Regardless of how much you have planned for the future, life has a way of unraveling at a moment’s notice. If you have not yet faced a sporadic financial emergency, then get ready because it will, at some point rear its ugly head in.
What is a Financial Emergency?
A financial emergency can range from the loss of a job, a health crisis, an accident, a fire, and anything else in between. Emergency situations are beyond our control, but that doesn’t mean that they have to bankrupt us in the process.
How? All you need to do is be proactive. When you do face a financial emergency, you will be delighted that you took the initiative and planned.
Nobody wants to plan for worst-case scenarios. But would you rather stay ignorant and let a life crisis ruin your finances or would you rather be well prepared to face it head on? Here, we have gathered some helpful tips to help you deal with any financial emergency that might befall unto you.
How do you prepare for a Financial Emergency?
Sometimes, as unfair as life can be, maturity dictates that you need to be prepared for anything. With that being said, you need to start having contingency plans in place before any catastrophe hits. Some simple cost-cutting methods that can see you through this challenging time include:
1. Reduce Spending and Save
The only way to survive such an ordeal is by being smart. There are a few ideas that can be implemented in your day-to-day life. These ideas will in no way decrease your standard of living, but they will still enable you to save back a few bucks every week.
- Buy in Bulk – instead of buying when necessary, start buying in bulks. Any foods that do not have an immediate expiry date should now be consumed in quantities. This will help save a few bucks per week. You will be surprised at just how much you can put aside every year.
- Use Public Transport – As tempting as it is to take taxis everywhere, metros and public buses can be coin savers.
- Eat In – Food cooked by another hand is always more delicious. But how much do you use eating out? Buy your cooking oil and other ingredients in bulk and enjoy home-cooked meals from now henceforth. You might be shocked by how much more you are pocketing monthly.
- No Need for New – Your family’s clothes do not have to be brand new. This isn’t to say that you cannot buy new outfits during seasonal holidays. But do you genuinely need to shop at a mall? There are thrift shops on just about every block so take advantage of this and start spending on vintage clothing.
- Recycle – If you have an older child, no rule dictates that every child needs new toys and clothes. Start recycling. Kids do not care if their expensive toys come from Toys-R-Us or it’s a hand-me-down.
- Scale Down – Every family saves up for a get-away vacation. There’s no need to splurge on an expensive vacation when that money can be put to better use. I love any family vacation that involves all my siblings and parents just enjoying each other’s company. A simple camping trip is all your family needs, a fishing trip, etc. No need to get out of your zip code to achieve a family weekend out.
2. Prioritize your Expenses
Money can get tight, fast. To ensure that you are never left in a rut, prioritize your spending. Your paycheck should always cover the basics first then the rest should be safely saved in a bank. Once you receive your paycheck, buy:
- Pay rent
- Clothing (if needed)
- Transport to and fro
- Debts (Have a direct debit arrangement with your bank to be removing a predetermined amount of money to pay for your mortgage, car payment, etc.)
How do you Deal with a Financial Emergency that’s Already Hit?
1. Readjust your budget
Re-allocate money from other utilities that are not in desperate need. Sometimes, you might be forced to dip into your cable account and make the necessary adjustments.
Reestablishing your budget can make or break your norm. Take a step back and evaluate what the necessities are. You might have to cut back on things that your family is used to, but considering the options, it might be the only way out.
2. Borrow from Family and friends
Family and friends are the most likely to lend you a helping hand when you’re in need. Often, they don’t require formal terms to the loan. It could be a relief from cold calculating commercial lenders, but it’s also a double edged sword.
No formal terms means that they could need you to pay back the entire amount suddenly. This would land you in another financial emergency.
Another drawback is that when money is involved, your relationships with these people could be placed under strain.
3. Quick Loans
If the two tips above don’t work, you can be able to take a quick loan for emergencies from lenders. These vendors will permit to acquire a certain amount of money within a specified time – you and your shylock will need to iron out the details. Keep in mind that shark loans incur a high-interest rate so it should only be acquired if the situation is dire.
Most people opt for the easy way out thus acquiring a credit card. This is a mistake. Granted that a credit card might take you from hot waters at a moment’s notice, it will undoubtedly leave you in the swamps when the tide has set in.
You will be left with debts to pay off, which will incur interests depending on how fast you pay the credit off. Do not take up a credit card unless necessary. Your card should be only designated for emergency purposes.
Some people have a hard time grasping how to handle a financial emergency without owning a credit card, but truth be told; you do not need credit to get you out of credit. All you need is some smart planning and cost-cutting ideas to get you through.
As tempted as you are just to take up credit cards and loans from the bank, there are more accessible solutions that will not leave you buried in debts. You will have to change your lifestyle and adapt to some new norms, but when you do so, you will not regret the changes.