How to Prepare Financially for an Emergency when You’re Deeply in Debt

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With all of the chaos over the recent Corona outbreak, you might be wondering what you need to do to prepare financially.  

The ideal situation would be that you are debt free, and have a healthy 3 to 6 month emergency fund saved up.  If that’s the case, you are probably going to make it though the next few weeks just fine.

However, if you’re like me, and have a giant pile of debt, and a tiny $1,000 emergency fund, you might be a little worried.

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    My biggest concern is not the virus itself, but the financial impact the virus has the potential to make on our lives.

    We are currently plowing our way through Dave Ramsey’s Baby Step 2, which is to pay off all debt (excluding a mortgage).

    Over the last 8 months, we have paid off a whopping K, but we still have a long way to go, and the last thing we need is a sudden drop in income!

    Since we are self employed podiatrists, our income depends on people needing to go to the foot doctor. 

    If we end up in full blown quarantine, people will undoubtedly push their foot issues to the side for the time being, and that will of course cause us to lose income and progress on our debt.

    It’s a little unnerving, but I’m trying to focus on the positives.  If this had happened a year or two ago (before we learned to budget), we would have been much worse off!  And I’m also quite thankful that we have our health, of course.  

    However, we are going to change up how we handle our budget and debt pay off plan for the next few weeks, and I thought I’d share this with you.

    Just in case you’re deeply in debt, and wondering what you should do!

    Related: Overwhelmed by Debt? 8 Steps to Take Now!

    How to Prepare Financially for an Emergency when You’re Deeply in Debt

    Here are my best tips to prepare financially for an emergency, even when you are deeply in debt or feeling hopeless. Don’t worry! You can do this!

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    Don’t use an emergency as an excuse to go deeper in to debt.

    Fear has a funny way of making us do crazy things.

    It’s okay to be nervous or anxious about what might happen in the next few weeks, or months, but don’t let it impair your financial decisions.

    Our business and home, are very paycheck to paycheck right now, so it’s scary thinking about what might happen if we aren’t able to see patients and our income suddenly drops.

    We only have our ,000 emergency fund to fall back on right now, and it costs well over $30K to operate our business each month.

    Knowing this, the first thing we will need to do is to pause ANY and ALL unnecessary spending at the office, and at home.

    Once we pause anything that’s not urgent or necessary, we will be able to better evaluate exactly what we might need to live on for the next few weeks, if we aren’t able to pay ourselves as usual.

    Cover your “Four Walls”.

    If you do in fact end up losing your income completely, for a significant period of time, forget about paying credit cards, student loans, or other unsecured debts.

    Yes, even if they are calling and threatening you!

    You must take care of your family first! This means providing shelter, transportation, food, and clothing.

    I would argue that transportation and clothing could possibly be done away with in order to make extra sure that your housing, utilities, and food are covered.

    If you are a Dave Ramsey follower like me, you’ll know this concept as the “Four Walls”.

    In other words, the “Four Walls” are the bare minimum expenses that you need for survival.

    Although it might feel like TV and Internet are 100% necessary right now (especially in a “quarantine”, when you don’t have much to do), you could do without them if it was a matter of going further in to debt or not.

    Anything you can eliminate to avoid going back in to debt, or going further in to debt, do it!

    This will likely all pass in a moment’s time, and you don’t want to be worse off than before, when everything returns to normal.

    Stop your debt snowball and pile up cash.

    Even if you are making excellent progress on your debt snowball, now is one of those times where you will want to pause it completely, and pile up cash!

    I recommend pausing your debt snowball anytime there is uncertainty in your life.

    Some examples might include: moving, job loss or change, pregnancy, or when you know you will need to replace or repair a large expense (like a car or appliance).

    A national emergency or disaster is no different! You should pause your debt snowball right now and pile up cash (even if you think your job and income are fairly secure).

    We just don’t know what might end up happening over the next few weeks.

