How to Navigate a Crisis

The first 9 months of 2017 were pretty rough for me in many, many ways, on my mental health, in my professional life, in my personal life, … and on my finances. I’ve vaguely hinted at it before in an earlier post, but the long rot on my finances eventually culminated in me not having any money when I left my job and moved to the Midwest towards the end of the summer of that year. The next several months were then spent slowly rebuilding my finances and changing my money habits.

Needless to say, I experienced my own money problems. I’m sure there are many of you out there who are experiencing some form of a crisis in your finances, whether COVID-related or not. Maybe it’s a crisis that happens semi-frequently or one that’s appeared out of the blue. Whatever the frequency (and severity), you can take the wheel and navigate this storm. “But, Chuku” you ask… “what exactly do you do when you find yourself behind on bills or have a huge expense coming up?” I am glad you asked.

I might not be an expert (yet) but I have some ideas (born from my own experiences and from what I’ve seen successfully applied) that may help you. This is by no means an all-inclusive guide, but just a starting point. Let’s go!

Step #1: Stop and Take a Few Breaths

I feel like this is probably one of THE most important things to do. When you get that “rent past due” bill, you’re facing a car repo, or (in my case) you’re leaving a job with no money in the and no clear way to pay ALL of your bills, you’re gonna feel like your world is coming to an end. Everything is getting worse and worse, and you see no light at the end of the tunnel. Maybe you feel like you’ll always be stuck and that nothing you do will matter.

This is the point where you have to STOP, take a moment, and then breathe. Take one deep breath. And then another. Then you have to tell yourself that things will be ok and that you can get through this, whatever it is. While you are in crisis mode, you have to find a way to calm any and all fears, so you can put yourself in a better place, mentally, to attack the problem.

Note: If taking deep breaths doesn’t do it, you can do an activity that you like (provided it’s a healthy one). Something that helps calm the nerves or makes you feel good.

Step #2: The Plan of Attack

Now that you’ve had time to put your mind more at ease, it’s time to face the problem head on. You know it’s scary, you know you can do it, but you can go in all guns blazing. You need a plan for how to address the crisis.

Rather than a wordy explanation, let’s go with some real world examples.

Example 1 — An Underwater Vehicle

Let’s say you have a rather expensive vehicle to get rid of and you’ve recently had your hours cut back (or you lost your job altogether). Your car is worth roughly $23,000, but you owe $27,000 on the loan, meaning you’re underwater on the car loan. It’s becoming a more common issue, given the tendency of American drivers to trade-in their cars every few years. You want to get rid of this car and hopefully get into something cheaper. Well, here’s your plan of attack.

1. You’re gonna need to save up cash and buy a car outright. You save up by a combination of cutting expenses and raising income. Netflix, Hello Fresh, and that iPhone might have to go if need be.
2. Buy the safest and most reliable car you can get for roughly $2,000-$4,000. It’s definitely not gonna be the sexiest ride… but it will get you where you need to go. Definitely focus on brands known for their reliability.
3. Assuming you have good credit, get pre-approval for a personal loan to cover the leftover balance. Start with your local credit union.
4. Sell your car for as much as possible, either to a dealer or do a private sale. Whichever one you’re more comfortable doing. Note: Selling privately will almost always get you more money.
5. Apply the personal loan to the leftover balance. While you’re still in debt, you’ve successfully gotten out of your underwater vehicle and reduced your overall balance owed. Instead of owing $27,000, you now owe $2,000-$4,000.

Note, this plan hinges on 1) buying a cash car, 2) having good credit for personal loan, and 3) a plan to pay off this balance (along with any other debts).

While we’re at it, let’s tackle that last item in our next example, shall we?

Example 2 — Getting Out of Debt

Let’s say you’ve finally gotten rid of the underwater vehicle in Example 1. You have the debt from the personal loan you took on plus debt on multiple credit cards, some of which are nearly maxed out. You’re happy that you’ve finally relieved the burden of the car, but the other debts are still stressing you out.

Fear not, for there are two methods of paying off debt. Here they are:

• Avalanche Method: Pay off debt with the highest interest rate (APR) first, while paying minimums on everything else, moving to the next highest APR, and so on. Mathematically, this is the correct way because you’ll reduce your overall interest paid.
• Snowball Method: Pay off debt with the lowest balance first, while paying minimums on everything else, moving to the next lowest balance, and so on. You’ll pay a little more interest here BUT you’ll begin to see progress, which will make you feel like you can actually pay off your debts (which you absolutely can).

