How to prepare for the financial crisis – Personal Contingency Plan
How to create a personal contingency plan and survive unemployment when you are broke and when everything seems so unsure now.
Many people are preparing for this financial uncertainty by buying a year’s supply of toilet paper (why?), but have you made a contingency plan for your family?
What is Personal Contingency Plan?
It’s just a simple way to make sure you have plan of action in place ahead of the problem and not trying to figure it out during the problem. It’s your financial guide to survive unforeseen event, like unemployment.
And it will be different for each individual or family.
Sit down with a journal and start a contingency plan and tear apart every cent you owe in dept and create or revamp your budget. resource
Having a written plan for every “what-if” scenario will help you better if ever faced with unforeseen event. Just write things down as they come to you.
Don’t get overwhelmed. Your personal or family contingency plan is not written in concreate. You can and should regularly make changes to it.
Think about it as fire escape plan.
Here is what I mean:
- Can I leave on unemployment insurance?
- How can I earn extra money?
- What expenses can I cut?
- How much my grocery budget allowance will be?
- Will I need to postpone my retirement or opposite take an early retirement?
How to Create a Personal Financial Contingency Plan?
Survival Planning 101: Do you have plan B,C,and D?
So first and foremost, if you want to prepare for financial turmoil you may already facing or may face soon, start to gather all available to you information.
#1 Gather All Your Sources of Income
- Spouse income
- Income from children living with you
- Government subsidies and benefits
- Do you have any gift cards laying around?
- What about points from a credit card that you can transfer into a gift card?
- Frequent Flyer points in case you need to travel
- Spring clean your house and sell what you can
All these assets can help you lower your monthly expenses, but only if you use it wisely.
I created bookmark folder in my Chrome browser and adding all the information that I came across there, for future references if needed.
When you come face to face with unforeseen event your lizard brain will kick in and you will lose ability to think rational. That’s why to be prepared in advance is so important. I am speaking from experience here.
Oh an one more thing, check out Canada.ca for latest updates and information on government financial assistance.
Next, you need to know when your unemployment benefits will run out. Can you take temporary position somewhere? Can you get a job at a local Tim Hortons or Starbucks?
RELATED: 17 creative ways to make extra money on the side
When We Have A Plan, We Have Footsteps
How to Survive Economic Downturn If You Unemployed and Broke
“If Plan A fails, remember that you have 25 letters left.”
Go on a Spending lockdown.
1// Think of what your options are at this point.
2// What are your options that, giving the choice, you didn’t want to have to take (but now might need to)? They may not be what you want, but they are still options that you may consider.
When you faced with an obstacle that you didn’t plan for, you must find a way to go around it.
Sit down an calculate all the income that coming and all the expenses that you have. Play around until it balances out.
You can download my simple budget spreadsheet that will calculate for you automatically.
TIP: Try to stay away from borrowing from your savings or credit line as much as possible.
Let’s go through the list.
#2 Essential Expenses
1// Housing
You must live somewhere, right?
Plan B, C, and D:
- Negotiate with the bank to lover your mortgage payment
- Negotiate lover homeowner insurance
- Rent out spear bedroom
- Move back with your parents
- Move-in temporary with your friend
REALATED: A Complete Guide to Renting Out A Spare Room or A Basement for Extra Money
2// Food – this means groceries.
Find a chipper recipe to make at home. It means to by groceries just enough to feed you and your family breakfast, lunch, dinner and snacks. You can find lots of ideas on Pinterest or YouTube.
Do you have extra food in your house, that you can plan meals around to lower your grocery bills? Knowing what you have can also prevent you from buying things you don’t need.
Cut eating out at restaurants completely including coffee at Tim Hortons.
Go to a local food bank if things get tough.
3// Utility Bills
Do your laundry during off-peak time. Turn off light when you are living the room. Every small thing counts.
#3 Nonessential Expenses
Stick to the necessities and illuminating nonessentials during financial crasis. You must seriously cut out everything in your life. The last thing you need is to be spending money when you aren’t earning any.
Change your mindset, think about your new income, not the income you had before.
1// Can you live just with one cell phone or change to a no data plan?
2// Do you need a landline if you still have one?
Because you need at list one phone number, for potential employer to contact you and to keep in touch with friends and family.
But does each member of your family need their own cell phone. You can cut prepaid plan. If you on a contract see if you can negotiate chipper plan.
3// Cut cable, Netflix and Disney Chanel.
You can still watch most of your favorite shows through antenna or on YouTube.
4// Do you need a car?
If you have two cars, is it possible to get away with one car or none (temporarily)? It’s a hard question for many. We leave without a car for the last 20 years and it’s not as hard as you think.
5// Minimum Debt Payment.
Just temporarily go down to the bare minimums on a debt payment.
Can you get a better credit card deal by transferring balance to another card with a lower?
The truth is, there’s no substitute for proper preparation, and putting plans in place if the worst should happen can provide reassurance during a financial turmoil.
You are in control of your environment, it’s all about adaptability.
#4 Emotional Stress
With financial hardship comes an emotional stress, worries, anxiety, or even possibly depression.
Losing a job is stressful. Not only do you lose a source of income, but you feel like you’ve lost a sense of purpose. So, it’s vital to have a roadmap in this most uncertain of situations.
It’s O.K. to allow yourself a few days to grieve, but don’t let yourself be crippled by fear or self-doubt.
Dr. Jud psychiatrist created YouTube playlist, that will help you to deal with anxiety during uncertain times.
Lastly, don’t keep your financial situation a secret, especially from spouse and children. It’s nothing to be ashamed of.
Unfortunately, if you are already in financial turmoil, there is lots of emotions you are going through, and you have to make large decisions almost immediately in order to lessen financial impact. So, read through the above a few times and start to prep yourself. Remember it’s just a faze in your life and it will come to an end, and you can use some of the info above to put yourself in a better financial situation.
Emergency Fund
I can’t end this article without mentioning importance of saving for Emergency.
Not every emergency in your financial live will have government backing. That is why it’s very important to have EMERGENCY FUND. If you are earning enough money to live on, start saving for Emergency Fund now!
As David Ramsey suggested it should be number ONE financial priority before paying out debt and saving for retirement.
Knowing that you have enough money save to survive even a year (O.K. at list three month) of a financial crisis is better then scrambling for a dollar in panic.
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