Have you ever had to deal with an unexpected financial emergency that blindsided you and didn’t know what to do? Financial emergencies include emergency home repairs, medical expenses, job loss, or an unexpected change to your financial situation. You still need to pay bills to keep utilities on and put food on the table, so how do you get by in a financial crisis?
Step 1: Assess Your Situation
Instead of panicking and running around, take some time to evaluate the situation carefully, which also helps in reducing stress. While you have a million things going on in your life, taking the time to assess your situation ensures that you are in the right frame of mind to make good decisions.
For starters, determine what got you into the financial emergency. Perhaps it was mounting expenses that you couldn’t keep up with, sudden loss of income, or even a natural disaster. While the causes may be different, they lead to similar problems and it’s better to work towards addressing the cause in the long run.
Step 2: Prioritize Your Expenses
Look at your expenses and determine the bills that should be paid before others. Critical items on your list ought to be shelter and food. This means examining your recurring expenses and determining the most important ones to you and your household.
Once you have listed the bills in order of importance, start looking into ways of cutting down your budget. Removing some things from your budget may not be fun, but it’s a necessary step if you want to avoid sinking yourself deeper in financial trouble. Be on the lookout for ways of cutting back, or even eliminating some items.
Step 3: Negotiating With Your Lenders
If medical bills, credit cards, and even the mortgage payments are becoming a burden, call the lender. Fortunately, these service providers will help you make payments, even if they will lower the interest rate or extend terms. Many people make the mistake of waiting until they are deeply delinquent before contacting lenders, and it’s too late by then.
You can always ask for money from your friends and family, and that little bit of help can be the push you need to go through the rough patch. In addition, you can also borrow quick cash from short-term loan providers like loanpig.
You might also have some cash available in retirement accounts or investments. Generally, withdrawing money from retirement accounts is often discouraged as it puts your security in retirement in jeopardy. On the other hand, it may be enough to pull you from sinking into further financial trouble.
Step 5: Leverage on Available Assistance
During financial hardship, you are likely to find assistance. In case you are going through a job loss, you can always claim unemployment benefits. If health insurance was available through your job, it’s a good idea to check whether you can maintain health insurance via COBRA. In case of work-related injuries, find out about workers’ comp, and in some cases, you may qualify for federal or state benefits such as Social Security Disability and Medicaid.
Since you fund the programs, directly and indirectly, it’s always a good idea that you take advantage in case you are entitled. Furthermore, check with your local community for resources that may help you get back to work in case of a job loss.
Once you’ve made it through difficult times, make sure that you start an emergency fund that can cover a few months worth of expenses. One or two month’s worth of expenses saved up in a separate account will also buy you some time to get back on track.