by Ryan H. Law
As my family and I were traveling back to Columbia this past Summer we saw off in the distance to the southeast a rough storm. Lighting was flashing all over the place and it looked as though it was raining heavily. We were traveling east so I was hoping we would bypass the worst of it, then the road started turning southeast. We were headed directly for the storm.
We hit it a few minutes later and now instead of lighting striking off in the distance it was hitting around us in every direction. It was pouring rain and then the hail started. The hail was at least quarter-sized and it was pounding our van. We couldn’t see more than a few feet ahead of us and there was nowhere to pull off and take cover.
In the midst of this extremely powerful storm we were relatively safe. Everyone was driving slowly and we were protected by our van. Some dangerous things could have happened, but we were safe, though a bit rattled, when we finally got out of it about 30 minutes later.
At one point during the storm I looked over to the right and was shocked to see a man riding his bike through this storm on the frontage road. I’m sure what started out as a nice bike ride quickly turned into a nightmare as there was also nowhere for him to take cover. As dangerous as the storm was for us, it was much more dangerous for him without any protection from the lightning, rain and hail.
All of us face financial storms – sometimes they are quick and light, other times it seems we can get no relief and that the storm will never pass. A job loss, hours cut, utilities or other expenses going up, unplanned medical expenses, your car breaking down, a dip in the stock market, identity theft and more can wreak havoc on your finances and financial goals.
Here are some steps you can take to help you get through these storms safely:
Slow down: The safest thing we could do in that storm would have been to take cover until it was over, but since that wasn’t an option we slowed down, as did all the other drivers around us. When facing your own financial storms take a minute and slow down. Assess the situation and make adjustments as necessary. You should also review your budget and goals and see where you can make changes. During financial storms you should be able to cut back or eliminate most unessential expenses. You may also need to put your financial goals on hold for a while.
Have an emergency fund: The best way to prepare for an emergency is to have a fully funded emergency fund of 3-6 months’ worth of expenses. Start out by putting at least $500 (for students) or $1,000 in a liquid account and don’t use it unless you have an emergency.
Have proper insurance in place: I consider insurance to be like a moat around your financial house. Three main enemies can be held back by your moat – getting sick, becoming disabled and dying during your working years when you have dependents. Health insurance and disability insurance will protect you and your loved ones from the first two, and life insurance will help those who are dependent on your income.
Along with insurance you should take active steps to protect your identity. You can read more about that here: http://mufinancialtip.blogspot.com/2011/03/protecting-your-identity.html
Get help if you need it: If you need help with food or other basic necessities contact your local United Way who can refer you to offices that can help. There are food pantries, education centers and more to help you weather the storms.
Don’t be like the guy on the bike. All of us were caught unaware in the storm, but the guy on the bike was facing the full pressure of the storm. We had the protection and strength of our van despite the pounding hail, rain and lightning, but the guy on the bike had nothing to protect himself except a helmet. Taking the steps above will help you weather many of the financial storms you will face.
Ryan H. Law, M.S., CFP®, AFC®
Personal Financial Planning Department
Office for Financial Success Director
University of Missouri Center on Economic Education Director