How to Deal with a Financial Emergency?
No matter what your financial situation, nobody is immune from the prospect of a financial emergency. It can hit any one of us, and in a wide variety of different forms. Job losses, unexpected medical expenses and emergency repairs to a home or vehicle can be stressful. Often, these bills can’t wait, and you still need to find a way to pay for your lifestyle and put food on the table for your family.
It’s not a nice situation to be in, but there are certain ways to deal with a financial emergency which are rational and calculated so that you can recover more quickly and get back to living your life without constant worry. Financial issues can be one of the top causes of stress in adult lives.
Whether you have to get emergency personal loans for the short term, rearrange your finances or cut down in other areas, there will be a solution best for you. This guide is all about helping you to find the rational option and next steps to take through a financial emergency.
Evaluate the situation
This means taking a fair and balanced look at the situation you currently find yourself in. An emergency can feel like a much bigger problem than it is due to the fact that we don’t always have a lot of cash in the bank. Money might be tied up in other places, so, when you need to pay for something it can be natural to panic about how you are going to access the money, even if you have enough.
It is important that you grasp the scale of the situation you are in. How much is the emergency going to cost you, and how will you raise this money without it causing unnecessary hardship?
For example, let’s say your car has totally given up. If you need it to get to and from work then this isn’t just a minor problem, it can be an emergency. However, the costs involved are pretty clear. The cost of buying a reliable car, or repairing your car, and (hopefully) no unexpected costs for the next year or two.
With other situations this can be way more complex. Medical costs, for example. A newly diagnosed condition or illness can come with all kinds of costs. Some might be covered by insurances, others might not. Do your best to evaluate what costs are going to be involved and when the money is going to be needed before you panic and start to raise funds. Knowing roughly how much financial strain this is going to cause will be the first step to solving your problems.
Prioritize your expenses
If we’re brutally honest with ourselves, we could probably all find a few ways to cut back and save money. We’re not accusing anyone of being frivolous, but we aren’t usually dealing with emergencies, and when the time comes to tighten the purse strings, expenses are one of the first things to evaluate.
Firstly, you can trim anything unnecessary if you need to. Some of the common outgoings that people have, which can truly start to add up, include monthly subscriptions. It might be time to stop going to the gym and start exercising outdoors for instance, or you might have to cut the cable TV for a while. These can be temporary measures, but there is no point in putting such a strain on your finances for things that are ultimately luxuries.
It’s not easy to admit that there will be no vacation this year, but it could be the right decision for the long term and to ensure you don’t end up in more financial difficulties. It might even be the case that you need to look at things like grocery shopping and cut back where you can to try and save some money. Often, people are surprised when they actually analyze the expenses and see where some of the money is going. If things have been going just fine for a few years then you might not have had a reason to do so.
We understand that not everybody is in the situation of being able to cut a lot of expenses and things might have already been tight before the emergency, but there are other solutions out there, too.
Negotiate with lenders
This is an option that everyone should take, but a lot of people don’t realise it is possible. Ultimately, if you owe a company money, they want to make sure they get that money rather than run the risk of you going bankrupt and then they will never see it.
So, for that reason, lenders are often open to the idea of making it easier for you to repay. Many have a way to restructure debt and help you for the short term, with options such as payment holidays for people who are struggling.
It is easy to assume that all lenders are unscrupulous and will not negotiate, but this isn’t the case – ultimately, they would rather get the money back with minimal hassle, plus some of the restructures of debt can even see them earn more money in the future. Obviously this isn’t the best thing in terms of the interest you are paying, but if you are looking to avoid the trouble of a short term hit by getting emergency personal loans then you want to ensure you can keep up with repayments and not spiral into debt.
Find extra money
That short title makes it sound so easy. You probably know already that finding extra money is not something that is as simple as just clicking your fingers, and you will need some sort of a plan to get your hands on the extra cash required to deal with a financial emergency in the short term.
