with a shocking expense is to go on spending as though they still have the same budget. Perhaps they go and buy something to try and make themselves feel better. Maybe they just continue spending like they always did, with hundreds of dollars going out for kids’ activities, a vacation that had been planned before the emergency, dinners out, and shopping trips.

Just stop.

You need a few days to re-assess your budget and see where you’re at.  You don’t want to regret the expenditures you make right after a financial catastrophe. Put yourself on a complete spending freeze for the next few days while you assess the change in your financial situation. Here are some more tips for going on a spending freeze.

Don’t sign anything right away.

This is especially true if you’ve lost your job. As much loyalty as you may have had to your company, they clearly don’t feel the same sense of loyalty towards you. Many companies will try to get you to sign paperwork right away to “settle the details.”  Trust me when I say, these details will be skewed in their favor, and not yours.  You do NOT have to sign anything while sitting there, stunned at your sudden change in circumstances.  It’s vital that you take the time to read over everything carefully. Your severance package, your 401K, any accrued pension, and unemployment benefits will be at risk.

In some cases, you can negotiate this, even though you are not sitting in the power seat. Don’t commit to any type of agreement while you’re reeling, particularly if they try to coerce you into signing immediately. Regardless of what you may be told, any delay in your unemployment benefits or severance will be minimal.

The same goes for an outrageous repair bill or other unexpected expense. Give yourself time to think things over and perhaps seek a second opinion before agreeing to spend thousands of dollars. Obviously, with some medical issues, time is of the essence and you may not be able to mull over decisions for several days. But when you can, take a bit of time to research your options before signing on someone else’s dotted line.

Create a budget for necessities.

It’s absolutely vital that you drop your expenditures to the bare minimum until you are able to get your situation handled. This may be another stream of income or a lump sum to cover the surprise expense.

You need to take a look at where your money goes and base your new budget on the necessities. Although having a vehicle in each stall of the garage and an iPhone in the hand of every family member is nice, these are not necessary to sustaining life.

  • Water
  • Food (and the ability to cook it)
  • Medicine and medical supplies
  • Basic hygiene supplies
  • Shelter (including sanitation, lights, heat)
  • Simple tools
  • Seeds
  • Defense Items

Absolutely everything above those basic necessities is a luxury.

For some people, the necessities might be different. Personally, I need at least basic internet to do my job and keep the money coming in. I don’t live within walking distance of any place where I can sit and work and use someone else’s internet, and if you consider that I’d need to buy a coffee each day to sit in Starbucks and work, paying for home internet is cheaper.

You may have some kind of special circumstance to, so if you do, calculate it into your new budget.

So, by this definition, what luxuries do you have?

Slash luxury spending.

Reduce your monthly payments by cutting frivolous expenses. Look at every single monthly payment that comes out of your bank account and slash relentlessly.  Consider cutting the following:

  • Cable
  • Cell phones
  • Home phones
  • Gym memberships
  • Restaurant meals
  • Unnecessary driving
  • Entertainment such as trips to the movies, the skating rink, or the mall

It may not be a lot of fun, but it’s absolutely necessary until your crisis is under control.

Start looking for new streams of income.

You know those people who tell you that it’s easy to find a new job if you weren’t such a snob?

Ignore them.

The job market of today is not the job market of a decade ago. Jobs are few and far between, and good jobs are as elusive as unicorns in Central Park.  Folks who aren’t seriously looking might find all sorts of things that look like wonderful opportunities online, but when closer scrutiny is applied, many of those jobs are scams or situations with horrible and unsafe working conditions.

You may need to look at creating your own streams of income, like:

  • Creating an online business
  • Using your expertise from your job (or former job) to work as a consultant
  • Doing various small jobs
  • Create a home-based business with a low start-up cost (Now’s not the time to make a large investment)
  • Use creative skills to make things to sell
  • Provide a service.  Maybe you can cook, sew, repair things, or build things. Lots of people can’t and will be willing to pay someone who can

The more streams of income you can create, the more financially stable you’ll become. This article and this article both have ideas for creating streams of income.

Sell stuff.

All that stuff you’ve been meaning to go through in the basement just might be the key to keeping a roof over your head.  It’s time to start an eBay account, have a yard sale, or get on Craigslist and start selling things that have just been sitting there for a while.

