Quote of the Week: “Only put off until tomorrow what you are willing to die having left undone” – Pablo Picasso
Have you ever been blindsided by an unexpected financial emergency and do not know what to do? We have all been there. Whether it is a job loss, medical expenses, or an emergency home repair, an unexpected change in your financial situation can be incredibly stressful. There is a virtually unlimited spectrum of difficult, or even potentially devastating, situations that life could hit you with sooner or later and yet the bills still need to be paid, and you need to put food on the table.
Your personal finance skills are your ability to handle life’s challenges in the most effective ways, maximizing your chances of success or survival, and minimizing the damages and other negative consequences. Will you be lost and devastated or will you have strong personal finance skills to stay in control and do the best that can be done?
While some of the personal finance skills and strategies are specific to the type of challenges you are facing, the most important of those skills are relatively universal. Your ability to cope well and stay in control depends most on your strengths in the following areas:
The people who walk out of a financial crisis unscathed are those who are prepared. The future is uncertain but a financial crisis is almost certain. You would be surprised to know that even wealthy folks face challenging financial situations from time to time. There is no immunity to it.
You have to prepare for one. How? Anticipate a potential cause of the crisis and plan accordingly. A medical emergency is very common. And it often leads to financial distress. Get a health insurance cover. Such emergencies can also be offset by an emergency fund. Setting aside money in an interest-earning savings plan that allows you to withdraw funds conveniently can help you when the car breaks down or when you temporarily lose your job or source of income.
While no one can predict the future, we owe it to ourselves to prepare for it. Prepare for emergencies because they almost always come unexpected.
[Read More: Planning For a Financial Emergency]
- Your actions
Nearly in every challenging situation there are a number of specific actions you could do to reach a successful resolution or to ease the pain and minimize damage. Similarly, if you take a different course of action you might end up in bigger trouble.
If there is no reasonable alternative in sight then you need to unlock your creativity and brainstorm some options. If there are too many options and difficult trade-offs then you need your judgment and your decision making skills to select the best course of action. You will most likely have only limited time and resources to make a decision. That can be overwhelming. Instead of panicking and letting your mind race in such a situation, write down your main thoughts and options. Consider them individually. This will help avoid cluttered thinking and give you a clear guidance of how to get out of the financial crisis.
- Your emotions
Understanding how to adequately handle your emotions (emotional intelligence) is an absolutely critical aspect in every given situation. Emotions are essentially messages from your inner brain to your conscious self. Your emotions can carry valuable clues for finding solutions and navigating through the most difficult problems you may face, if you learn to read them properly. However, like any concentrated power, emotions can turn highly destructive if mishandled. They can cloud or block your thinking and decision making abilities. Your inner voice, intuition or conscience is the most reliable navigator in preventing your crisis from ruining your wellbeing in the long term. Remember wealth follows health.
Understand and take control of your emotions.
People tend to get more stressed when they believe a situation is out of their control. When it comes to your money, you always have the power to make a difference, so recognize that choices exist for you to improve any financial problem. A difficult financial time can act as the time to reassess your position and aspirations. In the meantime, maintain an emergency fund and a health insurance cover to shield yourself and your loved ones during “rainy days”.