This article was written back in May 2008 , when the recession was perceived to be on the way, but not yet arrived:
Surviving and Thriving in a Recession
Negotiating a Financial Emergency
What does one do when faced with imminent redundancy, bankruptcy proceedings, or a repossession order on the family home? The most important thing of all is not to panic. Try to keep a sense of perspective. Genghis Khan and his hordes are not going to appear over the top of the nearest hill. No-one is going to die. And really, it doesn't matter what the neighbours think. They probably have problems of their own. No matter how dire the situation appears, one can come out of the other side of a financial crisis a stronger, wiser person.
In 1969, Elisabeth Kübler-Ross, a Swiss doctor working with terminally-ill patients, identified a number of distinct phases of the grieving/acceptance process. These 5 stages are as follows:
Denial: The refusal to accept the facts
Anger: The need to find someone to blame
Bargaining: The willingness to 'do anything' to make things right again
Depression: The realisation that the outcome is unavoidable
Acceptance: Coming to terms with reality
The journey through these steps is by no means straightforward. Sometimes the denial-anger-bargaining phases may be repeated many times. While not every terminally ill person reaches the point of acceptance about their own death, for those that do, the end is far easier.
These same stages can be applied to any traumatic event, on both an individual and societal level. Economic collapse is a case in point. Elected representatives are so used to putting a spin on unwelcome events that they are often the last people to indicate an understanding or appreciation of the severity of the crisis. This sort of denial is very unhelpful. Often, it involves calculated deception on a mass scale. This leaves the general population unprepared for what will follow.
In the last few years, those in government spurned numerous opportunities to warn about excessive levels of personal and institutional debt, rampant speculation in the construction sector, the proliferation of pyramid investment schemes, and the inevitable crash that follows every boom. Instead, they loudly proclaimed credit for the apparent economic miracle that had hypnotised an entire nation. But unfortunately, it was no miracle but a mirage. Like a shimmering image in the desert, the supposed wealth of the last 15 years has quickly faded away. Unemployment is already back to the levels of 1998 and retreating further every month. Construction activity - if measured by new house registrations - is back to 1987. Economic activity is contracting at a rate never seen before in the history of the Irish State. For many people, this will be no party.
If You are an Economic Casualty
Accept the things you cannot change. Closely examine those things you might be able to change. Resolve to begin changing those things that can be changed. Try not to get stuck in the initial denial/head in the sand phase.
When one is obliged to hand the keys to one's home back to the mortgage provider or debt recovery agency, it is going to hurt, With hurt comes anger. Try to roll with the punches. Seek help from friends, family, but be careful to go to those ones who can offer practical advice not platitudes and more denial. Consider paying for the services of a professional counsellor who can provide a safe environment for the expression of fear, hurt, sorrow or anger. Don't expect this stage to go smoothly. It's a roller-coaster from hell.
You will try to bargain. You think you can renegotiate the mortgage repayments, or talk your (ex) employer into taking you back on, or hang onto the shiny new car bought on credit. It is only natural to try to restore things to as they were before. However, be prepared for the worst case scenario. What if you don't manage it? What is the plan B?
Plan B may look like shit and it's the last thing you want. You've 'always' lived in your 'own' home, so the idea of having to rent - or worse squat - sounds like something that happens somewhere in Africa. How will you manage without a car? And how will you face your old neighbours or work colleagues if you bump into them in town? No wonder you're depressed.
But wait a minute, you didn't actually own that house, the bank did and now they want it back because you've stopped paying them. And don't a number of your friends live in rented housing, and live very comfortably because they aren't crippled with mortgage repayments? You can get the dole, and rent assistance, which is most definitely something you wouldn't find in any African country. Is a second car really necessary? Won't it be wonderful not to face into the two hour commute you swore would kill you if you had to do it for another winter?
Of course, the reality is that these steps do not occur quite so smoothly. The loss of employment can be a shattering experience not easily compensated for. With the loss of a job goes not just financial security but also prestige, the sense of purpose, self esteem, familiar routine, social interaction with colleagues, and mental stimulation. These will not be re-built overnight. However, there are a number positive steps that can be taken, both to get ones finances back in order and to help re-establish a sense of purpose.
