Career Advice - A Community Blog

Erik Larson writes about the job market, resume improvement, and career advice

6 Tips For Dealing With a Financial Emergency

Written by Erik Larson, Community Blogger | Oct 24, 2017 5:28 AM

The saying goes that one can never have enough money. The more you earn, the more you will have to spend as well. Most expenses are recurrent and therefore foreseeable and can be planned for in advance. However, unpredictable events such as job loss and health emergencies may need you to go above budget unexpectedly. How do you go about this while still maintaining your financial health?

1. Situation Analysis

For you to conclusively sort out a financial emergency, you need first to evaluate it and find out its cause. Whether your home theater broke down or you had a medical emergency, avoid making any rash decisions. Keep calm, do some research on the affordable options available, you may consult other people where necessary. This will help you make corrective interventions not only on that specific issue but also prevent future problems.

2. Emergency Funds

This means that you should always have some money kept away for emergencies only. Unfortunately, most people have poor saving plans which make them just a medical emergency away from being bankrupt. In the USA, close to 70% of the population don't save more than $1,000 while a third don't even save at all.

Things are not very different in the UK where about one-third of the population save less than £100. Looking at the statistics, it is understandable why some people almost sink into depression when faced with unprecedented situations. But it doesn't have to be that way for you. Make it a habit, actually - a personal policy, to save a percentage of your income in an emergency account and commit never to use the money for anything else.

3. Prioritize your expenses

When your financial standing suffers an unexpected hit, it is inevitable that you will have to cut off some things to survive. Not all bills are urgent, and not all expenses are necessary. For instance, you can forego that movie with your friends to pay for an emergency home repair. As such, when an emergency happens, you need to take a look at your budget and list the expenses in order of priority. Food, rent and school fees should obviously take top priority. The least important ones can be postponed until next month or completely removed from the budget.

4. Sort out your credit

When faced with an unexpected problem, your credit card can be of great help. Your car broke down? Just swipe your card at the garage, and that is quickly sorted out. It can also help you pay your medical bills and even rent. However, for that to happen, you must maintain a good relationship with your credit company.

If you are unable to clear your credit, call your lender and explain it to them. That also goes for when you need lower rates or deadline extensions. This way, they will be more willing to help you out in times of emergency.

A good credit score will also enable you to get access to quick credit at low costs. This includes, but is not limited to, online payday loans and unsecured loans.

5. Explore other options

While savings and credit may seem like the most convenient sources of money during a crisis, they are not exactly the best options. For one, using your savings might disadvantage you in case of another emergency. Credit, on the other hand, comes with terms and conditions, including high-interest rates.

So what to do when your car breaks down, and you urgently need like 500 bucks to have it sorted? Call your best friend, your siblings or your parents, explain the situation and ask them to lend you some money. You can offer to repay them back when things get better for you. Additionally, you can also consider picking up a side hustle to make some extra cash to cover up for unexpected expenses.

6. Prevent future emergencies

The saying goes that prevention is better than cure and that's no lie. When you manage to navigate through a crisis, start preparing for another emergency immediately. After evaluating as in tip (1) above, take some measures to ensure that the crisis doesn't catch you flat-footed again or even better, never occurs again. For instance, if it was a medical issue, get better and more comprehensive health insurance, or if your car is prone to breaking down, trade it off with a car that is easier to maintain.

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