Your trash might be another person’s treasure.  Instead of regifting those things in your attic, sell them so they can become someone else’s clutter.  You’d be surprised how much money you can make while decluttering your home.

Rely on the things you have on hand.

Instead of going out for a weekly shopping trip for food, rely on the groceries you already have on hand. (This is what you’ve been prepping for, after all!)

Use what you have to fulfill your needs as often as possible. Cook inexpensive meals and use stockpile ingredients.

Instead of replacing something that is broken, try repairing it. (Here’s a cool cheapskate’s survival kit with some things to help you fix what’s broken.)

Sometimes there’s a silver lining.

Of course, every situation is different but if you look for the upside, it can make things a whole lot more tolerable.

Take job loss, for example. Although sudden unemployment can be terrifying, it can also be the start of something wonderful.

When I lost my job in the automotive industry, I was devastated. As a single mom, how was I going to continue taking care of my two girls with no income?  Especially when one of them was about to start college!

Instead of being a bad thing, it turned out to be the best thing that ever happened to me. I was able to take the writing I’d been dabbling in for years from a hobby to a full-time job.  I made a conscious decision NOT to search for another job, but to follow my dream of being a writer and editor.

Maybe I succeeded because it was do-or-die time.  There was no option but to make it work. I began writing for other websites, started my own site, and began outlining books. As it turned out, that shocking, unceremonious discussion in the manager’s office was the best thing that ever happened to me.

As it turned out, that shocking, unceremonious discussion in the manager’s office was a turning point in my life. I’ve read many success stories that began the same way. Sometimes what seems like an ending can actually be a new beginning.

A health crisis may not seem like a positive, but if it encourages a loved one to turn over a new leaf and live a healthier lifestyle – or improves their current situation – it can have some positive benefits.

If your car breaks down – well, okay. Not everything can be painted in a positive light.

But your attitude is everything – if you can manage to keep your sense of humor and your positivity intact, you’ll survive much more easily than someone who crumbles at the first sign of a financial emergency.

Have you ever had a sudden financial emergency?

What happened? How did you deal with the crisis? Did it turn out to have a silver lining? Share your experiences in the comments below.

What to Do When You Have a Financial Emergency
Daisy Luther

Daisy Luther

Daisy Luther is a coffee-swigging, globe-trotting blogger. She is the founder and publisher of three websites.  1) The Organic Prepper, which is about current events, preparedness, self-reliance, and the pursuit of liberty on her website, 2)  The Frugalite, a website with thrifty tips and solutions to help people get a handle on their personal finances without feeling deprived, and 3) PreppersDailyNews.com, an aggregate site where you can find links to all the most important news for those who wish to be prepared. She is widely republished across alternative media and  Daisy is the best-selling author of 5 traditionally published books and runs a small digital publishing company with PDF guides, printables, and courses. You can find her on FacebookPinterest, Gab, MeWe, Parler, Instagram, and Twitter.

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  • Oh, yes. When my husband left, he cleaned out our joint accounts.
    I had sworn never to borrow money from anyone when I got my first job. So here is what I did.
    1. I went through every cushion in the house and found around five dollars. That went in the gas tank.
    2. I ate from my cupboards. Hmmm, sometimes I had weird combinations, but I still stayed healthy.
    3. I cleaned the vet’s office after my dog needed his services. He forgave the bill.
    4. I cancelled cable, and made due with an antenna.
    5. I did not go anywhere for entertainment. I used the library, went for walks with my dog, and generally used my time more wisely than when I watched useless shows on tv.
    6. I had several unmarried men at work; I offered to mend, clean, or do laundry. Several took me up on it.
    7. I spent absolutely no money on anything, including going to the store. I made biscuits instead of buying bread, used dried milk instead of fresh, and ate a lot from cans and cupboards. I used vinegar and baking soda for cleaning products and prayed my vacuum didn’t die.

    I learned a lot about frugality and buying useless stuff!!! I’m a minimalist now and love it.

  • My Dad fixed cars for a living and taught me to do the same. We live in a small town where every body knows every body. Dad had a good reputation for fixing cars for many years and worked at home as well as a full time job at a dealership. I am very grateful that my Dad taught me to fix cars but even more so that he taught me a good work ethic. I also worked a full time job as well as working at home. There have been times when I would not have a job but never miss a days work. If I didn’t have anything to start on in the morning we would go to the local dinner and have a cup of coffee. By the time we got a refill we would have something to work on that day.

