A financial emergency may blindside you, but the sad part is, however, distressed or depressed that has made you, there is no running away from paying your monthly bills. Life goes on, and you need to pull up your socks and deal with the situation.
So, how can you handle it?
There are steps you can take to cope with the financial emergency while you reduce the impact and get ready for the next one.
1. Evaluate the situation
First of all, calm down and take a moment to evaluate your situation carefully. This is an essential step as it will help you make the right choices for a better financial future. Before you brainstorm for solutions, try to figure out the root cause of the financial emergency.
- Is it job loss?
- A medical emergency?
- Natural disaster?
- Car or home repairs?
- Mounting bills?
Understanding the root cause will help you plan an attack that addresses the specific problem.
2. Use your emergency fund
You should have been ideally putting away funds to tackle these kinds of financial emergencies. If you have been smart to do that, now is the time to tap into one. If you haven’t, you should keep reading.
3. Ask help
Even if you don’t have the money, the emergency has to be dealt with. You can ask for help from family or friends. If you don’t like to do it, get a personal loan to cover the costs. In case of a medical emergency, get a personal medical loan to pay off the bills immediately. Once the bills are paid off, don’t relax; you are not in the clear. Paying off your bills with a personal loan was a quick fix. You are yet to plan a permanent fix to your whole financial situation.
4. Plan for the next financial emergency
Once you’ve made it through the financial emergency, you need to start overhauling your whole financial picture and take steps to reduce the impact of such events in the future. Follow these steps:
A. Create an emergency fund
A good rule of thumb is to save enough to make ends for a good 6 months. The more you save, the better you’ll manage your financial situation. Don’t get disheartened if you are not able to save enough. Save anyway, however little it may be.
B. Keep a personal line of credit ready
You may want to consider keeping a personal line of credit ready 24/7 when such an emergency strikes.
As long as you treat a line of credit as an emergency fund and don’t withdraw from it unnecessarily, it can be a blessing. You don’t have to pay interest if you don’t use it. Only when you withdraw from it, interest is applied.
C. Prioritize expenses
The best approach to take to prioritize your expenses is putting your needs before your wants. Establish which expenses are essential and which are not. The basic needs such as food, housing, monthly bills, debt repayments, etc. have to be paid first.
Let go of your wants. Your magazine or gym subscription, coffee shop, restaurants, etc. can be put behind the burner.
Keep cutting down your spending not just until you recover from this emergency, but until you are able to have an emergency fund in place, so you are prepared when the next financial emergency strikes. A budget can help here. It will help you keep track of your spending.
By having a plan in place will keep you ready when a financial emergency strikes. Prioritize your expenses, have an emergency fund, and a backup plan too. You’ll be then in a better position to cope with your next stressful situation.