Emergencies happen. The best time to create an emergency financial plan is when you are not experiencing an emergency. You mind is a little more clear and reasonable. What is considered a financial emergency? Anytime your income is reduced beyond your control. This can include job loss, disability, unpaid maternity leave, and more. There is an Emergency Financial Plan worksheet in The Vault to help you and your family plan for the unexpected.

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What is an Emergency Financial Plan?

An Emergency Financial Plan is a guide you follow during a financial crisis. This is a step by step plan will help you determine income options, what bills to cancel, and ways to adjust your budget. Creating an emergency financial plan will lessen the stress in the future during a money crisis.

There are emergency plans for fires, car accidents, and more but what happens financially? What do you do if the fire or car accident leaves you without an income for 3 months? That is when you pull out your Emergency Financial Plan and get on track.

Step 1 – Determining Worse Case Income Scenario

No Income

This is absolutely THE worst case scenario. An Emergency Financial Plan for a no income scenario would be living completely off of your emergency fund. An emergency fund is enough money to live off of for 3 to 6 months until income can start coming in. I will discuss more in a later post about building an emergency fund.

Unemployment or Other Government Assistance

In order to create an Emergency Financial Plan utilizing unemployment or government assistance, you need to know what your state offers. Each state has different assistance programs and offer variable amounts of unemployment. For more information about the assistance offered in your state, visit your local Department of Labor.

Single Income Family

Going from two incomes to one income is a scenario to address in your Emergency Financial Plan. When making your plan, choose the smaller of the two incomes for the worst case scenario. Have you thought about living off of one income? What would that look like? Would you have to supplement your income with some government assistance? It is good to know this information now so you don’t panic IF the time comes.

Step 2 – Sorting Expenses: Needs vs Wants

When drafting your Emergency Financial Plan, knowing what monthly expenses are needs versus wants can help tremendously to lower your budget. What can you live without? Obviously, you cannot live without housing and groceries but eating out at restaurants is a want not a need.

Go through each bill/expense to figure out what you will cancel or downgrade, and which you will keep. Here is a short list of what I consider wants:

• Restaurants
• Subscriptions
• Cable
• Expensive cell phones
• New clothes
• Movie theaters and other leisure entertainment
• Gifts
• Beauty

Don’t forget to stop contributing to savings/retirement accounts, if needed.

Step 3 – Get the Family Involved

Creating an Emergency Financial Plan should be a family effort. Definitely make the plan with your spouse but also be an example for older children. When sharing your Emergency Financial Plan with teenagers, don’t scare them. Let them know that it is just a precaution and it is something they will be making with their family one day. This ensures that everyone is on the same page and not panicking if a financial emergency were to happen.

Making an Emergency Financial Plan is important even if it is not perfect. Just think you have one less thing to stress about in an emergency. Has your family discusses having an Emergency Financial Plan?

Ezekiel 38:7 – Be ready and keep ready, you and all your hosts that are assembled about you, and be a guard for them.