Money Matters: April Showers

When it rains it pours. In the same week of having to shell out a gigantic tax bill which is eating up over half of our savings (we made the huge mistake of not having enough taxes taken out up front), Don and I have also been hit with $340 of unexpected car repairs, $220 in annual licensing renewal fees, and if that wasn't enough, Don also lost a filling tonight when he was flossing his teeth so we have a gigantic dental bill coming up and no dental insurance to speak of. Luckily, we just barely managed to avoid a huge vet bill also this month which would have been the real cherry on top kind of finish.

These are the financial storms that will gang up on you and pounce with unexpected tenacity right when you feel you finally have gotten things under control. And as demonstrated above, they like to come at you all at once, like a heavyweight champion pulling out all the stops for a knockout in the last round of a fight. I know you all can relate to these down pours. The truth about financial planning is that even the best laid plans are subject to the chaotic elements.

Financial storms will attempt to make you feel powerless and defeated. They will attempt to undermine your new found confidence in your financial discipline and side track you from your goals. But they need not be. As human beings we have two primary responses to a threatening situation. We can choose "flight" which is to avoid or run away from the situation. Or we can choose to "fight." Our initial response to a financial storm is always loss of control. But by fighting back and addressing the situation, we may gain at least a partial handle on it and prevent further losses without giving up all of the previous progress we have made. Below are a few steps to follow when fighting back during a financial storm which can help you to achieve a more desirable outcome.

Step #1: Seek Shelter
When a financial storm hits, the first thing to do is to take cover. Financial storms can often create as much or more stress as they do actual economic hardship. Whether you have been laid off, your car is on the fritz, or you are facing huge medical bills, you need to put yourself in an environment and surround yourself with a support system who is going to uphold you mentally and physically over the coming days. Also, give yourself a moment to acknowledge your losses but do not give in to defeat. This may be the smartest or the stupidest advice I have ever given, but have this mantra ready to repeat over and over in your head until it sinks in, "It's only money." It's a hard thing for a Cheapskate to say as we never like to let go of a dollar we don't have to, but the truth in prosperity is that happiness, fulfillment and security do not come from money. Money is a tool, nothing more and nothing less. You would be surprised at how much you can sacrifice and still enjoy a very prosperous life. By addressing your own frame of mind and surrounding yourself with a support system up front, the elements of the storm will seem much less harsh as you endure them from a place of shelter.

Step #2: Perform a Triage
When you go the the emergency room (at least this is true for the Animal Hospital, I have never been to a People ER before), a triage nurse comes out to greet you. His or her job is to evaluate your condition and assess the situation in terms of which patients are a priority in order of severity. So to do we need to approach the situation when a financial storm hits. In a financial storm, you may have several obligations competing for your attention. They may all seem like emergencies at the time. Don's need to spend $200 on a new wardrobe earlier this month for interview outfits sure did seem like an emergency prior to the other unaccounted for expenses that popped up. By sitting down and methodically evaluating the situation, you can prioritize your needs and come up with a plan to address them which will not only give you a greater feeling of control over the situation, it may also save you big dollars. Which of the items are most important to you? Are there some that can be put off until later (i.e. take public transportation for a while until you can get your car fixed)? Maybe some offer payment plans? Is there anyway to get the expenses reduced (coupons, hardship discounts, grants)? What is currently in your budget that you can live without in the short term to make up for the extra loss in income (cable, cell phone, fun money)? What additional resources can you draw on to cover the expenses (i.e. savings, credit, garage sales)?

Step #3 - Weather the Storm
Once you have assessed the situation and formed a plan, then you just have to stick with it and ride it out. Don and I were able to pull the taxes from our savings. For the additional car expenses and dental bills, I rearranged our budget to scale back as much as possible. We won't be able to put anything additional towards savings this month but if we can eliminate all other nonnecessity items and keep our food & gas budget below $275 for the next three weeks than we can still cover all of this months expenses on our income without having to dip anymore into savings or credit. It will be tight for us and we will have to remain focused, determined, and disciplined, but we can do it.

Step #4 - Start Rebuilding
Financial storms take a lot of focus and energy to get through. When we get through them, we need to congratulate ourselves and remember what our original goals were. If you had to dip into savings, it's time to start rebuilding the nest egg. If you had to borrow from credit, start thinking about how paying off that debt fits into your overall financial plan. Chances are you are going to be a stronger than ever Cheapskate once you have weathered a few financial storms as you will most certainly have picked up some new skills for stretching the budget and be more acutely aware of the value of a dollar and what it can do for you. As you are refocusing on your dreams and setting your path for the future, don't forget to incorporate the things you have learned. Are there additional things you can structure into your financial plan that will help prevent similar financial storms from occuring again (i.e., preventative health care, revising your tax deductions)?

In the end, none of us can escape the occasional burden through the economic hardship of a financial storm. All we can do is plan for them as best we can and follow the steps mentioned above when they do occur. Financial storms need not be the undoing of all that we have done to set ourselves on the path to prosperity. After all, it is true what they say that April showers bring May flowers. I, for one, am looking forward to May!