Managing a Cash Flow Crisis

Key Takeaways

  • Sooner or later we all face a cash flow crisis.
  • Make sure you have a plan in place to handle both short-term and long-term cash crises.
  • Having financial confidence and clarity is essential in today’s complex world, especially for making it through those times when things go “bump in the night.”

Chances are, you or someone close to you has shown up for work on a Monday or Friday morning, and was handed a pink slip out of the blue because an entire department was being closed. It’s terrible getting sucker-punched like that, and it can really make you feel cash-starved and uncertain about your future.

If you’re lucky, you’ll receive a severance package and land a new job within a few months. But even in that best-case scenario, there will be days, even weeks, where you may have trouble getting your act together. Not only are you looking for work, but you’re also out of your routine, and none of your bills have gone away just because you’re unemployed. You could also be facing a big tax bill or a loan coming due, or you could have long-term care expenses for aging parents, college tuition bills, or adult children who may need a loan or are planning to come back to live at home. You might also be facing big medical or long-term care expenses for yourself.

First, recognize that there are both short-term and long-term types of cash crises. Short-term crises can usually be handled by tapping your emergency funds or cashing in stocks or other holdings from your portfolio. Those types of hits are not too bad. But the longer-term cash crises are more problematic because they fundamentally change the way you operate.

What do you do?

  1. Look at readily available assets you can tap to increase cash flow.
  2. Create a plan to reallocate portfolios in the future to make sure they will provide you with readily available cash flow. 
  3. Verify any tax consequences.
  4. Determine where you can generate new income or reduce expenses. Many times, the new income can come from activating your pensions, Social Security or certain portfolios you own. On the expense side, you could downsize your house or reduce expenses for disposable goods and services that you like but could do without if you had to.

The sooner you address these items, the sooner you can get yourself out of cash-crisis mode.

Sometimes the biggest challenge is taking that first step toward cash flow clarity. If you or someone close to you is facing a crisis like this and needs some objective guidance, make sure they talk to a qualified professional or contact us any time for advice.

Until next time, enjoy.

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