Updated: Apr 28, 2020
Guest post by Harry Goldberg.
Broadly defined, financial hardship is the inability to pay debts & obligations with the income & assets you own.
When in this type of situation, it can be very challenging to see the light at the end of the tunnel.
Managing cashflow is a very simple concept which many people make complicated.
If your income is greater than your expenses, then you have a cashflow surplus.
If your expenses are greater than your income, then you have a cashflow deficit.
The difficulty for most people experiencing financial hardship is to see ways of reducing their expenses or increasing their income. This is because we, as people, become accustomed to the lifestyles we have. This includes lifestyle expenses like the rent or mortgage we pay, the type of groceries we buy & the entertainment we pay for.
If you are experiencing financial hardship, here are four suggestions to consider.
1. Earn more money
The common phrase for this nowadays is “hustle”. If you need more money and you don’t want to reduce your lifestyle then you need to earn more. This will typically be exchanging time for money.
E.g. finding an employer for after-hours shifts (such as administration or phone based work) or doing tasks for money (such as removals or gardening).
If you have a family, being able to work from home or have flexible hours is very helpful for this. The potential to keep working after the kids are asleep can genuinely be a lifesaver.
2. Cut your coat to suit your cloth
If you don’t have enough income, reduce your expenses, typically this will be in the following order:
A) Eliminate expensive vices such as alcohol, smoking & gambling
B) Cut out entertainment expenses
C) Purchase less expensive versions of the essentials (in financial hardship, even $2 saving on dishwashing liquid can help)
D) Find a new place to live with lower rent or smaller mortgage
3. Sell assets to help in the short-term
If you have a nice car, consider selling it.
If you have a nice home, consider selling and then renting. If you have nice jewellery then consider selling.
This is a valuable time to identify your priorities. Jewellery is associated with significance while quality of food you eat is associated with health.
Which is more important to you – Significance or Health?
4. Ask for help
Only do this if you have a plan!
Can’t earn enough, can’t reduce expenses enough or can’t sell assets to help until challenging times tide over?
Then finally ask for financial assistance. Here are some options to consider:
Government support (if available) in the form of micro loans or social security
Ask for extensions on debts such as postponing the mortgage repayments
Ask for reduction of obligations such as reduced rent or interest rates
Ask for an advancement of pay from your employer
Consider financial or other support from family & friends such as moving in with parents or having friends baby sit while you work your second job
Depending on where you are in the world, there are often financial counselling services for people in desperate situations and this could be very valuable.
While it can be difficult to look forward when things are so difficult today, having faith in the future is the most powerful tool you have to find the energy to push through.
Wise parents at this stage will be involving their children in these decisions. It will help them avoid the same situations their own lives by teaching them valuable life skills. It will also help them understand why you are cutting back lifestyle costs.
Can you turn this period of surviving into a lifestyle of thriving in the future?
Harry Goldberg at Purpose Advisory is a guide, educator and example who empowers people toward the Fulfilled Life. He delivers personalised and comprehensive services to help clients clarify their identity, uncover their purpose, redesign their lives in line with their vision & values, build lasting wealth, and use their wealth effectively to amplify their impact in the world.