How to Manage Financial Storms

Tue, Jul 21, 2009

When was the last time you were caught in a financial storm? Sometimes when we’re in the storm it may seem like there is no way out or few options in front of us. And sometimes we just want to run for cover and avoid the storm all together.

We all have financial storms. The severity of the storm depends on how well we’re prepared for it. If we don’t have money in savings and are swimming in debt the financial storm might turn into a hurricane. However, as the unexpected storm approaches and we have 3 – 6 months of living expenses in savings we might downgrade that storm to a rain shower.

Manage financial storms

To manage a financial storm, you must become a good storm forecaster. Financial storm forecasters see the storm on the horizon and make changes to account for what lies ahead. Of course no one can be perfect at forecasting as you probably understand from watching your favorite weather man, but paying attention can make a dramatic difference in the type of storm you have to weather.

Anticipate changes

The first question we need to ask ourselves is: do we see clouds in the sky? In other words, do we anticipate life changes within the next year? Good examples of these might be a new addition to the family, moving, poor company performance where we’re employed, health complications and more. All of these things may be good indications that we’re going to need to spend some money and we need to get prepared.

Is it really a financial storm?

After seeing something on the horizon, we then need to ask ourselves – is the storm really a financial storm? Questions we might ask to identify a financial storm include the following:

Is their cash on - hand in emergency savings that might be sufficient? If so, this may downgrade the urgency. Emergency savings is there for a reason. Sure it was hard work building it, but it’s their to use for an emergency, so don’t hesitate when you need it.
Is it truly a need? In other words, can we wait several days or longer before making a decision? If so, delayed spending may bring clarity to help us really determine a want from a need.
Is it money required for health, shelter, food or transportation? Generally, these areas rank highest on the family priority list. If the expense is lower in priority, we need to try to delay the expense as discussed.

Steps to deal with a financial storm

So, we have determined this is a storm and action is required.

1. Don’t panic!

There is hope in God. God can do amazing things when it comes to our finances by way of trusting Him. There is a reason for this storm which may be unknown to us. Trusting God in the situation, no matter how grey or ominous it looks, will bring peace and comfort. Pray, stop and listen for guidance!

Seek first his kingdom and righteousness, and all these things shall be given to you (Matthew 6:33, NIV)

2. Involve others who can help

We can’t be afraid to ask for assistance or counsel. We need to seek assistance from a financial counselor or church pastor. Believe me, having another perspective on the situation can be valuable, especially if it helps us make a decision that would prevent the use of credit cards or debt.

The way of a fool seems right to him, but a wise man listens to advice (Proverbs 12:15, NIV)

3. Conduct serious and focused brainstorming to identify options

There are too many ideas to list and it depends on the size of the storm, but the below may be a good start if a series amount of cash is required.

Sell a large asset such as a boat or motorcyle.
Have a yard sale.
Get a temporary part-time job.
Reallcoate budget spending to account for the expense, i.e., cut out entertainment or eating out for a defined period of time.
Slow down the debt payment plan or seek credit counseling assistance to decrease payments if there is no wiggle room in the budget
Seek assistance from family.

A last resort

The last resort would be the use of credit or debt. This is a hard thing for me to mention because of my strong desires to pursue debt free living, however, if health is involved or other serious issues this may be necessary. However, we shouldn’t take this step without financial counsel. If credit is used, the important next step is to put a debt plan in place to pay it off and get back on track.

Financial storms, while unpleasant, are a test of our faith and can help us determine quickly how orderly we are managing our finances. The better prepared, the less severe.

What are your thoughts on steps to take to manage financial storms? Can you think of other steps that may be important to consider?