No matter how careful you are with financial planning, life remains unpredictable. Whether it’s medical expenses, an unexpected job loss, or an emergency home repair, all these things can be stressful to handle for you and your family. These unexpected financial emergencies can also adversely affect your financial health in the long run.
That’s because aside from the emergency expenses, you still have food to buy, bills to pay, and other monetary obligations to shoulder every single month. Unfortunately, this setup can make your entire financial situation more complicated. Knowing the steps to deal with financial hardships is essential under these circumstances.
Read on to learn the four ways to deal with a financial emergency.
Assess your current expenses
To handle a financial emergency more effectively, you may need to evaluate your current expenses to have a clear picture of your financial situation. When you know how much you spend and can save over a certain period, you can deal with an unexpected financial expenses by looking for solutions like cutting back on spending.
Based on a 2016 Survey of Consumer Finances (SCF), 7.8% of the participants have mentioned cutting back spending as their primary response to an unforeseen financial crisis that makes them unable to pay their bills. That being said, evaluating your financial situation is vital to take advantage of the abovementioned solution.
So, since money can get tight in a financial emergency, assessing your expenses and overall financial health would allow you to prioritize your spending. This means allocating your money to essential items, such as food, shelter, utilities, and secured debts. Once you know which budget categories need to be prioritized, you can start cutting your expenses and saving money to manage a financial emergency.
Consider taking out a loan
Experiencing a financial emergency can be frustrating if you have no savings to fund it in the first place. In that case, one of your options to address the problem is to get a loan. You can ask a family member or a friend if you can borrow some money from them.
But if you don’t want to bother them about your financial problems, you can seek help from banking institutions and lenders within your area. They might offer you a financial solution that helps your situation. For example, suppose you’re living in Canada or other parts of the world. In that case, some online lenders offer financial services like e transfer payday loans Canada 24 7 or wherever you may be located.
Generally, e-transfer payday loans are designed to help borrowers obtain instant cash online to cover unexpected expenses. Once you fill in the application form and submit the required supporting documents, the lender will review the application and decide within a few minutes or hours. If the loan is approved, you can receive the funds in your registered banking account any time of the day.
However, before applying for a loan, conducting thorough research about your prospective loans is essential to ensure you find the best possible deal.
Look for income streams to earn more money
Making extra money from different income streams can also be an excellent way to deal with a financial emergency. When you have a side income, you can set up an emergency fund to help you tackle an unexpected expense for a shorter time.
Generally, having an emergency fund is essential as it helps you pay some expenses, especially in times of crisis. For example, an article published by Forbes Advisor says that approximately 40% of people have used their emergency savings during the pandemic. The funds have helped them cope with the financial constraints caused by lockdowns, stay-at-home orders, and even the closure of businesses.
That being said, finding extra money can be critical in building an emergency fund and paying unforeseen expenses which aren’t included in your monthly budget. Thankfully, there are many ways to generate various sources of income. For example, you can start earning money from something small like working part-time in a restaurant, babysitting, and other similar jobs. But if you have the resources, you can consider more significant opportunities like taking online jobs, investing, or starting a home-based business.
No matter how small or big the amount is, it’s essential to keep exploring some extra income streams to help you address financial emergencies without straining your finances.
Negotiate with creditors
Dealing with a financial emergency means you need some money to finance an unexpected expense. However, if you have a tight budget or have no emergency savings, you have to obtain the payment from your budget, which can lead to trouble paying your bills.
To remedy the situation, you can contact your creditors and try to negotiate certain payments instead of putting them off, as it can result in hefty late fees and interest. For example, if you have monthly utility bills to pay, you can call your utility service providers and ask if they have programs to help you keep up with your bill. If you have credit card bills, you can also talk to the credit card companies and ask if they can defer payments for a while.
By doing all these, you can handle an emergency financial situation without compromising your budget and the payment of your monthly bills.
A financial emergency can be a frustrating situation. But by keeping the information mentioned above in mind, you’ll know what to do to get out of it as quickly as possible. Consequently, you’ll be able to live the best financial life possible even after a crisis.