Updated on 01.15.07

Crisis Management: When A Disaster Causes Your Expenses To Exceed Your Income

Trent Hamm

Every once in a while, life will deal us a disaster: someone dies, the primary household income disappears, or a major benefactor stops paying for things. Suddenly, you find yourself with more monthly expenses than income and no obvious way to bolster that income immediately. What do you do?

Here are eight things you can do if life deals you a serious blow.

1. Don’t panic! The less time you spend crying and wishing things were different, the more time you have to save yourself from an even bigger disaster. Sit down and realize that life will go on and you’re much better off taking the bull by the horns and tackling the problem.

2. Contact your creditors immediately. Contact every group with which you have a debt, relate your situation to them, and see what programs they have for people in your situation. Almost all creditors have programs that will reduce your payments in such situations. For example, it’s quite easy to get forbearances on student loans.

3. Eliminate unnecessary monthly programs. Chuck things like Netflix, XM Radio, eMusic, and other monthly bills you don’t really need. List all of your monthly bills and chuck as many as you can. Get rid of those premium cable channels. Remember, you can restore these things when your financial situation is straightened out.

4. Downgrade some of your required expenses. If you’re leasing an expensive car, stop by the dealership and ask what you can do to switch to a less expensive model. Again, they’ll work with you; it’s much more cost effective for them to deal with you this way than doing the collection dance. Lower your cell phone plan. Look for ways to trim your energy bill. Try to reduce your insurance premiums by raising your deductibles. Just move through each regular expense and do what you can to reduce it.

5. Ask family and friends for help. These are the moments where your true friends and family will step forward and lend you a hand. Call them up and tell them what’s going on and ask for any help that they can provide. In the past, I’ve basically invited friends and family to live with me, to eat every meal with me, and have given them cash gifts. One thing, though: don’t ask for a loan and don’t accept one if it’s offered. Turn it down politely, because an ongoing loan situation is one that can destroy a relationship.

6. Sell any unnecessary fully-owned assets. I have a couple of assets that I enjoy but that I can sell for a decent amount of money if a major financial crisis occurred. Own some fine jewelry or art? Now is the time to perhaps take that painting to an art dealer and put a print up on your wall instead.

7. Find a free channel for your frustrations. I’ve seen people who find themselves in this situation actually go on a buying spree and make the situation worse. Instead, find something free to do that can burn the feelings inside of you. Take up jogging, cooking (chopping vegetables takes away my frustrations at times), or, well, writing a blog (Blogspot is free, after all).

8. Ask for a raise. Ask for a meeting with your boss as soon as you can. Sit down and explain what has happened and request a raise. If you’re a solid employee that your organization wants to keep, they will help you out if your story is true. This doesn’t mean that you should make up sob stories to try to get a raise, because that type of action will destroy your relationship with your employer.

Such manuevers can do a lot to bring your monthly budget into balance after an unexpected event.

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  1. moneymonk says:

    3. Eliminate unnecessary monthly programs.

    I think this should be done w/o a disaster. Little things like that consume our disposable income, That discretionary spending depletes our savings.

    One thing, though: don’t ask for a loan and don’t accept one if it’s offered. Turn it down politely, because an ongoing loan situation is one that can destroy a relationship.

    very good advice!

    It’s always good to save as much money as you can.

  2. Wanda says:

    Great advice, but I’m not sure asking your boss for a raise is the best way to proceed. Every thing I’ve read about negotiating raises say that you should ask for raises because of documentable results that you have achieved for the company, not because you need the money due to a personal situation.

  3. Trent Hamm Trent says:

    You absolutely should talk to your boss if such a crisis occurs. The fact that you are making this situation clear to your employer demonstrates that you do in fact value your job; if you hide it, it shows just the opposite when the news comes out.

  4. Nathania says:

    I’m glad you wrote the part about not accepting loans.

    On a further note, people should not OFFER loans to people in crisis. JUST GIVE freely from your heart (within your own means to do so, obviously).

    I wish I had known the part about contacting creditors during unemployment. My fear of dealing with finances has royally screwed up my credit.

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