If only no one needed to deal with emergencies that would be nice. But we live in the real world and not in a utopia and there are emergencies and when they come up, our finances can be really messed over. Here are some tips from a reader on how to manage financially (or at least attempt to) during an emergency.
Is money tight right now? Are you encountering difficulty paying your bills on time because of an emergency? Everyone deals with different kinds of financial uncertainty at some point in their lives. Some find themselves in an urgent situation where they need access to fast cash. This can include losing their jobs, becoming too ill to work, or covering a significant home repair.
Dealing with these unexpected financial setbacks can catch anyone off guard. This is true if you don't have enough savings or emergency funds to buffer them. A survey showed that the cost of sudden financial crises could be hefty, ranging from $3,000 to $4,000 on average.
If this resonates with your situation, you've come to the right place. Below we'll discuss some practical tips to help you keep your finances afloat during emergencies.
Establish an Emergency Budget
Establishing an emergency budget is crucial, regardless of the financial crisis you're dealing with. Because with reduced income or increased expenses, your regular budget won't be adequate anymore. Thus, you have to create a new spending plan on managing the money available to you while you're coping with a financial emergency.
An emergency budget should only include your basic needs and financial obligations. Here are several simple ways to get started:
Reassess Your Regular Budget
Before making any changes to your budget, consider looking at how you've been spending your money. This can provide you with an accurate picture of where your money is going and where you tend to overspend.
Assess New Income and Expenses
A financial emergency can either cause a drop in your income or an increase in your spending. When developing an emergency budget, ensure to assess your new income and expenses. Once you have an idea of your present financial situation, the better you can make practical changes in your budget.
Eliminate Discretionary Spending
It's more imperative than ever to be aware of your spending during an emergency. It's the reason why you need to have a budget that's focused on your bare necessities. After figuring out what expenses are most important to you, eliminate any discretionary expenses like travel, subscriptions, and dining out. Note that this will depend on your specific circumstances.
Create More Streams of Income
Cutting back on non-essential spending can help you free up more money. It will also help create more income streams during the ongoing financial emergency. If you can take on additional hours, you can look for a side hustle online or get a better-paying second job. Selling valuable items that you don't need anymore can also help you earn extra income.
Prioritize Your Debt Payments
Managing multiple debt payments while you're facing an emergency can be challenging. If you're struggling to pay them on time, the best thing you can do is figure out which debts to pay off first. Several debts have more severe consequences than others if you don't pay them. But prioritizing them can help you save money and clear your debts faster.
Explore Short-Term Financing Options
Taking on debts might be the last thing you want to do. But if you don't have savings or emergency funds, it might be your best option. You can explore reliable short-term financing options like GoDay payday loans to cover your immediate financial needs. These types of loans allow you to borrow up to $1,500, which you can typically access in as little as one hour from the time of approval.
Start Building an Emergency Fund
Your first line of defence against a financial setback should be an emergency fund. If you don't have it right now, make sure to start building one after your financial emergency has passed. It should cover at least three to six months' worth of your living expenses. But you don't have to save the entire amount all at once. Just regularly set aside a small amount, and it will eventually add up.
The Bottom Line
Dealing with a financial crisis can be stressful. It may feel that your current financial situation won't get better most of the time. But as long as you have a solid game plan in place, you can survive any financial emergency.