A Starter Guide To Surviving A Personal Financial Crash

by Pam on January 18, 2017

There are certain things we all need, in order to live. In order of priority, they are oxygen, water, food, sleep, and heat. Some people will argue as to whether there is anything else to add to the list. However, these are the things without which the human body cannot function. Without other things, life may be difficult but can be survived.

On the other hand, nobody wants just to survive, and so there is another level of priority below this. Without the above, we cannot live. Without the things on this lower level, we cannot live comfortably. It features things such as a roof over our heads, healthcare, and security.

This type of prioritizing will be familiar to many – it’s essentially a fleshing out of Maslow’s Hierarchy of Needs. You’ll have seen it represented as a pyramid with the things we absolutely need at the bottom.

At the top, there are the things that make us truly happy. In all but the most drastic of circumstances, we can all count on the bottom row. But we can all think of a way in which the things on higher levels can be threatened. It doesn’t take too much imagination to see things like our homes and our health being placed under threat.

All that needs to happen for that to start playing on our mind is a change for the worse in our finances. A simple change of circumstances can be all it takes; it’s what makes us a risk-averse species. But sometimes there is nothing you can do to stop that change happening – and then, it is a matter of protecting what you have.

Some Things We Cannot Control

As already mentioned, humans are by and large averse to risk. This is why we have stringent health and safety regulations in most areas of life. We know how to cross the road and all those simple things so as not to end up dead or injured. We expect that stores we enter, places where we work and our homes will be inherently safe. We expect, as a minimum, to be able to get through each day safely.

But there are circumstances we cannot control. Illness can come to any of us (even if we live healthily) and accidents happen. Even if we’re always careful, there is an element of risk attached to simply living. And if we get ill or injured, it can impair our ability to work and to earn. This is when those priorities are threatened.

In fact, it doesn’t even need to be through injury. Many people turn up to work one morning expecting to go through their day as usual, only to be told that there is no longer a job for them. Sometimes, no longer a business there to work for. It happens. And again, those priorities come under threat.

How Do We Ensure We Get Through Those Times?

If you have become unable to work through illness or injury, there will hopefully be social security benefits you can rely on. The key word there is “hopefully.” Unfortunately, the process of getting access to them can be a long and stressful one, with no guarantee of success.

As with any form of insurance, there is a stringent set of guidelines in place to prevent benefits being claimed fraudulently. And as with insurance, this inevitably means that innocent people will be denied what they are entitled to.

That’s where help like http://www.brownandcrouppen.com/social-security-disability/ssdi/ can be invaluable. It’s been shown that claimants with representation have a greater chance of success. Much the same applies if your job is lost due to layoffs or liquidation. You should be entitled to compensation or at least a redundancy payoff. There should be legal avenues that allow you to pursue these. Don’t assume you’re in a fight you can’t win – you always have options to allow you to claim your due.

Mostly, This Won’t Happen Overnight

Of course, even if you can secure compensation and social security, there is likely to be a spell in between where money is tighter. Even when you do get these payouts, it may fall short of your usual salary. Although social security comes out of money you have paid in, don’t expect to have the same disposable income you once had.

Whether the shortfall is momentary, temporary or longer term, you will need to look at what you need and what you want. This takes us back to priorities. While you might enjoy a Friday night at a bar, you need food. You may have become used to steak once a week, but you need heating and healthcare.

In other words, if you find yourself short of money, it’s the luxuries that need to be stripped out first and in order of size. Although not strictly defined as a “need,” we would struggle without some fun. If you can protect life’s little pleasures, protect them. But make sure first that you meet mortgage or rent payments and can eat. And consider lowering your food costs with recipes designed to save money, such as http://allrecipes.com/recipes/15522/everyday-cooking/budget-cooking/

Debt: Negotiating The Balance

Sound home finance is important at the best of times, and as far as possible you should make sure you are avoiding debt. However, not everyone can manage this all the time. If you have access to an overdraft or have money available on a credit card, it may be a way to deal with short-term financial stress.

This is another area where priority needs to be respected. If you know that a payout is coming, then you can borrow to meet needs. Bear in mind the difference between knowing something, and something having been promised. Promises can break, but if there is a guarantee then short-term borrowing may make sense.

What Can You Sell?
Many financial “experts” will advise people in financial difficulties to look for something to sell. This is easy to recommend but often harder to make a reality.

The difficulty with this way of raising money comes with the fact that if something has that high a value, it’s probably something you need. You could get thousands out of your house and your car. But then all you’ve done is create another problem. Selling your home is the nuclear option, and you’ll still need to find somewhere to live.

Sure, if you have something with a large financial value on it, this may be the answer to at least some cash flow issues. Just don’t sell something you’ll need to replace unless it is your only option.

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