    This is not to scare you, but simply prepare you and give you some control.

    If you have a pile of cash sitting in your account, you will feel much more secure, especially if things start to get worse.

    And, if everything returns to normal in a couple of weeks, you will not lose any real traction on your debt snowball.

    You can now take that little pile of cash and chunk it on your debt!

    This is what we will be doing, and I encourage you to do the same.

    Look for side hustles you can do or other ways to increase income temporarily until the storm passes

    I’d rather not wait and see if our income tanks.

    While we wait to see what happens with this virus, I am doing anything and everything I can to generate side hustle income from my blog and other work from home resources.

    We have cut our living expenses down to a pretty low and manageable amount, and even if our practice struggles to stay afloat in the coming months, I am reassured knowing that it only takes a couple thousand dollars to keep our home going.

    Grabbing on to a little online or work at home side hustle right now can be extremely helpful in boosting your income, while you wait for this unstable situation to change.

    Again, if everything goes back to normal, the worst that might happen is that you will have extra money to throw on the debt! That would be a definite sunny side to this whole craziness!

    Cancel or pause unnecessary subscriptions or spending.

    As I mentioned above, when discussing the “four walls”, now is a good time to cancel or pause any unnecessary subscriptions or services that you might be paying for monthly.

    You need to free up your income to be able to provide the essentials for your family, like rent/mortgage, water, electricity, and food.

    Stay optimistic.

    It’s really easy to fall into an anxious or depressed state, when all we hear is doom and gloom all over the news and social media.

    If this is bothersome for you, try to steer clear of the news right now and simply love on your family.

    Stay optimistic, and think about all of the past crises that Americans have faced and ultimately pulled through…stronger than ever!

    Use this time to think about the blessings that you have, and not about what you are lacking.

    If you’re struggling to get started with budgeting or debt pay off, use this opportunity to stay at home and save money!

    Being somewhat “forced” into a “no spend” challenge, could be just the thing you need to really be able to evaluate the areas where you commonly overspend.

    You might even finally make the time to have a budget meeting with your spouse, and discuss your financial goals!

    There’s only so much Netflix we can watch, right?!

    Wash your hands, take care of yourself, and love on your family! We will all get through this together.

    Make sure you avoid making financial decisions that are based on fear, and instead put all of your energy and focus on the things you CAN control.

    How are you preparing financially during this unstable time, and how are you handling your debt snowball? Let me know!

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    1. I love how open you are with your life and finances, and it’s very encouraging. Thanks. During these days when people are worried about a health crisis, it helps to have some practical tips to handling our finances. We are in debt, also, and dependent on a small church income, so the crisis is hitting a little close to home. when people don’t want to gather as much… I know we are blessed, though, with a healthy family, a teen at home, and 2 grown children and a grandson living a ways from us…so it’s all in your perspective. Stay open and helpful. We all need to have each other’s backs, and it will all be okay in the end, anyway.

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    3. The $1k emergency fund is probably my biggest concern with the DR plan. Our EF was small at $3k before all this started, but we are now bumping it up to $10k. I think everyone’s EF should be based on their liabilities (job security? kids? own house? own business ?) vs. a one size fits all plan. We are still making extra debt payments, but saving more too. Praying for the people who have lost income and don’t have enough saved.

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      Hi Jasmine! Yes, I agree that our emergency fund should probably be much more. We own a medical practice, and because of our debt payments there, our practice barely makes it month to month when there’s not a crisis going on! We are pausing everything and will definitely try to build up an office emergency fund moving forward. I just get so excited to pay off debt when I have any money! But now I’m seeing how it would have been helpful to have more set aside! Crazy times!


    hi! I'm shannon

    I’m a wife, mom of three, doctor, and blogger! In 2018, I decided to turn my mom blog, into a personal finance blog so others could follow along on our journey to pay off over HALF a MILLION dollars in student loan and practice start up debt. I hope you enjoy following along, and maybe even find some inspiration along the way.