How to Avoid Crisis Living

I suppose the first step to avoiding crisis living is to define what it is. From observing people I have known who either live this way all of the time or go through seemingly endless crisis cycles it is to be in a state of self-perpetuating trauma. Usually a lack of money is involved along with a lack of preparedness. While most of us go through periods when money is tight and we have to spend it suddenly, such as when the car breaks down or the washer takes a dump, it is because we have foreseen the possibility of sudden expenses or of less money coming in and have prepared for it by establishing an emergency fund. Or maybe you have learned to fix some things yourself, or you have a side skill that can bring in some extra cash. Whatever the scenario, excluding what is truly catastrophic, such as a major illness or the death of a bread winner, it can usually be handled by being prepared. Even the drastic examples of illness and death can be somewhat alleviated by carrying the appropriate insurance, but the point of this is to address avoidable crisis living and not the unavoidable tragedies that can befall us.

Maybe an example is in order to underline my point. The following is based on the actual experiences of some people I know. A couple buys some new furniture for their apartment at one of those no interest until X amount of time stores. They didn’t really need new furniture, but decided they deserved it because they had never had any before. Next they get a large income tax return and decide to treat themselves to a new computer and TV. Everything is going well and they feel pretty good about themselves, until the car breaks down. They have no money to fix it so it sits. She is able to get rides to work but he can’t and his work eventually lets him go for poor attendance. With only half of their normal income now coming in they start to fall behind on their bills. Their bank is eating them alive with overdraft fees. Not wanting to get evicted or have the utilities turned off they decide to take out some payday loans. They can’t pay off the new furniture in time and get hit with the full interest amount. There are new payday loans to pay off the old ones. The cable is turned off because of nonpayment so the new TV and computer sit useless. The stress of all of this turmoil is putting a strain on their relationship and has left them exhausted and depressed. They are fully caught up in crisis living.

The point of including the above example is to illustrate how a couple of bad decisions snowballed into a financial disaster. Because they did not establish an emergency fund with the tax return and did not adequately distinguish between needs and wants everything came crashing down.

While there will always be plenty of unforeseen little disasters that sneak up on us one of the best precautions we can take is to realize they are always lurking, ready to pounce. It has been my experience that you will never get to a point in your life when bad things stop happening to you. It is how prepared you are to handle them that makes all the difference.

Related Reading:

Four Leading Causes of Overspending

What Financial Advice Would You Give to Future Generations?

Does a Financial Education Matter?