There are many things that could put a family into a personal financial crisis. The death of the primary bread winner (like what happened to this family), or the loss of a job are two great examples. When a crisis hits your family, quick action is needed to have a speedy recovery.
I recently discussed the definitive action one needs to take during the first week of a financial crisis, or the golden week, a concept I introduced in my book, The Doctors Guide to Navigating a Financial Crisis. The reason for the urgency during the golden week is to stop bleeding money while you figure out what to do to recover from the crisis. If you quickly cut expenses, you will make your emergency fund last a lot longer. If you are having a financial crisis now, for example, you didn’t work for the last two months and are behind on everything, then read the golden week article as well to help direct your recovery.
The golden week is all about taking action to cut regular expenses. Now I want to emphasize the opposite. There are things you need to urgently procrastinate. I know that doesn’t make sense on the surface: urgent procrastination is an oxymoron. But if you are aggressive about procrastinating on a few things, it will make your emergency fund last longer which in turn will give you more time to recover.
What to Postpone
There are things you already have scheduled that you should postpone in the midst of a personal financial crisis. (This is not limited to the current pandemic, but anything that causes a financial crisis for you such as a job loss, major health issues, death, or natural disaster) The CME trip to Las Vegas and the family vacation to Disney World are good examples of things to put off. No matter how disappointed the kids might be, a financial crisis is not the time to spend money on optional endeavors. Even if you think you “need” the vacation or an emotional boost right now.
An elective surgery you have been planning, such as cosmetic dental work or an inguinal hernia repair, can wait a little longer. You are not likely to suffer if you put them off, but you will suffer if the money you spend for the procedure turns out to be needed for a more crucial expense, like a mortgage payment.
This is not the time to think about replacing your car, unless it is to purchase a cheaper car to eliminate a payment or to capture the equity in an expensive car you sell. Never consider swapping to a car with better gas mileage as a money-saving strategy. The drop in gas expense between the two cars rarely has a good effect on your finances when offset by the expense of the new car.
Your financial crisis may require you to postpone your retirement date. Retirement is all about having enough passive income so you don’t have to work every day. If your savings just took a big hit, you may not be able to retire as planned. You might need to work a few more years to rebuild your capital. An additional three years of work is three more years of retirement plan contributions, three more years for the stock market to grow, three more years of accumulated interest, and three more years you were not taking money out of your retirement plans. All those threes can really add up!
This might be a reason to wait longer to take your social security. For every year you postpone starting to take your social security, your social security income will be 8% higher when you do begin. This only works until age 70, when your social security benefits stop increasing if you procrastinate.
Minor home repairs will have to wait. No matter how bad the house needs repainting, it will have to wait another year. You might need to make an exception to this if your crisis recovery plan involves selling the house. If your road to recovery involves losing the house to the bank, don’t make any repairs.
Some parents really go overboard planning birthdays and other parties. I have been to some very expensive parties for 3-year-olds. Those are not luxuries you can afford during a financial crisis. Scale back on the presents and the party. A homemade cake and a few friends over to play will have to do. The child will love the party just as much without the financial setback to you.
If your crisis happens near Christmas, you’ll need to make adjustments to your gift-giving plans. Holiday travel might be out this year as well. Your parents will understand if you can’t come visit for Christmas. If you fill them in on your financial crisis, they may even pitch in to help with your recovery.
If your crisis involves a crash of the stock market, that’s another opportunity to do nothing. More money is lost by acting during a stock market drop, and locking in losses, than by procrastinating during a drop. Don’t change investment plans based on what the stock market did today, last week, or is expected to do this week. Invest for the long haul and these blips won’t matter.
The bottom line is to procrastinate on anything that is not absolutely necessary. You need to save cash for food and shelter, not vacations. You don’t need to see the latest movie in the theaters. It will be available next year and will be just as new to you then.
If you are experiencing a personal financial crisis in your household right now, please pick up a copy of my newest book, The Doctors Guide to Navigating a Financial Crisis. It is filled with the things you need to know and do to get yourself back on track and recover from your setback. Don’t waste any time, take action now, before you lose something else in the crisis. Don’t let the golden week slip away without massive action and urgent procrastination.