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How To Survive A Financial Emergency

You were in a severe car accident and suffered a spinal cord injury. You are now paralyzed and can no longer work. The bills from her injury are starting to pile up. You've already depleted your emergency savings. Without an income, it has become tough to pay necessary household expenses let alone thousands of dollars in medical bills. So, how do you survive a personal financial crisis such as this example?

Examine the Situation

The first step in any financial crisis is to evaluate the situation. Panicking about the situation won't solve any problems and will only make things worse. It is essential to try to remain calm as you evaluate the problem. This will help you make the right choices and formulate a plan of action to get out of the mess.

Evaluate Your Options

What has caused the crisis? Is there anything that you can do to remedy the situation? In the above example, the financial problems were caused by a personal injury that was related to a car accident. Nashville Personal Injury Attorney Keith Williams says “the person above could be entitled to compensation from the other driver’s insurance company if the accident was the other person’s fault.”  

Even you are at fault in an accident; you might still be eligible for compensation if the injury was due to a design defect of the motor vehicle you are driving. A real-life example of this occurred back in 2014. A jury ordered Toyota to pay more than $12 million to reality television star Chelsie Hill after she was paralyzed in an accident. Even though the accident occurred because the driver of the vehicle in which Hill was riding was drunk, the jury still found Toyota partially to blame for Hill's injuries. The design of the seat belt in the vehicle was defective, which caused Hill's paralysis. Therefore, the jury awarded her 12 million dollars for her injuries. This example illustrates why it is so important to look at the cause of the financial problems to see if there is any way to remedy it.

Determine Your Plan of Action

After examining why you are in a tight financial situation, you'll need to come up with a plan of action. Is there anything that you can do to remedy the situation? Your plan of action will be based on your situation. If you were injured and you believe that you might be eligible for compensation, then the first step in your plan of action should be to consult with an attorney. Maybe you were fired for being a whistleblower at work. In that case, your plan of action would include speaking to a lawyer to determine if you have a wrongful termination lawsuit. Maybe you are buried in debt because of a business failure. You see no way to get out from the crushing debt. Portland Business Lawyer says in cases like these, “you might want to consult with a business attorney to come up with a plan of action.”

Prioritize and Cut Spending

During a financial crisis, you must make sure you are prioritizing spending. Pay the important things first:

  • Food and shelter

  • Utilities

  • Vehicle or transportation expenses for work

  • Attorney fees

Having a written budget can be beneficial. If you are really in dire financial straits, don't worry about prioritizing non-secured debt, such as credit cards. Those can be discharged in bankruptcy. Food, shelter and having a vehicle to get to work are far more critical.

The next step is to cut spending as much as possible. Cut out any non-essential items. Don’t waste money on things that are not necessary until you get back on your feet.

Don’ts for Dealing With Financial Emergencies

You can unknowingly make your financial situation worse by making the wrong decisions. Below are some don’ts for dealing with financial emergencies.

Panic

When a severe financial emergency occurs, your instinct might be to panic. However, severe anxiety and stress will only make it difficult for you to make rational decisions. Plus, it could cause long-term damage to your health. If you are having a hard time coping with a financial problem, talk to a therapist.

A therapist can help you develop coping skills to manage the stress. Plus, they can also treat any anxiety or depression that you might have related to the crisis that triggered the financial problem. For instance, if you were paralyzed in an accident, it is common to experience depression as a result of the significant life change. A therapist can help you cope with your new reality.

Borrow money

If you are in a financial crisis, then you might be tempted to take out a loan to help you stay afloat. However, you should reconsider that idea. Taking out a loan or credit card could make matters worse. San Francisco bankruptcy attorney JLG Lawyers say "if you are having serious problems repaying debt, you are facing judgments or wage garnishments, you should talk to a bankruptcy lawyer instead of getting deeper in debt."

Commit A Crime

People who are facing serious financial problems sometimes do commit crimes to try to deal with the situation. You might be tempted to falsify overtime records or to take cash out of the register at work and put it back later or lie on a food stamp application to get benefits. These actions are all no-nos. According to Alaska Criminal Attorney D. Scott Dattan, these actions can lead to jail time and fines.