When you are faced with some sort of setback, be it divorce, a health crisis, the death of a loved one, or a natural disaster, very often it’s accompanied by financial stress. While this sucks mightily, it doesn’t have to ruin you. Here are some tips for averting a financial crisis when the rest of your life is running off the rails.
- Cut cash flow drains. At times of emotional upheaval it can be tempting to splash out on personal trainers, a renovation, or travel to get away from it all. Don’t. This is the time to cut out unnecessary expenditures, particularly ones that suck your bank account dry month after month like cleaning services, gym memberships, ski clubs, or the Jelly of the Month club. Try to eliminate all of the non-essential monthly drains until you have a very good sense of where you are financially. You can always add them back in.
- Meet with a trusted financial advisor. This is an emotionally fragile time and an expert can assess your new financial position with a clearer head than yours. If you do not have a financial advisor, call your bank and ask if they offer a free consultation or ask your friends who they use and see if you can buy an hour or two of their time.
- Don’t get hung up on keeping the family home. A friend of mine is a divorce lawyer, and she maintains that one of the biggest reasons women end up in a financial pickle is they try to keep the too expensive family home. Don’t compromise your retirement or your kids’ college fund to pay for a big house. If you want to keep in the same neighborhood, see if there is a smaller home, a townhouse, or a rental apartment. Your kids would rather move than have you worried sick at the end of each month.
- Don’t keep up with the Joneses. Friends don’t let friends go broke. Be honest with your friends about your situation. Instead of going out for expensive dinners or shopping parties, suggest a walk or have people over for tea. If your friends won’t adjust some of their plans to suit your new budget, you might want to reconsider the friendship.
- Start to track all of your expenditures. Begin tracking your spending using one of the online budgeting tools. Track everything you spend and yes, that includes that latte you just had. You will quickly be able to see where your money goes, and you can decide where you need to trim.
Believe it or not, a financial setback can be a blessing.
You will learn what is important to you, who your friends are, and how to take care of yourself financially. And one day, when this is all behind you, you will appreciate the little luxuries in life even more.