How to Prepare for a Personal Financial Crisis

Anyone can experience a devastating financial crisis. The best thing you can do when disaster strikes is having a plan of action. Financial crisis can come in many forms. More often than not, it involves job loss, unexpected medical expenses, or hefty car repair bills. With that being said, it can happen to anyone, so here is a guide to preparing for, and surviving, a financial crisis.

Have a savings

The best way to prepare for a financial crisis is to have an emergency fund. Having a savings account purely for emergency situations can help pull you out of a financial hole pretty quickly. Afterward, you’ll need to build it back up again, but you’ll still be able to pay your monthly bills while doing so. A good rule of thumb is to have 3-6 months worth of salary saved up. This will buy you some time in the event of a financial disaster.

Pay down your debt

Debt is a leading cause of financial crisis. Having debt and then accruing more becomes an extremely hard hole to dig yourself out of. Before a financial crisis happens, pay off debt and keep it as low as possible. An abundance of debt also indicates that you’re living beyond your means, which leads into the next point.

Reduce expenses

Reducing your overall expenses will leave you with more money. The good thing about more money is that you have more of it to save. The more wiggle room you have in your budget the better. We all have unavoidable expenses, like housing expenses and food, but trimming the fat will make job loss a much easier pill to swallow.

Build out your resume

The best thing you can do for yourself before a financial crisis is to invest in yourself. Building out your skillset and resume increases your marketability. If you lose your job and have taken the time to hone your skills, landing a new job will be an easy task. Additionally, gaining new knowledge and refining skills can also set you up for a job that pays more, which will get you back on your feet even faster.

Extra income

Use your skills to make some extra money from home. Doing so will be vital in times of financial crisis. Having a little extra cash flow on the side won’t solve all your problems, but it will help keep you afloat or pay down debt. To start earning some extra money from home, provide freelancing services or sell unwanted personal items on eBay. The possibilities are endless, as long as you’re willing to do the work.

Seek help

Finally, seek help when needed. This can be before, during or after a financial crisis. The best option is to have a plan before disaster strikes, but asking for help at any stage is better than dealing with it on you own. Seek help from a financial advisor. They can help you budget, plan for retirement, and guide you on the ways of making the most of your money.