  • Go visit http://www.missingmoney.com to see if you have any money that has been “escheated” to the state. Businesses across the country have to send in unclaimed funds every year and your odds of finding some missing treasure here are much better than any lottery.

    Enter your name – previous names – business names – deceased relative’s names etc. Check previous states where you have lived. When you find something, claim it – it’s yours! And it doesn’t cost anything to check this site or claim your funds. Happy Searching!!!

  • I was fired from a long term job, but got my vacation pay/etc. and then the company allowed my unemployment claim because they knew my firing was unjustified. Not going to get into that. I ended up unemployed for three years, could not find a job in my field to save my life, for various reasons, including I was max waged-out and aged out. College degree, making about 60K/year. Burned thru all my savings including 401Ks. I spent the first year trying to find a job in said field, and then started applying for jobs across many spectrums. I applied for jobs from my field to fast food. I was under or over qualified. Thank God I had begun prepping about a year or so before I lost my job. Those stores helped us out immensely. I finally got a job making 8.00/hr. Big step back, but it was income. My big takeaway, and especially on a much lower income, with no reserves anymore, is to work on building an emergency fund. We have done all the cost cutting stuff. We don’t eat out, I cook from scratch as much as I can, we haven’t had cable for years, we try to keep our phones/plans as cheap as possible. We don’t own new vehicles, we upkeep ours as best we can, and when we’ve needed another, we buy used. Internet is one we have had to keep, and we are limited to what is available in our area. Which sucks, cuz neither option is cheap. The one thing we haven’t really explored is selling stuff, because each time we’ve thought about it, someone we know was in need of what we wanted to sell, so we instead passed it on. Good karma, right? We also donate regularly to the local thrift store. I remember doing yard sales with my mom, and that is SO not my thing. And being frugal, what I have isn’t the ‘latest/greatest’. Don’t forget trash picking! every tv we’ve owned the past couple years have been trash picked, even ‘smart’ tvs! Our lawnmower and snowblower were trash picked too!

  • If you don’t have an emergency fund to take care of things like car repair,an appliance that breaks down,time off of work ect then you need to do all these things TODAY and build one not wait for an emergency to happen,

  • I wish I could deliver this message to every 18 to 20 year old in the US: Expect to be forcibly retired by age 50. Only unionized and federal government employees have protection against age-ism.
    Teenagers need to be informed that they have about 20 years to earn money by working for someone else (ages 20 to 40). Once an employee is about 40, employers start actively looking for excuses to fire him/her, and it becomes a 6 to 12 month ordeal to find another job. Once an employee is about 50, he/she should expect to get fired and to **never get hired to another job again.**
    People who think they’re going to be able to earn money by working for someone else until full social security age or older, had better be unionized or a fed.
    So an employed person age 20 to 40 should already be starting a side hustle so as to be able to make money after he/she is forcibly retired.

  • I have had two financial emergencies in my life. The first was self caused, when I went into a business and it failed. We were fortunate in that we had enough money to keep going (in spite of my bad decisions) and I was able to find a job in my former industry with a month.

    The second time I was laid off. I had a generous lay off package but it took me four months to find work – in a different state. Even with managing our money what I thought of as frugally, I literally started when we would have got into financial trouble – as the money ran out the new job kicked in.

    The biggest thing I can suggest is to start retiring debt as quickly as possible. We had foolishly purchased a new home and the house payment quickly drained our bank account. For our current home, we purchase quite a bit under what we could afford so that in the event of a second job loss, we are both more able to go longer and have to pay that out less on a monthly basis.

    My other recommendation would be build an emergency account as quickly as possible. Because those emergencies will happen.

  • Check for unclaimed property in states you have lived in. You might be surprised at what is waiting for you. State Comptroller usually has a web site. You may have to notarize a document and provide proof of ID and possibly ownership.

  • I worked as a nurse for a Catholic Hospital in Colorado Springs. Lots of “ear banging” about how kind and holy they were. I came down with a bad gall bladder. The surgery took place in their OR, of course. Their surgeon botched the operation and I almost died. Spent two weeks in a septic coma. 57 days of inpatient care later, I staggered home on a walker. The hospital FIRED me “because I could no longer do the work”! A month later, my family’s health insurance went away. That started a rough three years of unemployment. Very glad my wife and I led frugal lives….

  • You Need More Than Food to Survive
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