Handling Tough Financial Times with Crisis Management

5 Min. Read
Life can throw unexpected challenges our way—whether it’s a job loss, medical emergency, or something else. More than half of American families live paycheck to paycheck, and many would struggle to handle a financial emergency. According to the Federal Reserve, nearly a third of households would face serious difficulties if a major unexpected expense came their way.

The higher the cost, the harder it is for families to afford it. That’s why financial experts recommend saving three to six months’ worth of expenses in an emergency fund. Crisis management is all about being prepared and knowing how to respond to these unexpected times. Regardless of how prepared you feel, it is normal to feel off balance when life gets confusing– especially with financial difficulties.

The first step is to identify the types of emergencies you want to prepare for, whether it’s unexpected car repairs, medical bills, or damage to your home. Then, make a plan to ensure you’re ready when the unexpected happens.

Here at Marine Credit Union, we believe it is important to help our members with their financial goals, including helping them manage tough times financially and emotionally. Let’s explore how you can be better prepared for financial turmoil’s through crisis management.

What Is Crisis Management in Simple Terms?

In simple terms, crisis management means staying calm and finding a way to solve problems during a tough time. It is about how you react to these challenging times that put us in very tough emotional positions that can often cause us to react emotionally, rather than reacting rationally with a calm demeanor.

What Does It Mean to Be in Crisis Mode?

Being in crisis mode is when you feel overwhelmed because something big has gone wrong. Your brain and body go into “fight or flight” mode, making you feel anxious or panicked.

Symptoms of Crisis Mode

When you’re in crisis mode, you might feel:

• Really stressed or nervous (more than usual)
• Trouble sleeping or focusing
• Tired but unable to relax
• Quick to get upset

Of course, these are very general symptoms that could be caused by other factors but in crisis mode, these emotions can be extremely disorienting and often make it harder to fulfill everyday tasks.

What Are the 5 Stages of Crisis Management?

Crisis management is like solving a big puzzle in five steps:

1. Spot the Problem: Figure out what’s wrong.
2. Plan for Action: Decide how to fix it.
3. Act Fast: Do what you need to do.
4. Communicate: Let others know what’s happening.
5. Recover: Work toward getting back to normal.

Let’s talk a bit more about what to do when you are in crisis mode and the five steps you can take to build a financial and emotional safety net.

What to Do When You Are in Crisis Mode

If you’re feeling stuck, try these steps:

1. Take a Deep Breath: It’s okay to pause for a moment and just let yourself breathe.
2. Ask for Help: Talk to someone you trust, like a friend, family member, or your credit union/bank. Don’t be afraid to ask for help!
3. Make a List: Write down what needs to be done and focus on one thing at a time (check out our 5 steps below).

How to Get Your Body Out of Crisis Mode

Calm your mind and body by:

• Doing deep breathing exercises
• Taking a walk outside
• Drinking water and eating healthy foods
• Getting rest, even if it’s just a quick nap
• Listening to your favorite music
• Hanging out and cuddling with your pets
• Etc.

5 Steps to Build a Financial and Emotional Safety Net

Step 1: Create a Buffer

Planning for financial emergencies starts with building some breathing room into your budget. If your expenses are already stretched to the limit, look for ways to save—such as cutting back on groceries, reviewing insurance plans for better rates, or canceling non-essential subscriptions.

Once you’ve created some wiggle room, use it to start an emergency fund. Set a goal, like three to six months of essential expenses, and contribute to it regularly (or as much as you can, even $5 now and then is better than nothing). Automating transfers from your checking account to your regular savings account or high-yield savings account can make saving easier. The size of your buffer depends on your income, essential bills, and family situation.

Step 2: Balance Your Books

Understanding your financial picture is crucial, especially if you’re living paycheck to paycheck. Track your income and expenses carefully to identify potential issues before they escalate.

Start by reviewing all your accounts—checking, savings, retirement, and investments—and make a list of your household assets, like cars or real estate. This inventory will help you assess your financial health and determine what’s at risk during an emergency.

Consider consolidating funds into a dedicated emergency savings account. Aim to set aside enough to cover three months’ worth of essential expenses, giving you peace of mind and quick access during a crisis.

Step 3: Prioritize Access to Funds

When emergencies strike, having quick access to your savings is more important than chasing high interest rates. Avoid relying on credit cards or high-interest loans by ensuring your emergency fund is easily accessible.

Opening a second bank account specifically for emergencies can help. Choose an account with a debit card for immediate access, and store the card securely. If you use credit cards responsibly, they can act as a temporary solution—just be sure to pay off the balance with your emergency fund as soon as possible.

Step 4: Address Emergencies Immediately

When faced with a sudden expense, act as quickly as you can. It is best to avoid delaying payments or borrowing money unnecessarily, as this can lead to high-interest debt. Focus on paying for urgent, essential expenses first and set up payment plans for less critical costs if needed.

Keeping an emergency fund can save you from relying on costly credit options like payday loans, which often have interest rates exceeding 10%. Even a modest emergency fund can make a big difference in staying financially secure during tough times.

Step 5: Prepare with Insurance

Insurance can be a valuable safety net in financial crises. Consider policies like life insurance to protect your loved ones, disability insurance for income during illness or injury, and property insurance for your home, car, or belongings.

Medical expenses are one of the most common financial emergencies—20% of adults face major unexpected medical bills annually, with median costs ranging from $1,000 to $1,999. Insurance policies can help offset these costs and reduce financial stress.

By combining savings and insurance, you can confidently navigate emergencies and ensure your family’s financial security. Preparing now can make a significant difference when life throws unexpected challenges your way.

What to Do If You’re Struggling Financially

If money is tight, here’s what you can do:

1. Set a Budget: Look at your income and spending. Cut back where you can.
2. Talk to a Financial Advisor: Marine Credit Union offers resources to help you make a plan.
3. Focus on Essentials: Pay for what you truly need, like housing, food, and bills.

What Is Financial Readiness?

Financial readiness means being prepared for life’s surprises. It’s about saving money, planning ahead, and knowing where to turn for help.

Marine Credit Union Is Here to Help

No matter where you are on your financial journey, we’re here for you. Whether you need advice, tools to save money, or someone to talk to, Marine Credit Union can help you through tough times and prepare for a better future.

Take the first step today—your future self will thank you!