How Do I Come Up With $25,000 In A Crisis?

Tragically, life will sometimes present you with seemingly insurmountable problems. Sometimes, life’s tragedies come with a price tag. A big price tag.
Imagine your child fighting a battle with cancer that, despite insurance, requires that you pay $25,000 for medical bills. Could you imagine getting a son or daughter with a drug problem? Have you checked out the cost of rehab? How would tell you up with the money? The following ideas may help you survive the financial side of a personal tragedy.

1. Plan ahead. The surest way to prepare for this sort of crisis is to have a significant cash reserve. Maintaining a one year cushion should be your goal. That cushion can absorb all sorts of crises, allowing you to focus on the human side of a crisis rather than the monetary side.

2. Insure the risks you can. You can’t insure against every risk, but you can insure many risks. Don’t hang on to risks you can’t afford. Talk to your insurance agent today.

3. Use your retirement savings. Don’t use your retirement savings to replace your car after an accident—that isn’t a genuine crisis. Don’t use your retirement savings to fund elective surgery—it’s not a crisis. In a genuine emergency, however, you may be located in a position to borrow from your 401k without penalty. You can always withdraw money from an IRA, but be ready to pay the 10% penalty plus tax.

4. Borrow against your home equity. Home equity is fleeting. Borrowing against it is risky and unwise in all but the direst circumstances. Don’t borrow against your home to buy a new car or pay extra for a vacation. Be cautious about borrowing for home improvements—improvement is in the eye of the beholder. If you don’t have the capacity to borrow from your 401k in a crisis, your home equity may be a refuge.

5. Try grandstanding. There are countless web sites for people to raise funds from their friends for all sorts of causes, from movies to charitable causes. One of these sites, GoFundMe (bit.Ly/c2JOFU), is focused on helping people to raise money from their friends in a crisis. You’ll be amazed at what your friends are ready to do for you in a pinch.

6. Work out a plan. Sometimes the nature of the crisis, say a big medical bill for now resolved (or ended) health problem, leaves you with a big pile of bills. You may find myself in a position to develop a payment plan with the key healthcare providers. If you’ve been wiped out, they really don’t have a choice but to agree to your plan.

7. Consider bankruptcy. Filing bankruptcy won’t provide the resources you need in order to put your teen in rehab, but it will stop the calls and end the pain associated with a big medical bill. Talk to a bankruptcy attorney if your assets and income just aren’t sufficient to deal with the piles of bills your crisis created. Prudent living can help you avoid bankruptcy, but sometimes there simply is not an alternative through no fault of your own.

Solving the fiscal problems associated with a family crisis can be daunting and every discussion around money feels like salt being rubbed in the wound. By trying your best and drawing upon the first six items, in the plan above, you can generally avoid the seventh. It may seem overwhelming, but you can go through it.