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What to Do When You Have a Financial Emergency

The Organic Prepper

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.

The Organic Prepper

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1 Response to What to Do When You Have a Financial Emergency

  1. mary in TX says:

    ‘Have you ever had a sudden financial emergency?’………………….yes

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