I’ll go into detail at a later date about which is better, but suffice to say, both methods are highly effective and recommended for paying off debt fast.

Whatever method you go with, this is what you do:

1. If you don’t budget, you need to start budgeting. Like yesterday. It’s AMAZING how much money you’ll realize is going out the window. Also, you will get a greater sense of control with your finances.
2. Cut expenses where possible and raise your income as much as possible. If you need to (and are able to) take a second/part-time job and work nights and weekends. Keep in mind: this is a temporary move until you’ve paid off your debts and find better footing.
3. Save up at least $1k or $2k. If you end up using this money, pause the next step to rebuild.
4. Apply your debt-payoff method of choice: Avalanche or Snowball.
5. When your last debt is paid off take a big sigh of relief and congratulate yourself.

And that’s pretty much it for your plan of attack. As you’ve seen, the plan may be different based on the circumstances, but the goal is usually the same: getting rid of debt. Seriously, getting rid of a debt (whether big or small) will make you feel like you can take on the world!

If you find yourself in either situation, follow this plan! Hell, you can even modify it to suit your needs. The whole point of these exercises is that you need a plan for addressing a crisis, especially money problems.

Step #3: Gaining & Sustaining Motivation

The hardest part of initiating any plan, whether it’s to get out of debt or to lose weight, is motivation. Gaining momentum is hard and sustaining it is a hell of a lot harder to do. There are so many opportunities to get off of the train and just stop.

I have realized this first-hand with my recent weight loss (roughly 65 lbs) and I tell it to a lot of people I know. There are sometimes where I just want to stop limiting my caloric intake and just go back to the constant snacking that pushed my weight to 310 lbs (and I am 6’00” tall). But then I think about what I’ve been able to achieve now and the much better shape I am in. Also helps that I no longer have sleep apnea! And so this is what keeps me going.

For the longest time, before I changed my eating habits, I had this sense that I could not control my weight-gain. I wanted it to stop, but I didn’t see it as a serious enough issue. That was until I was diagnosed with sleep apnea. The turning point came at my friend’s wedding, when I was dressing and noticed that one of my dress shirts didn’t quite fit me right. Man, that left me kinda dejected. It also made me want to change and drop this weight. And so I did, and even laid out a plan of attack for it. Followed through too.

The plan was initiated the following day, roughly two years ago (as of the publishing of this post). I still follow it (albeit with some slight modifications). It was pretty grueling. As I tell my friends and family, the first day is always the hardest, the first week is the hardest, and the first month is the hardest. Then you hit a groove as the results become more apparent and people start to notice (and believe me, people began to notice, and then I did). The results of my weight loss were most apparent in my increased athleticism. Suddenly, I could do drills in karate or fencing without huffing and puffing. I started winning more of my matches/bouts. It felt (and still feels) really good.

All this to say is that when you’ve finally ready to put your plan into motion, you’ve gotta have that sense of urgency. When that plan is underway, you’ve gotta be in it for the long haul. The best way to initiate a plan during a crisis is to approach it with 1) a sense of urgency and 2) tangible short-term goals. To keep from falling off of the bandwagon, you need to see and feel the progress of your efforts. When you see that debt paid off or when you see your savings account hit $1k, you’re gonna feel so great. You’re gonna feel accomplished (because you are!). You have to use each and every accomplishment, no matter how small, to continue pushing forward to get through a crisis and achieve your goals. Hell, each step you take in your plan is an accomplishment in and of itself. Use that as motivation.

Summing It All Up

Wow so the direction of this article might have changed a little but that’s OK! Where I am really trying to go with this is that, no matter how tough your personal or financial situation may be, there might be a solution right around the corner. You might not be able to get through all of your problems, but you can start to gain some control over your finances. All it takes is taking a step back, formulating and executing a game-plan, and gaining and sustaining the motivation. Also, you don’t have to be alone in this endeavor. If you’re married, work with your spouse and become a strong team. If you and your friends are in similar situations, lean into each other and motivate each other.

Do you have any similar stories that you’d like to share? Feel free to do so in the comments or with me personally at denofdollarsblog@gmail.com.

Happy New Year and here’s hoping 2021 ultimately ends on a much better note!