Financial emergencies can easily leave you feeling blindsided and stressed. Whether it’s a job loss, medical expense, or a bear market, a sudden change in your financial situation can come as a nasty surprise.
If you’ve recently been struck by a financial emergency, there are steps you can take to reduce the negative impacts.
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1. Evaluate your finances
During uncertain times, it’s important to have a full picture of what you have and what you owe. Try to get a complete look at all of your financial accounts, debts, and cash flow to understand where you need to make efficiencies. The Personal Capital Dashboard is a suite of free financial tools designed to help you always know where you stand when it comes to your money, in real time. You can aggregate your investment accounts, bank and credit card accounts, retirement plans, and more to get a holistic view of your finances. You can also use the dashboard to track transactions to see where you might be able to be more efficient with your budget.
Additionally, it’s important to evaluate your emergency funds and ensure you have the right amount saved–they can create a financial buffer that keeps you afloat in a time of need. Our Savings Planner tool can help you decide on the right amount for your emergency funds so you don’t have to make big changes to your portfolio while markets are down.
Lastly, take a good look at your monthly spending and your budget. Are there any places you could make efficiencies? Any extra streaming subscriptions, unused gym memberships, or wine clubs? These may seem like small expenses, but in a pinch, these extra costs can really add up.
2. Negotiate with lenders.
You may be surprised at how willing lenders will be to work with you. Lenders and issuers are currently putting together programs to help people during the epidemic. Your credit card company may be willing to lower interest rates, and in some cases, even temporarily delay minimum payments. Likewise, your mortgage company may be willing to restructure your payment plan. Utility companies also offer programs to keep the lights on and make payments affordable during times like this. Check out the extensive resources at the 211.org website or simply call 211 to be connected.
3. Look for other ways to make money.
So where do you turn when you’ve tapped your emergency fund?
You can always try to liquidate unused assets. Have a diamond ring you never wear? Or an olds bridesmaid’s dress hanging in the closet? Designer accessories? There are online platforms willing to pay you cash, or allow others to bid on your items. Depending on the quality of the garments, electronics, and media you’re willing to sell, you could quickly bring in needed cash.
If you don’t have any high-value items to “spring clean”, try selling your services instead—especially if you are out of work and have time on your hands. Try finding freelance work in your field of work (consultant, writer, designer, lawyer, etc). Many companies hire contractors for short-term projects . If you’re unable to find a job in your field, consider possible options like babysitting, walking dogs, driving for an app company, or running tasks for people.
4. Focus on the long-term.
If your financial emergency is accompanied by a stock market decline like it is for many during the coronavirus pandemic, it can be hard to watch your portfolio dip and do nothing about it. But if you’re investing for the long term, doing nothing is often the best course. Remember what happens when you sell investments in a downturn–you automatically lock in your losses. If you plan to re-enter the market later, you could pay more and not capture all of the gains from the rebound.
5. Talk to a financial advisor.
A professional, fiduciary financial advisor will provide an independent perspective on your financial plan. This way you can have an informed conversation, and get the honest, transparent advice you need through the tough times.
Personal Capital offers wealth management services, and our financial advisors are fully equipped to serve you remotely. Your Personal Capital advisor has unique visibility into your financial life as they see virtually the same information that you do on your Dashboard. This allows them to make highly personalized recommendations based on your entire financial life, not just the assets we manage.
And if you’re currently working with another advisor, ask yourself this: does your advisor use a real-time retirement planner, or other virtual tools, that allow you to plan together using a holistic view of your entire financial situation, including accounts he or she doesn’t manage? If not, then give us a call. We’re here to help.