How can you come out on top when life throws a curveball (or two) at your finances? Whether you're hit with a job loss, sudden illness, divorce or a major storm, the heartache quickly filters down to your wallet.But according to Stephen Pollan, a Manhattan lawyer and author of the forthcoming book “Lifelines for Money Misfortunes,” (Wiley) there's good news: Of all the setbacks you face in life, those related to your finances are often easiest to overcome. “You're in charge of your financial situation, and you have control over what you spend, and to some extent, what you earn,” he explains.Chris Gardner (whose life was played out on the big screen by Will Smith last year when his best-selling autobiography, “The Pursuit of Happyness,” became a major motion picture) couldn't agree more. He recovered from a stream of setbacks — lack of a steady income, a broken relationship, parking tickets and homelessness — to become a trainee at Dean Witter Reynolds. Today he's CEO of his own brokerage firm, Chris Gardner International Holdings.
I recently had the chance to talk with both men about what you should do if your financial life suddenly takes a turn for the worse. Here are their suggestions:Call your creditors
If you immediately inform the mortgage lender, bank or credit card issuer that you're having a rough time, you'll receive a lot more sympathy. Explain that you're taking full responsibility for putting a plan in place to get them their money, and then get back to them quickly. “They'll respect you for doing that, because you've made their job so much easier,” says Pollan.
But don't call up every month singing the same tune, and be prepared to keep whatever promises you make. Make more moneyEvery little bit counts, especially when you're strapped for cash. Moonlighting, working an hour of overtime each day and selling a few unwanted items on eBay are all great ways to scrape together some extra money. Cruise a Web site like craigslist.org for freelance or short-term moneymaking opportunities. And assuming your financial strife doesn't stem from the loss of your job, Pollan says that your first stop might be your boss's office to ask for a raise. Just be prepared to explain in detail why you've earned it. Cut your spendingEverything that isn't absolutely necessary waits until your head is back above water, and that means dining out, entertainment and trips to the mall. Doing without will only give you the extra motivation to get caught up. You'd be surprised how much cash you can save by cutting out extravagances. Throw all of it toward your debts.Ask for help if you have toTake friends and family up on their offers to assist you. Putting your pride aside is well worth it if it means saving your credit score. A couple of unpaid babysitting hours so you can squeeze in a bit of overtime can be really helpful, as can an offer to help run errands or take someone who's ill to a doctor's appointment. And if you're in the market for a job, put your feelers out there. The best opportunities are passed along by word of mouth. Once you're back on your feet, plan for next timePeople who have emergency funds are far less likely to take a dive every time an extra bill comes their way. When the unexpected pops up, you can dig into your emergency savings for living expenses instead of whipping out the plastic. Think of it as borrowing from yourself instead of the bank. Aim to have three to six months' worth of expenses stashed in a savings account that's easily accessible but will still bear you some interest.
These days, you can get over 5 percent in an online money-market account. (AmTrustDirect.com, for instance, is paying 5.36 percent with a minimum deposit of just $1.)Finally, make sure you have insurance coverage in all the right places
If you have anyone depending on your support, you need life insurance and — if you can afford it — disability coverage (unless you have a spouse who could care for you). And everyone needs health insurance, no exception. So make whatever cuts in your budget that are necessary so you can afford these policies — and do it just in case the unthinkable happens.
With reporting by Arielle McGowen.
Jean Chatzky is an editor-at-large at “Money” magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's “Today Show” and is also a columnist for Life magazine. She is the author of four books, including “Pay It Down! From Debt to Wealth on $10 a Day” (Portfolio, 2004). To find out more, visit her Web site, .