Handling a Financial Emergency: Tips for Staying Afloat
The pandemic took its toll on American families. As of now, 56% of Americans can’t afford a $1,000 emergency.
With most people living paycheck to paycheck, it makes it difficult to afford things like an illness, car repair, or vet bill. Read on to learn how you can handle a financial emergency.
Table of Contents
1. Assume Emergencies Will Happen
You certainly don’t want something bad to happen to you or your family. However, you can’t control life. Things are going to happen.
If you expect an emergency to happen, you’re able to prepare yourself for it. Ask yourself what would happen if you lost your job. What would you do if you needed to buy a new car?
You’ll be able to think outside the box and set up an emergency fund for these occasions.
2. Sell Assets
When financial emergencies come up, most people think about going into debt. It’s possible that you have existing assets that you can sell for extra cash.
That allows you to handle the emergency without making your financial situation worse. You probably have things like season tickets, collectibles, and gym equipment collecting dust.
Those things are worth cash. List them on Facebook Marketplace and make money fast.
If you have a big emergency, then you have to look at other assets. Ask yourself, “Can I sell my term life insurance or car?”
You’ll be surprised by what you can sell to make up for the emergency.
3. Get a Fast Loan
Where else can you get funds for an emergency? You can use your credit cards. This requires careful thinking. You can damage your credit score because you’ll increase your credit utilization rate.
You’ll then have to pay down your credit cards with high interest rates. That could take years to do.
There are some loans that give you cash immediately, like payday loans and title loans. These are high-interest, short-term loans.
Only use these loans if you’re certain you can repay the entire loan and fees within a few weeks.
Personal loans are another option if you have a little bit of time. Online lenders work with people with high and low credit scores.
Be sure to research lenders before you apply. Get prequalified first, compare rates and terms, then apply for the loan with the best terms.
4. Tighten Your Budget
The worst thing about a financial emergency is that it takes months or years to recover. You can shorten the amount of time it takes to recover by tightening your budget.
Look over your expenses and trim them down as much as you can. If you went into debt for the emergency expense, put those extra funds towards the debt.
You can also put those extra funds towards building an emergency fund.
Tips to Handle a Financial Emergency
Financial emergencies aren’t a matter of if they happen. It’s a matter of when.
Think through different scenarios and how you’d handle them. Use the tips in this article to get the funds you need to get through it.
If you learned a lot about handling a financial emergency, you’ll enjoy the other articles on this blog. Check them out today.