We are all faced with financial emergencies from time to time, that’s just the nature of life — whether it’s an unexpected bill, a costly car accident, job loss, or just a culmination of poor financial decisions.
The good news is that if you don’t panic and face the issue head-on, there are ways to handle the emergency and quickly get back on track.
Let’s take a closer look at 6 things you can do when you need emergency financial support …
1) Honestly Assess the Situation
Sticking your head in the sand is often the reason financial problems emerge in the first place. Step one to tackling a financial emergency is honestly assessing the situation — how much money do you need? When do you need it by? What are your current spending habits?
These are all the kinds of questions you should be asking and noting down clear answers to.
2) Cut Spending
Even if the emergency seems overwhelming, there are always ways you can cut spending to reduce the negative long-term financial impact. The good news is that a lot of these cuts might only be temporary.
Cancel cable and Netflix, switch to a cheaper cell phone plan, buy unbranded food and household items, and cut out all luxuries.
Even if this doesn’t immediately cover your emergency, whatever money you do have coming in will now go further and help you rebound quicker.
3) Consider all Loan Options
If you’re not one to usually borrow money and loan/credit card debt is not part of your financial emergency, then it doesn’t hurt to get a credit card or emergency loan (which you can get online) to cover you until you’re back on your feet. Think of it as saving in reverse.
Even if you are in debt, borrowing more can get you out of an emergency as long as you are absolutely certain that your income will eventually make up for it. However, never borrow simply to refinance existing debt as this will simply deepen the problem in the long run!
If the situation is particularly bad you will need to prioritize spending. While missing rent or a utility bill is always bad, there is a window of time (weeks to months) before the repercussions really sink in. In other words, you aren’t going to be evicted the next day and your electricity won’t be cut off immediately if you miss some due dates.
Don’t literally starve yourself if your paycheck will arrive soon and can cover your other expenses a bit late.
5) Contact Creditors
If you know you’re going to struggle to pay bills, it is better to contact your creditors beforehand than to miss payments and go into hiding. Some credit card companies might give you extra time, temporarily reduce interest, or work out a more reasonable repayment plan.
Utility companies can switch you to a different tariff or allow you to repay an outstanding balance in installments tacked on to future bills.
Creditors want to ensure they get what is owed and this is more likely if they work with you through a tough financial period.
6) Ask for Help
Don’t be too proud to ask for help from friends, family or other loved ones, if you’d do the same for them. You can repay and treat them later, strengthening your bond.
Financial emergencies often seem worse at first than they really are. By following the above advice, most people should be able to get back on track. However, it is also wise to start an emergency fund (savings of 3 months income), which you can tap into if an emergency arises.
Got any other tips? Let us know in the comments below!