Have you ever found yourself in the middle of a financial emergency? You may even be experiencing one at this moment; what can you do? You’re not alone, over 76 million Americans struggle each year according to a survey from the Federal Reserve Bank. There are lots of reasons and causes of financial stress. Whether you’re in the middle of a crisis, or want to help plan for the future, there are options available to get you back on your feet.
Here’s five tips on how to deal with a financial emergency:
1. Start an Emergency Fund
An emergency fund is a specific savings account that you only touch in the event of an emergency. Personal financial planners will tell you that an emergency fund is even more important than paying off certain kinds of debt—because having an emergency fund is what prevents you from going into debt, especially debt with burdensome terms like payday loans. Follow the link to find out more: https://www.gofundme.com/c/blog/emergency-fund
2. Create a Budget
How do you get control of your finances? Spending less money sounds easier than it really is. Creating a budget (and sticking to it) can be a great tool for spending less, and saving more. Here are some tips for creating a budget.
- Track your weekly spending. If you use a debit or credit card, you can see where your money is going each week. Small purchases like a morning coffee or fast food can add up over time.
- Divide expenses into categories. Some examples can be entertainment, eating out, groceries, bills etc.
- Set money aside for an emergency fund. Even a small amount saved overtime will add up when you need extra funds for a crisis.
- Gradually cut down expenses. Instead of cutting out restaurants entirely, limit yourself to once or twice a week.
If you need additional assistance in creating a budget, take a look at this article from US News.
3. Cut Expenses
Cutting expenses can be another option to take during a financial emergency.
Spending less money in just a few areas can provide relief.
Here’s some tips for reducing your monthly expenses:
- Save money on transportation. One option can be to carpool to work with your friends. By alternating days with your coworkers, you can save on gas, reduce wear and tear on the car, and in some cities, make use of carpool lanes.
- Reduce entertainment expenses. Do you have cable for watching your favorite shows? Switching to a streaming service like Hulu or Netflix can be a cheaper option. Some of the networks also stream episodes for free on their website as well.
- Cancel unused memberships. How often do you go to the gym that you pay for each month? If you only go once a week, it may be a cheaper option to find a gym to pay per use.
For other tips on saving money by reducing expenses, Trent Hamm has written up 40 ways to save on monthly expenses.
4. Prioritize Your Expenses
Are your bills overwhelming you?
A financial crisis can make it hard to follow your budget. It’s important to be pay your monthly bills, but sometimes this is impossible.
Here are some tips on how you can prioritize your expenses and get through the crisis:
- Make a list of all monthly expenses. Listing them out gives you a clear picture of how much money you’re spending each month.
- Figure out which expenses you have to pay. Once you have your list, you can mark which ones have to be paid first. Groceries and your rent/mortgage should be at the top of your list. Most utility companies will give you extra time to pay bills so that you can prioritize the more urgent bills.
- Contact your creditors. Late payments can damage your credit, and ignoring the problem will make it worse. Most creditors will let you set up a payment plan or allow an extension.
For additional tools on prioritizing your expenses, visit the United Way’s article.
5. Reduce Your Debt
How many of you want to get rid of your debt? Even if you’re on a tight budget you can follow these tips to be debt free over time.
- Create a budget. Once you write down everything that you spend money on each month, subtract that amount from your monthly take-home pay amount. Look for areas where you can cut back on to free up more cash.
- Separate your debts from the budget list. Arrange your debts from smallest to largest. You will want to know what the minimum payments are for each of these debts.
Use money that you’ve freed up to start paying off the smallest debt. For all other debts you will want to maintain the minimum payment. Once you pay off the small debt you can use that money on the next loan repeating the process.
For more tips on reducing debt, take a look at the Huffington Post article from Tiffany Allche.
6. Get Financial Help
What if you’ve exhausted all other options for managing a financial emergency?
Ideally you would have access to emergency funds that have been saved up over time for a situation like this, but if you’re currently experiencing a hardship, you need cash urgently.
An option would be to get a loan to help pay for bills, essentials for the household, and other needs during the emergency.
A traditional bank loan may not be an option. You may be asking, what can I do? A 30 day payday loan, like one from ElcLoans, can help you.
Used responsibly this can get you through an emergency until you’re back on your feet.
I hope that you found this information helpful.
Having a financial crisis can be a stressful time, but there are tools and resources available to help get you through the hard times.
Each of these tips are options that you can put into practice immediately.
Do you have any other tips that you would like to share?
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