Weathering A Financial Crisis

Whether it's losing a job, facing unexpected medical bills, or a family member who needs help, handling a financial crisis can be downright scary. While you may experience a very rough ride for a while, there are some things you can do to make sure you'll recover more quickly:

Take Stock: Take the time to put on paper where you are. List your debts and the payments due. Write down your monthly expenses (looking through credit card statements and your checkbook register will help). Also create a list of assets that may be helpful in an emergency; savings accounts, retirement savings, securities or even antiques or collectibles that could be sold.

Talk With Your Creditors: If you have credit cards, student loans, or other unsecured debts, contact your lenders immediately if you think you will have trouble meeting the monthly payments for a while. Many lenders will work out a reduced payment schedule so you can get back on your feet. If you prefer, a non-profit credit counseling agency may be able to negotiate with your creditors for you.

Create a Paper Trail: Keep a notebook near the phone where you can record notes from conversations with lenders or other service providers, to avoid misunderstandings later. Keep copies of statements and correspondence.

Get Help: You may not be able to handle all your financial matters alone, so don't be afraid to ask for some help. If you'll be spending day and night at the hospital with a loved one, for example, ask a trusted friend, a relative, or a financial advisor to help you make sure your bills are paid on time, or to sort through medical bills and insurance correspondence.

Don't Jump to Conclusions: Taking money from your retirement account or tapping the cash value of your life insurance policy to pay bills or living expenses may have serious implications you haven't considered, so try to get advice from an expert before you take any major financial actions.

Stick to the Basics: If your income is less than usual, or your expenses are more than usual, keep a close watch on your spending. Even though it may seem stressful to cut back, it will be even more stressful to face a mounting pile of bills you can't pay when the crisis is over.

Use Credit Cards Carefully: Credit cards can be invaluable in a crisis, since they allow you to charge items and pay them off over time. But they can also be dangerous if you aren't careful and charge more than you can afford. If you do use credit cards, choose those with the lowest interest rates and pay them back as soon as you can to cut your costs.