This is an excerpt from the April issue of The Cheapskate’s Guide to the Galaxy. (Go here to subscribe for only $5 per month.)
I’m going to start this issue telling you why February and March were terrible months for me. I had some major financial problems, but there’s a moral to the story, so bear with me. (I’m not just whining or looking for sympathy, I promise.)
What I want you to take from this is how just about anyone can run into hard times financially, no matter how carefully you try to prepare. Although I know there should be no shame in this, I was terribly embarrassed when I ran into problems lately.
It’s what you do to bail yourself out of your financial problems that determines whether they’ll be ongoing or whether you’ll recover and get back to a state of comfort and security.
Medical bills took a chunk out of my financial security.
Everyone has heard about the terrible flu going around the United States this year. It killed thousands of Americans swiftly and without mercy. So, when my youngest daughter became ill, I immediately began doing everything possible to help her recover. She’s normally a healthy child and we eat well, take all the right supplements, and nurture our immune systems. But, she works with the public in her program and flu happens.
Soon, I had run through my arsenal. We tried all sorts of home remedies and supplements, but this virus was relentless. Knowing as I did how many people had died from it, I took her to the doctor and the hospital. Not once, not twice, but three times.
We do not have health insurance because our monthly payment is double what I pay for rent, nearly $2000 a month for 60% coverage after we pay $10,000 in deductibles. Instead, I sock away money for paying in cash. (Even after our recent crisis, my decision is the most cost-effective one.)
With two kids in college right now, my emergency fund is like everyone else’s – good but not unlimited. Within 3 weeks of my daughter’s illness, I’d gone through my entire emergency fund and maxed out two credit cards that are ordinarily unused. I don’t regret it for a second because her flu turned into bronchitis, then viral pneumonia – she needed medical care.
But I began March in overdraft in all three of my bank accounts and in thousands of dollars’ worth of credit card debt. I used a third credit card to buy gas to get everyone where they needed to go and I didn’t have a penny to my name.
It was a sickening feeling, especially after I’ve worked so hard to create an atmosphere of financial stability for my children. I felt physically ill every time I looked at my bank account online or saw another bill in the mailbox. I was embarrassed, frazzled, and feeling desperate.
Some of you may read this and think, “Wow, Daisy’s supposed to be telling us how to get out of debt and here she is maxing out credit cards and telling us about it. Unsubscribe!”
You can do that, but please consider continuing to read this article, just in case you fall on hard times yourself.
It can happen to anyone.
Obviously, I’m not telling you about our financial saga to make myself look bad. I’m telling you because I want you to know that no matter how much you try to do everything right, financial problems can happen to anyone, at any time. Whether you have $100 in the bank or $100,000 in the bank, something can happen that wipes out your emergency fund just like it did mine.
This doesn’t mean that you failed financially – it means that circumstances can affect you, just like they do everyone else, no matter how careful you are.
Before my daughter’s illness, I was doing everything “right.”
- I had enough money in my emergency fund to carry me through 3 lean months
- I had numerous credit cards with zero balances
- My only debt was my car
- My kids are going to school without student loans
- I opted out of health insurance because it was more financially practical to pay cash (and I still agree with that decision)
Everything was great.
Until it wasn’t.
It’s what you do next that makes all the difference.
So, here I am, the Cheapskate Queen, with maxed-out credit cards, no emergency fund, and little in the way of disposable income.
But here’s the good news. If you know how to deal with these kinds of emergencies, it’s only temporary.
Here are the steps I’m taking to get things back on track.
- When I got paid next, I put $500 in my emergency fund.
- I found some places to cut my monthly expenses. (Go here to read about auditing your expenses)
- We ate from our pantry and used personal care items from our stockpiles.
- I immediately began snowballing debt to pay it off quickly (Go here to read about the snowball method of debt repayment)
- I organized a yard sale to make some extra money and listed some bigger items on Craigslist
- I worked on some extra projects to bring in some cash, all of which went to debt.
- We pared our expenditures to the bare minimum this month.
How I raised some money.
Lots of folks who knew my situation recommended that I put up a GoFundMe page and ask for donations, but I just couldn’t bring myself to do it. This isn’t to say bad things about people who do so – I’ve donated to many of them myself. But I felt that my situation, while exceptionally stressful, was not dire enough to ask for people to just give me money and that I had some resources to earn the money instead.
Because I’m a writer, I finished a book I had been working on and put it up for sale immediately. (You can check out my new book here.) I am selling it for a low introductory price to sell lots of copies quickly and help myself out of my current bind. Of a necessity, the price will go up once it’s on Amazon, but for now, I can sell it for only $5.49 per copy.
You may have different talents that you can put to work to make extra money quickly, like consultations of some sort, custom-made handcrafted items, the food you’ve raised on your homestead, childcare, tutoring – you get the idea. Get your product or service to market quickly and reasonably, and worry about charging higher prices later.
We worked together as a family to reduce our expenses to an all-time low and use the supplies we already had on hand. While I still have some debt, I’ve begun to rebuild my emergency fund and pay things off as quickly as possible. We were able to do damage control and keep the negative effects of a bad month to a minimum.
Keep reading the April issue for more money-making ideas and a guide to having the perfect yard sale. (Subscribe here)
And don’t forget to help others. As bad as your situation may feel, there are probably other people out there in the same boat or similar. I offered a PDF copy of my book to those who can’t afford it. (Email me if you fall into that category: daisyluther2 at gmail dot com). This is my personal philosophy and it’s good in two ways – you’re helping someone out and you never feel as sorry for yourself if you are in a position to help others.
Here are the steps to take when financial disaster strikes.
The first thing to remember is that you must forgive yourself for getting into trouble financially. It can – and does – happen to just about everyone. It’s how you deal with it that determines whether you’ll regain your equilibrium afterward.
- Audit your situation. See where all your money is going, see how much debt you’re in, and see what the most immediate ramifications will be.
- Take care of the most important things first. In most situations, keeping your home paid for (rent or mortgage), paying utilities, and making your auto and insurance payments should come first. Take care of the things that will have the most immediate ramifications first.
- You may have to make some late payments on less vital things. If so, communicate with those to whom you owe money and try to make arrangements. This may affect your credit, but by communicating with them, you can keep damage to a minimum.
- Cut your expenses. When you audit your situation, you may find some places that you can slash your regular expenses. Don’t hesitate to reduce services that are unnecessary or to whittle down your monthly obligations. (More ideas here)
- Put a little money back into your emergency fund as soon as possible. This may sound counterintuitive but having a bit of money for minor emergencies means that you won’t need to rely on credit cards for these things, putting you even further in the hole.
- Pay off your debts. Use the snowball method to attack your debts. Start paying these off AFTER you pay for the things I recommended in step 2.
- Use the things you have on hand. Delay a trip to the store for as long as possible by planning a menu using the food in your pantry and freezer. (Think about the stockpile challenge we did and use those strategies. Get some ideas for meals from your stockpile in this article) Use the shampoo, soap, and personal hygiene products that you have already instead of buying new products.
- Raise extra money. This may come from selling things you don’t need, taking on some extra work, or by creating a product or service to sell. However you do this, use the extra revenue wisely to get out of debt and to rebuild your emergency fund. There are more ideas for making money quickly in this issue.
It’s a difficult, humiliating situation, but it’s something you can fix. If you are in a longer-term, more dire situation, this article may be helpful to you.
Things will get better.
Things might be tough right now but know that it can happen to anyone, even me, the Head Cheapskate. Take the right steps to regain your financial equilibrium and limit the long-term damage of your situation.
I hope that knowing it happened to me, too, is helpful.