We are all capable of making extra money though, and when times get hard it could be the perfect opportunity to either get smart or get entrepreneurial (or both). We’re not talking about rummaging down the back of the couch, finding money is more complex than that, but in this modern age there are plenty of opportunities to do so.
Here are some of our top ideas for anyone to be able to find extra money.
A part time job – this is the obvious one! If a financial emergency hits and you aren’t working then finding a part time job can be a solution. Or, for example, if you are a couple and one of you works, it might be time for the other to bring in some cash even if just temporarily. This can make things tough, especially where childcare is concerned, but it could be the most simple way to significantly increase the money coming in.
Ask for a raise – if you are already working then you might be in a position to request a raise in your salary. Be careful with this as you don’t want to annoy anyone and you should make sure you are asking for something realistic, but actually, if you are good at your job and provide plenty of value then it could be possible.
Sell some things – this can range from the small things that are hanging around in your garage to the big expensive items that you use from day to day. It really depends on the financial situation you are in. If you have a $20,000 car but need to raise $15,000 for a financial emergency, think about whether you can cope with a downgrade in your vehicle. This can always be a temporary thing, too. You can build to buying a new car when things have calmed. If you don’t want to take such drastic action then you can sell on eBay or elsewhere online, and there is probably a lot of stuff within your home that you don’t actually need or want anymore.
Time to Borrow?
A lot of people are worried about borrowing, and this is normal. There’s no doubt that having to borrow money is not ideal for a lot of people, and it can cause some hardship in the future if not dealt with properly, so you need to borrow within your means.
It may be the case that you have some value built up within your house and possessions, but parting with these to pay for your financial emergency isn’t the most sensible way to deal with it, so borrowing money or getting a line of credit can help you in the short term. Your financial emergency will be temporary and though the need might be pressing now, it might not warrant drastic action like selling the house.
Borrowing can be done in many different ways, and some of us might be fortunate and be able to borrow from friends and family. This should still be done in a formal way, with a promise of repayment, but if you are able to do this you can avoid paying interest.
If you have a decent credit rating then there will probably also be a lot of financial options available to you. Products like loans and credit cards that can ease your woes in the short term, but obviously need to be repaid in the long term. Everybody is in a slightly different situation and it depends what sort of money you need to raise, and your financial history, but borrowing can be a good way out of an emergency and allow you time to raise the extra money to repay your debts.
Take advantage of available assistance
Depending upon the situation you find yourself in, you will find that there are schemes and assistance plans available for you. Societies do not want to see people going bankrupt or struggling with emergency situations, and there could be a plan to help.
If your financial emergency is medical, why not see if there are grants and support available for any surgery or lifestyle changes you will need to make. There could be charities that support you.
If you are struggling with debt already, there are government guidelines to dealing with this debt and plans to help you with consolidation and repayments. The government’s own site on the issue can be found here.
If you are a serving member of the military, a veteran or a close relative of someone in the forces, the SCRA is a specific facility for you to access financial support and receive guidance on the best ways to handle debts.
If things get too much for an individual or a business and everything is spiralling out of control, bankruptcy can be an option, but this is truly a last resort as it can impact you for decades in the future.
The US government provides a lot of information for citizens on which schemes and forms of help they might be eligible for and you can find more about this here. It is important not to panic and think you are all alone when it comes to dealing with an emergency, you can often find that there is help available.
Summary – Dealing With Financial Emergencies
Though the way out of a financial emergency can be different for everyone, it is important to recognize that there are things that you can do to face up to the challenges that have been presented to you, and that there might be help and support you had not even considered out there.
The most important thing is to keep a calm and calculated head while you are dealing with the problems that have arisen, as this will enable you to make sensible decisions and find a way out for the future. Don’t be too proud, this sort of thing can happen to anyone, and asking for help is not something to be ashamed of. Our guide to dealing with a financial emergency has loads of ideas for you to pursue as you try to get things back on the straight and narrow.