Financial crisis can be quite painful: But, there is help

You CAN Survive a Financial Crisis

Financial crisis can be quite painful: But, there is help
“U.S. unemployment rate drops to 7.5%, but some Iowans still struggle”

The above headline from the Des Moines Register on May 4 gave a true picture of how some Iowans are not realizing the positive outcomes. This quote by Mark Vitner of Wells Fargo may give a clue about why this may be for Iowans.

“I’m not blown away by this jobs report at all because of the composition — there are an awful lot of low-wage jobs,” said Mark Vitner, a senior economist at Wells Fargo, the largest private employer in the Des Moines region. “About 45 percent of the jobs created in the past three years have been low-wage jobs.” (Des Moines Register, May 4, 2013)

Almost everyone faces a financial crisis at some point in their life. The cause might be one or more of many things. It may be due to a medical emergency for which there is either no insurance or insurance that is insufficient to cover all the costs. With the current economic conditions, it may well be a job loss. It may be that there is an unsuspected household expense, such as the refrigerator dying. whatever the cause, a financial crisis can be quite painful. But, there is help.

One solution is to take a second job, or for the other spouse to take a job if they don’t already have one. This solution is somewhat limited for a number of reasons. Increased taxes is one drawback. Also, when the second spouse goes to work, their income is often limited by childcare expenses and other increased expenses simply because of the employment. So, the expected income will of necessity be limited.

Another solution might be to get a short term, or payday, loan. This is one of the more expensive options, but is easy to obtain and can bring almost instant relief to the financial crisis situation. The interest rate is high, and the relief is only temporary, but if the emergency is a one-time, short term situation, this might well be the solution. But, if the situation might be long term, this might not work other than to buy some time.

If you have any assets, it might be possible to liquidate them, or possibly to borrow money at a lower interest rate, using the asset as collateral. Though the value of the collateral will only be a percentage of the total value of the asset, it may be enough to help you though the financial crisis. Collateral means you put up the value of the asset to insure payment of the loan. If you find you can’t pay the loan back according to terms, you will lose you asset. Since its value was equated to only a portion of its value, that means you have in effect sold your asset at way below its value.

Though the suggested solutions bring only temporary relief, you will still face the situation and need a longer term solution. There is really only two ways to handle a financial crisis. They are to increase the income and/or to decrease the expenses. Either method is limited in scope, and it may require both to alleviate your situation.

Of course, a second job or a spouse going to work will increase the income to some degree. However, this may not be enough. There are other ways to increase income. One is to ask for a raise at your current job. This may or may not be possible. Many people enter into a business of their own, many of them online. This allows working from home and can sometimes bring in a significant amount of extra income. But, this is not a get-rich-quick situation. It will require hours of work and even some financial outlay. It is important to research the opportunity well. Be careful of borrowing money to take advantage of a deal. You are already in a financial crisis. You don’t want to escalate that situation.

You may find that you need to decrease expenses as well as increase income. Though the ability to decease expenses is limited, it is one of the easiest ways to alleviate the financial crisis you are experiencing. It can be painful to reduce expenses. It means changing the lifestyle you have become comfortable living. It is something in which the whole family has to get involved.

To start with decreasing expenses, it is necessary to get a clear and accurate picture of you financial situation. You will need to keep a very close account of where you money goes for at least the next month. You must account for every penny. Those small purchases of a couple of dollars can add up over a month. Such things as a movie rental or a fancy coffee may go unnoticed, but the add up to a significant amount over time. Check your spending for any such items.

Some expenses cannot easily be changed, such as the amount of rent or a car note. But, most expenses can be decreased a bit. Just a small decrease in each area of these expenses can add up to a large savings. For example, decreasing energy consumption can save on energy bills. For the duration of the financial crisis, cut out all expendable items like movies, coffees, etc. Put off any purchases possible, such as for clothing, or special classes for the kids. It is temporary, and you will eventually recover from this financial crisis and be able to move on to the lifestyle you desire.

Written By: Evelyn Guy
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