Raging wildfires, hurricanes, civil and political unrest — not to mention a global pandemic. 2020 is turning out to be…well, quite an interesting year. And if you’re dealing with the loss of income and the potential threat of an eviction, how can you protect your finances?
Just like how you should have a home evacuation kit and emergency plan in place should a natural disaster strike, creating a plan should you be met with a financial upheaval — a job layoff, furlough, or medical emergency — could save you from further stress and disastrous consequences.
Let’s take a look at what you can do to safeguard your money should a financial disaster strike:
Research Credit Options Beforehand
Being blindsided with a financial emergency could have you resort to taking drastic, less-than-ideal measures, such as racking up a small fortune in credit card debt. Or you might be tempted to take out a payday loan, which are often fairly predatory toward consumers in distress.
Instead, research credit and loan options before you’re met with an unexpected situation. Preparation is key. The good news is that you have quite a few types of credit and loan options at your disposal — credit cards, online-only lending platforms, and personal loans to start. When you receive an offer for a credit card, read the fine print so you can get your head around the terms, conditions, rates, and fees. You want to know what you’re getting into, and whether the offer is a good fit for you.
Check Your Credit
To see where you fall in the eyes of creditors be sure to check your credit report before shopping around. The easiest way to do this is to order a free copy of your report from AnnualCreditReport.com.
As for your various credit scores, there are many credit monitoring services, money management apps, and credit card networks that offer a free credit score. These might be based on one of the scoring models provided by FICO or VantageScore, but the score these services and platforms offer should be within close range. If you need help making sense of a credit report and your credit score, consider meeting with a trained credit report expert. They can walk you through your unique report and answer any questions you might have.
Know When You’re Entering the Danger Zone
Just like how you’re alerted when a hurricane or wildfire is approaching where you live, create markers of sorts to inform you when you might be heading into financial danger.
For example, if your savings fund dips to a certain number, or the balance on your credit cards hits X amount, then take those as signs you’re creeping into “warning” terrority. And if your savings sinks to an even lower number and your credit card balance reaches an even higher amount, then your finances are in a perilous state.
To prevent your finances from entering dangerous territory, think of what you can do to avoid it from happening in the first place. And should you fall into that territory, what can you do to turn things around?
Look Over Your Budget
Pour over your spending plan. See if there are any ways you can trim your budget. Drum up ways you can stretch out money in case of an emergency. Can you save on groceries, go on a no-spend challenge, or take advantage of any hardship programs? By saving money now, you could potentially free up money to put toward your savings or make greater progress on your debt in case a financial disaster strikes.
Review Additional Sources of Income
If you’re currently employed, can you take on additional shifts or hop on a project and potentially make more money? Or maybe you can take up a side hustle. There might be some side gig options that you can do safely that don’t require a ton of equipment or materials upfront to get started.
Another route to take? Perform a side hustle that leans on skills and equipment you already have. For instance, if you have a bunch of handyman tools, you could offer your services on a platform such as TaskRabbit.
Revisit Your Debt
It’s not always pleasant, but before financial disaster strikes, you should take the time to review and assess your existing debt load. Are you able to comfortably manage your debt? Or are you skating on thin ice? If the latter, revisit your debt repayment strategy, and see what you can do to make your debt load more manageable.
You can go the debt consolidation route, or the debt refinancing route. Another option is to hop on a debt management plan (DMP). With a DMP, you work with a third party, which can help you come up with a custom plan that’s in line with your needs and situation. A DMP can also simplify things — you make a single monthly payment to the party handling your plan, and don’t need to deal with calls from debt collectors. Plus, you might be able to lower your interest fees or payments.
Setting a financial disaster plan in place now could prevent your finances from taking a big hit should you experience a money shake-up. Creating safety checkpoints, knowing what the warning signs are, and making sure your money ducks are in a row could help you avoid further duress.