How to Survive a Financial Crisis

A simple mathematical equation can tell you whether or not you will be affected by the Financial Crisis 2008. The equation is Y minus X equals ?

Y is your income, and X is your expenses. Now this equation has always been the deciding factor on whether or not you were in a financial depression, as in depressed over your financial situation.

If this equation does not figure right (considering there is not supposed to be a negative number for the result) then a few tips can help you make it through this bigger financial situation.

First Rule: Don't blame the government

I know, I know, I know. This is the easy thing to do, and we're all doing it. The way the economy is set up, particularly the status quo theory (the rich get richer, the poor get poorer) just doesn't work. It never has and it never will. Unfortunately, and I repeat this, it will never change. We know that the politicians are going to promise "things will get better".

We like to believe them, because it feels good to hope that someday we won't have to hope to be able to pay an overdue bill. The sad reality is that if you hope for this too much, you'll hope your way straight into debt. You can not blame the government for your financial situation.

You can not trust the government to put you in a better financial situation, because that will never happen. Only you can take those steps. The longer you point fingers around, the longer it takes for you to step up and take action over your own financial depression.

Second Rule: Change the equation

If X is greater than Y, and you have no control over Y, then you need to change X.

When figuring your expenses, chances are you have been very flexible about what's really important. Now is a good time to hire a new metaphorical bouncer. Every expense that arrives, if it is not an absolute need, should be denied entrance or kicked out. This may mean you live without cable or satellite TV. (Gasp.) This may mean you eat Ramen noodles everyday for a month. This may even mean stumbling through the dark throughout the day, only turning lights on when you absolutely have no choice to.

The point is that if X is a larger number than Y, you and only you are responsible for formulating an equation that works. Not only should your expenses be less than your income, but also a difference large enough that you can have security.

Third Rule: Understand the importance of security

Security is something we all long for. The thing is, we don't desire security the same way we desire a 42" flat screen HDTV to hang in out living room. Understanding the importance of security is the only way you can really rearrange your budget to accommodate the screw ups we're paying for. Seriously though, think about your own future. If your car breaks down, this causes a major disruption, much like the Wall Street Bail Out making headlines and history. It's an unexpected change that nobody was prepared for.

Having security means you are prepared for such an emergency, and you can stay on your daily living without worrying. It's stressful, I'm not going to lie, but putting money into savings is much more important than buying a bigger, newer TV. Having security takes priority over any and all "luxury expenses", from chocolate cupcakes to satisfy a craving to cable or satellite TV for daily entertainment.

Fourth Rule: Changing lifestyles

This is incorporated throughout all of the rules, but it is very important so it also deserves a step of it's own. The goal is to survive through a financial depression. The truth is that it is not the Financial Crisis 2008 you need to adapt to, it's your own financial situation that needs adjusting. That's the goal. The plan is to analyze your budget, which is basically X vs. Y. Analyze both figures to the fullest extent, and change everything you possibly can.

This means changing your life style. Is it possible to increase Y (income) because if it can be done without an increase in X (expenses) than you'd be a fool to settle for less. In the case that Y is an invariable number that is not flexible, fortunately X is a very flexible number. Readjusting your expenses does require major life changes. A strong example of this is not relying on television to entertain you. Only drive when it is absolutely necessary. This means spending free time when not at work, at home, with "nothing to do".

Part of the life changes needed are seeking out "things to do", things that will not cost you any money at all.

Once you have formulated a plan, and begun acting on it, you will actually feel a thrilling rush of accomplishment. This will be accompanied by something you've never had before.... extra money. It is very important to make smarter decisions, to keep any and all extra money in a safe secure place to accrue and to not spend it frivolously, no matter how strong the temptation. We don't know what's in store nationally, but I can guarantee you can prepare yourself for anything as long as you have a secure leg to stand on.

Fifth Rule: Planning ahead vs. one day at a time

Here is where much of the confusion takes place when forming a budget. Is it more important to plan for the future (as in savings for retirement or an emergency pillow) or is it more important to get through each day as it comes. Many of us don't see an option, because we feel that all we can do is "what we can", struggling to make ends meet and taking it one day at a time.

However, both are just as important, and with the suggested life changes and cutback on expenses, you'll realize that it really isn't as hard as it seemed. Making it through each week is not so hard when you aren't prioritizing bills that satisfy your wants over your needs. Once those needs have been met, however, the next need is to put aside for your future. Everybody needs to have something to fall back on in case of an unexpected job loss or emergency. Everybody also needs to have a retirement fund available, because you may think you're having a hard time now... what will you do when you can't work anymore? (Trust the government to help?!)

These rules are not something to follow temporarily. A financial crisis takes a very long time to recover from, or to make it through. You may never be rich like a Hollywood star or a member of congress (how dare they claim to relate to struggling Americans?!) but you can survive through any financial depression, and gain personal financial strength on the way.