The definition of a financial emergency is any financial situation you haven’t planned for and cannot handle. Unfortunately, it happens all the time to families. Fewer than half of all families in America have an emergency fund set aside for situation such as this, and you never know what might happen to cause you to handle a financial emergency such as this. There are so many things that might go wrong in life, you just can’t prepare for all of them. You can prepare for a few things, but sometimes life is too much to handle. When you have a financial emergency on your hands, it’s easy to feel overwhelmed and out-of-sorts. What makes it even more difficult is there is no one-size-fits-all financial emergency for every family.
For one family, a financial emergency might be a child breaking his baseball glove during practice and needing a new one. If his family can’t afford to spend an additional $30 on a new glove, their world falls apart. Another family might have significantly more money in the bank and not see a broken baseball glove as a financial emergency. That family might see a flood in their large home as an emergency when they find out their insurance doesn’t cover it. There are all types of financial emergencies and no way to plan for any of them, but that’s why you take a deep breath and learn how to get through financial emergencies.
Plan Ahead for Financial Emergencies
The best way to handle financial emergencies is through prior planning. Before a financial emergency occurs, have a plan in place for such a thing. This means having an emergency fund available with at least six months of living expenses in it. This helps with job loss, it might help with a car that needs new tires or a repair, and it might help when your roof leaks and requires repair. This is what an emergency fund is for.
It also helps to save money in a regular savings account you can use to make upgrades to your home when necessary. You can use it for a down payment on a home, to buy a new car if yours no longer works, or if you have to pay bills you didn’t see coming. Avoiding credit card debt, paying off your cars and home as fast as possible, and living within your means are always fantastic ways to stay out of debt and avoid financial emergencies.
Look for Other Alternatives When Emergencies Occur
Sometimes you can’t help but experience financial emergencies that require more attention. Maybe you lost your job and your new job doesn’t pay you enough money while you look for more or better employment. You’ve used all your emergency fund and savings, and now you’re living paycheck to paycheck while you work things out. When your tire blows and you have to replace two of them, it’s not really an option.
This is when you might have to handle your emergency using alternative methods. You might consider using your car as collateral and applying for car title loans in Orlando, borrowing against your 401k, asking a family member for a loan, or taking out a home equity line of credit against the equity in your home. You can sell old clothes, toys, or furniture. You can take on a second job. You can open a small side business. You can do anything within your means to make ends meet while you get your life together.
Handling Financial Emergencies in Life
You know to prepare in advance and to look for alternative methods of income while you’re in an emergency situation, but how do you handle a financial emergency emotionally? It’s not always easy, but it’s something you need to consider. There are a few things you can do to help handle financial emergencies with a little less stress and anxiety. This includes the following:
– Call your creditors and ask for lower rates
– Call and ask for lower bills
– Work with lenders to postpone payments for a period of time
– Talk it out with your spouse
– Remain calm
When you are calm and in control of your situation, you tend to make better decisions. Eliminating the chance you might make more mistakes or create further financial ruin is going to help you in the short and long-term. Start by staying calm and calling your lenders to reduce your regular expenses. You can ask them to lower rates, explain your situation, and work something out.
Next you make changes to your everyday life. You start buying generic groceries, eating at home only, and skipping the expensive coffee run each morning. You cancel expensive cable and cell phone plans and use less expensive alternatives. You do what you can to make things work in the moment so you don’t have to suffer more later.
Keep in mind many financial emergencies aren’t the big emergency you think they are upfront. Sometimes taking a calming breath and putting things to the side for a day clears your mind enough to tackle your problems with ease. An unexpected medical bill is almost always negotiable. Offering to pay cash is usually a great way for you to get a steep discount. If you can’t pay cash, you might be able to work out a repayment plan with the facility. Keep in mind most people just want to get paid, and they’re almost always willing to work with you to guarantee that happens.