Recovery
Carry out a financial audit. Tot up the weekly/monthly outgoings and see where the money is going. Get tough with luxury items, unnecessary travel, and eating out. These things are history. Cut down on food costs by cooking at home. A wholesome meal (spicy lentil dhal with potatoes or rice for example, or stir fry with pasta) for a family of four can be made for under €10.00, even with extras thrown in. Inform the members of the family this is the way things are going to be.
Take steps to reduce the heating and electricity bills. Lag the hot water cylinder. If it is lagged, put a second lagging jacket round it. It costs only €15 and is worth doing even in rented accommodation as the lagging jacket can always be taken with you when you move. Lag all pipes in the loft: the lagging costs under €2 a length. Draught-proof doors, windows, and loft hatches. A roll of sticky back draught excluder costs three or four euro. Collectively, this will be the wisest €50 investment you ever spent. Bleed all the radiators to get them working properly and have the central heating boiler serviced. If you own your own home, and still have a few euro to play with, double the amount of insulation in the loft.
Have cheap solid fuel stoves fitted into all open fireplaces still in use (if they're not in use, board them up to cut down on draughts and heat losses). A new cast iron stove can be bought for a few hundred euro. Second hand ones cost only a fraction of that. Get used to concentrating household activities in one room that can be kept warm and cosy. Turn down the heating elsewhere if this can be done without the house becoming damp. Explain to other members of the household what is going on.
Scavenge for fuel. There is a wealth of fuel lying around both urban and rural areas waiting to be harvested. This includes old pallets, dead wood in forests and hedgerows, and stuff lying in skips. Buy a bow saw, small hand axe and some work gloves. Allocate a place at home for fuel storage. If space permits, build a small covered area for the storage and sorting of salvaged material.
For households still with a vehicle, a small trailer is a very useful item. But not too small: it should at least be capable of holding a standard sized pallet easily and have a removable tailgate.
Cancel all direct debits that can be dispensed with. Clear outstanding credit card debts - these are the ones you pay prohibitively high interest on - and stop using cards altogether if you find you keep running up big debits. Avoid money lenders like the bubonic plague. Open an emergency account with the local Credit Union and get used to paying in something every week, even if its only a tenner. This fund will help you through unexpected temporary crises, and can be used to cover one-off costs such as footwear for the children, gardening tools, bicycles, and insulation.
Engage in activities that will boost morale. This is particularly important if you have recently lost your job. Put all your newly imposed spare time to good use - learn new skills. Sign up for evening classes, make use of the local library, or put up notices advertising that you are looking for work experience. Resist the temptation to spend the day looking at the telly.
When approaching people for work experience, keep your dignity and don't sell yourself short. Don't offer to work for nothing. At the very least, get travel expenses and a nominal payment. If the work includes unpleasant tasks or non-learning activities like cleaning or tidying up, then it should warrant at least the minimum wage. If in doubt about your legal rights, consult the local Citizens Advice Bureau. You can work up to three days a week and still qualify for some dole money.
Start a garden. Even the smallest space can be used for growing something. For more on this, check out the gardening diary:
Join Forces
Seek out and join forces with other people in similar predicaments. This can be a very positive experience and may give rise to opportunities for labour, skills and resource sharing. It can also help relieve the sense of personal isolation. Be careful however that you don't end up with a kitchen full of people who want to talk about their problems but aren't prepared to do anything to solve them. Establish clear grounds rules. Give the group a name that defines it in positive terms: The East Side Self Help Group. Check to see that an appropriate group doesn't already exist in your area.
Set up an internet blog where people can exchange ideas and information. This would be really useful, as it would enable people in different localities to communicate with each other.
Finally, keep the faith! Crises can seem insurmountable when you're in the middle of them, but five years down the road you'll laugh at a lot of it. Keep in mind too, that the skills you learn in surmounting with this current crisis will probably stand you, your family and even your community in very good stead for the future.
These are just a few thoughts of how to deal with a personal financial crisis. If you are reading this and have ideas of your own, send them to us and we'll post them on the website.
