I think we all know what prompted this post. Let’s say it all together now…
Coronavirus.

That’s right. The COVID-19 that has everyone on edge is definitely what prompted me to post this guidance earlier than planned, but it is something that definitely warrants discussion.

But this really is important. It seems like only yesterday we went through the terrible 2008 recession and market crash, but it is something that has definitely shaped the way I view and manage money.

Even in more recent history, it was only two years ago that those of us in the military were facing the government shutdown, and were bracing for the impacts of not receiving paychecks.

Today, it is coronavirus that is threatening many in terms of income, potentially losing money for those who own a small business, potentially losing work or getting laid off, and for all of us who are watching retirement and investments take a huge hit.

Today the face of the current crisis is COVID-19, but tomorrow? No one really knows what the next crisis may be, but there is one thing I know for certain–there will be another, and another, and surely, another.

Preparing for a Crisis

Let’s be very honest with ourselves for a moment–life happens. And when it does, you want to be prepared. We all know and love the 6 P’s (Prior Proper Planning Prevents Poor Performance), because they truly encapsulate what it means to be ready for a disaster.

Does a disaster always have to be something that warrants a national emergency? NO! For you and your family, a disaster may be a flat tire, or the heater going out, or the roof leaking, or an emergency medical expense you weren’t expecting. Maybe it is your spouse losing his or her job, or a child getting sick, or having to catch the next flight home to care for a loved one unexpectedly. Disasters happen–we need to be prepared.

The most important thing I will say is this…

When in amidst of a disaster–the last thing you should have to worry about is money.

I mean it! You are going through enough stress having to deal with the situation in front of you. Adding the stress of how to pay for certain expenses, or even getting your finances in order will only make the current situation seem much more threatening than it already is.

The only way to mitigate the money stress that may accompany a disaster is this — Have a Plan.

Making a Plan

When times are good, this is the best time to create the plan. When you are not concerned about losing your job, trying to pay the bills or get food on the table, this is the time to sit down and create a course of action you and your family will take when an emergency strikes.

How to prepare for a disaster in the good times

In these times, there are two steps you should follow, in this order:

1. Pay off debt
2. Build an emergency fund of 3-6 months of expenses

Once you get out of debt an have an emergency fund, trust me, you will be able to breathe better, even if you are not in a period of crisis. However, when disaster does strike, you will not have any payments to make and you will have a cushion of money should your income decrease.

When times are bad, well, this can be a little trickier. Note, I said tricky…but not impossible.

How to prepare for a disaster when you are in the middle of one

If you are out of debt and already have an emergency fund in place, just keep doing what you’re doing. Ultimately, your goal here is to tighten up the budget a little, but keep moving on in a “keep calm and carry on” kind of way.

However, if you do not yet have an emergency fund and also have debt payments rolling in, make the plan to move forward with these steps in the following order:

1. Pay to support your family by prioritizing the “4 Walls”
2. Pay the minimum payments on debt that you owe
3. Stock-pile money in savings until the crisis is averted

Let’s talk about how these steps are going to help keep you afloat during a disaster…

I completely understand when there is not enough money at the end of the month, and sometimes having to “rob Peter to pay Paul” when there simply isn’t enough income coming in to cover the expenses. I’ve been there. If you are in this situation, you don’t have to stay here–there is hope of getting out–but trying to do so in the middle of a crisis is not the time.

If you are in the middle of a crisis, the goal is to avoid adding more debt, and keeping your family safe and secure until the storm passes by.

The Four Walls

So here are the goals of the step–help your family be safe and secure by paying for the “4 Walls”

1. Food
2. Utilities
3. Housing
4. Transportation

By keeping these “four walls” up and around your family (and in the order they are listed as well), your family will be fed, warm, sheltered, and you can get to work.

Now, by “food” I do not mean going out to eat out (and you probably shouldn’t be doing that amidst the current COVID-19 situation anyway), we are talking food that you can cook at home and eat for breakfast, lunch and dinner. Keep your family fed first. This applies to all of the walls as well, so don’t try to rationalize buying a brand new car because “transportation” covers the four walls. Stay humble, stay modest, work your way through the crisis first.

Pay the Minimum on the Debt

If you still have money left over from your paycheck after covering the four walls, then pay the minimum payments on the debt you owe. While I am a firm advocate for becoming completely debt-free, this is not the time to attack debt. Pay the minimum payments until the disaster is done. Then you can attack debt with a vengeance and work toward becoming debt free.

Stockpile in Savings

Once you have paid for the four walls and paid the minimum payments on your debt, if you still have money left over–save it!

If you do not have an emergency fund already in place, this is something you should start doing right now! Again, the key is to avoid accumulating any more debt, and you want to be prepared while you are in the midst of the emergency. Therefore, save any extra dollar you can until you are out of the thick of it. Once the disaster is over, you can put the money you saved toward the debt and get rolling on your debt snowball and become closer to being debt-free.

Bottom Line

The one certainty in life is this–life is uncertain. Within minutes, the life you’ve known could drastically change, without an end in sight. The best thing you can do for you and your family is to make a plan before disaster strikes. If you find yourself in the middle of a crisis, take the steps necessary to stay afloat and weather the storm together. You can make it through; make the sacrifices now so you can be equipped for a better future.