How To Create A Personal Financial Disaster Plan

How to Create a Personal Financial Disaster Plan

By

Marsha Walker Eastwood, B.S.Ed., MSHSVC

We have all heard of the importance of a rainy-day fund, aka sock money or candy to handle life’s small nuisance emergencies, but what the importance of an all-out gulley washer fund, aka personal financial disaster plan?  Sock money is usually a few dollars put away here and there and left untouched until a need arises, nut funding your financial disaster plan involves introspection, work, and sacrifice.

When the average person thinks of disasters, they think of natural disasters such as hurricanes, tornadoes, forest fires, floods, and even burial expenses for an uninsured loved one. The reality is any unplanned event that significantly disrupts your life can create a financial disaster. Typically, this type of event can include an emergency visit to the dentist, car repairs, emergency home repairs, food lost during a power failure and even something as simple as a prescription for new medication. Although you may have insurance to cover a portion of the expense, there is almost always an out of deductible to be paid up front. Many times, some of these events can occur at the same time and the question becomes where the money is going to come from. You can’t rob Peter to pay Paul if Peter is broke. So how then do you create a financial disaster plan that does not include borrowing or the use of credit cards to meet these needs? It all begins with a goal, paper, and pencil, revisiting your budget, introspection, sacrifice and due diligence.

First things first. Realistically a goal of 1500.00 is a great ballpark figure to shoot for. If that sounds like a lot of extra money, it is easier to achieve the goal with a few life-changing decisions. You can start by making a list of all monthly expenditures in order of priority, necessities first - rent or mortgage payment, food, utilities, medications, if any are taken, and vehicle maintenance expense. Next list the secondary expenditures – clothing, credit cards, entertainment expenses, and finally personal indulgences. While some amounts are fixed, others can be adjusted with minimal effort, so let’s begin with food.

When it comes to creating food, budget forget the statistics. You know how much money you must spend on food. The problem is the amount of food that is wasted adds up to wasted dollars as well. Every Wednesday the grocery sales circulars arrive in the mailbox, you see a few that seem just perfect based on cost.  But what is the real cost of the items and are they all at one store or multiple stores? Grapes that are on sale for ninety-nine cents a pound, and chicken leg quarters that are on sale for sixty-nine cents a pound sound like real bargains, but that only holds true if the store is near you or in between your workplace and home. Otherwise, you will find yourself using more gas that negates any sale prices. The same holds true with couponing. If you clip for things you don’t need, you are on the fast track to reaching your budget threshold without getting the items you really need. Just think if a family of four can save just 10 cents off the cost of each meal by drinking water instead if fruit drinks or carbonated beverages, the savings could add up to about $270.00 a year, money that can help fund your personal disaster fund.

Your vehicle is an investment and as with any other investment it needs routine maintenance. By getting routine oil changes averaging $60.00 to $120.00 a year can increase the life of the engine and overall performance that could add up to thousands of dollars depending on the needed repair. For many mechanics, oil changes give the green light for upselling, but you can avoid these charges by checking with national repair chains such as Goodyear and other tire dealerships that offer deep discounts on oil changes that include a complete free inspection of the belts, brakes, fluid levels, battery, and alternator. Once again, the additional savings frees up more money for your financial disaster plan.

Secondary expenditures are where the introspection and sacrifice begin. While clothing is a necessity and just like all other necessities, a budgeted amount for each family member is the best way not to overspend. Forget about trying to keep up with current fashion trends, co-workers, and friends and consider instead more practical cost-saving options. Don’t purchase items on a whim, or for a one time wearing, or for some future use because it is costly and impractical. Shop for multi-seasonal wear items that are on sale at various times of the year. Where you shop can also make or break a budget. If you are a brand loyalist, chances are your favorite brick and mortar store will have the same items on sale online at a significantly reduced price. The same holds true for various mail order catalogs but stay away from high-end specialty clothing catalogs. If you find one item you like, it is for certain that you will consider some or all the matching accessories. Other options include consignment shops and thrift stores, many of which have up to 50% off shopping days. Many name brand labels can also be found at Savers, a national chain run by Easter Seals. You can take items you don’t wear and donate them in exchange for a 20% off coupon on your next purchase. Add that to the daily 30%-50% discounts through the store and you can get twice as much for your money,

Next on the list is credit cards. Interest rates aside, let’s look at how they are being used. If you are paying the minimum amount on a card and then using that amount to purchase food, toilet items or gasoline, it is time to cut the card and the cord. You don’t have to close the account, just continue to pay the minimum balance until you can either afford to pay it off entirely or the balance is paid in full. This protects not only your credit rating but your budget as well. The money you save on clothing can be used to purchase the items you were putting on a credit card. It is also important to remember that when it comes to credit cards less is more- fewer cards, less payments, more money for your financial disaster fund.

In 2018 very, few people can imagine life without cable, internet, or some sort of streaming website, and yet the cost can quickly become prohibitive making it anything but entertaining. While the cost of smart TV’s has come down significantly, the cost of cable/satellite continues to rise, but there are ways to reduce those cost. The first and least expensive one is purchasing your Cable/Wi-Fi Modem. Most cable companies don’t tell their subscribers that they can purchase their own modems instead of paying the average monthly rental fee of $10. This one change can add another 120.00 to your financial disaster plan. Additional ways to save include skipping the bundles of joy and upgrades. In addition to the added cost of programming, they often include tethering you to a two-year contract, so even if the service is not up to par, cancellation is not an option. Another way to reduce your monthly bill is to simply call your provider, tell them you NEED to reduce your bill and ask if there are any specials. Usually, various networks such as Showtime and Cinemax offer three to four-month discounted rates and some providers offer a three-month good customer reduction. These interim reductions can add up to an additional 200.00 in savings and 200.00 more toward your personal financial disaster plan goal.

The last area that creates an opportunity to make a significant infusion of cash towards your goal are your personal indulgences – a rigid schedule of eating out one day of the weekend, expensive birthday gifts, and party favors, expensive personal care products, expensive make-up and colognes, expensive bed linens, towels, wash cloths, dishes, and flatware.  Most national restaurant chains have monthly specials, many that include great menu selections for $25.00 or less for two people. Gift-giving is a sign of thoughtfulness. You don’t have to break the bank to show you care. Set a limit of $25.00 and when you buy the gift, make a 20.00 contribution to your personal financial disaster fund. Party favors, balloons, and brand greeting cards can all be had for $1.00 or less at dollar stores.

Creating a personal disaster plan can be funded much easier than you think and can significantly ease the angst associated with a major financial emergency. If you continue to fund your personal financial disaster fund at a rate of 1500.00 a year in an interest-bearing savings account, it will continue to grow and increase your ability to weather a major financial storm.

©Marsha Walker Eastwood

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