Monday, October 25, 2010

Money Monday: What Not to do in a Financial Crisis


A financial crisis can blindside you with no warning. If you lose your job or someone in your family has a serious illness, you can find yourself in financial trouble almost instantly.
It’s no less distressing, however, when a financial crisis comes at you in slow motion but you can’t seem to do anything about it. That’s the case when every month you have a little more money going out than coming in, and every time you sit down to pay your bills it’s just a little bit harder.
Either way, the most natural response is to panic. Whether you’re in a sudden crisis or a slow-motion disaster, remember to hold steady and avoid making these common mistakes:
  • Staying in denial. If you don’t know how bad it is, it won’t hurt, right? Wrong. People say things like, “There’s no point looking at all the bills – I can’t pay them anyway.” Open the bills! Read every statement and make a list of what you owe. Make a budget so you know how much it takes to get by. Look at all your options, including drastic measures like sharing living space or moving. You can’t make the best decisions unless you know where you stand.
  • Giving up. Throwing up your hands is not an option. There is no easy way out of a financial crisis, but there is always a way. Avoid bankruptcy or foreclosure if at all possible – except for extreme cases, they are too expensive and demoralizing and don’t solve the root problems.
  • Taking desperate risks. The lottery is out, of course. (Believe it or not, people do gamble when they’re desperate.) This is not the time to start a new business if you don’t have enough money to give it a fair chance, or to take out huge loans to invest in real estate. Play it safe.
  • Being afraid to take any risk. It’s scary to look for another job, possibly in a different state, or to go back to school. Remember, no choice is risk-free. Measure the pros and cons, make your decision, and go for it.
  • Feeling embarrassed and alone. It may or may not make you feel better to know how many people struggle financially just like you’re doing right now. However, it is encouraging to know that so many people have survived difficult financial times. You can survive and go on to reach your goals, too!