Life can be unpredictable, and if unexpected circumstances affect your finances, even minor expenses can cause many problems for you. These unexpected financial expenses can leave you feeling blindsided and helpless. Whether it’s a medical expense, job loss, or emergency car or home repairs, the unexpected change in your financial situation can be stressful, and the pandemic hasn’t made things easier, either.
No matter how stressful the situation, you still need to pay the bills, and your family still needs food and other things. If a financial emergency has recently struck you, here are a few useful tips to help you deal with the situation.
1. Evaluate the situation.
Financial emergencies can cause anxiety. As soon as you realize a crisis has struck, take your time to sit down and evaluate the situation. Thinking through the problem will give you a clear head on how to move forward. Remember that what you do today can have long-term consequences on your credit and finances.
After you’ve calmed down, try to determine the cause of the financial emergency. You’ll have many ideas to brainstorm, but it’s essential first to understand why it happened. Typical reasons may include sudden loss of income, a natural disaster, or mounting expenses you can’t keep up with. While each situation may be different but can lead to a similar crisis, your plan of attack needs to address the problem’s cause. Putting a band-aid on the wound that’s bound to open again is just a temporary solution. The issue may come up again in the future.
It’s also helpful to speak with a qualified financial adviser who can figure out what to do in a financial emergency and how you can make a strategic plan to deal with it.
2. Evaluate your expenses.
Knowing how much money you spend and how you can save might make it easier to deal with an unexpected expense or loss of income. Not all bills are the same; some are essential more than others. If you can’t afford to pay them all at once, you need to evaluate and prioritize.
Essential bills are the ones related to food and shelter. Failing to pay for your Internet service may be inconvenient, but it’s easier to go to a library with Wi-Fi than to find a new place to live, so rent and mortgage should be among your priority bills. Food should also be among your essential expenses because you won’t think clearly or work productively on an empty stomach.
Once you know which bills you should prioritize, you can start looking for expenses to cut your budget – stuff like premium streaming services, expensive phone plans, or any subscriptions you can do without. If you regularly go to restaurants or order takeout, consider cutting back and making food at home.
You don’t have to look for significant cuts, savings can add up, and in the long run, the money can end up addressing your financial emergency.
3. Contact your lenders.
If you’re having trouble paying your mortgage payments, medical bills, or credit cards, call your lender as soon as possible. If you call them and inform them of your situation, they will help you make your payments. The Consumer Financial Protection Bureau advises working with your lenders directly. Unbelievably, it’s in their best interests if you can pay some payments than none at all.
A common mistake people make is waiting for too long to communicate with their lenders. Don’t wait until the situation is critical. If you know that cash is getting tight and you need some help, talk to them, and they may consider giving you a lower interest rate or extending your terms. This way, you’ll be able to avoid late payments that may affect your credit score.
It’s also important to remember that your credit card isn’t a replacement for emergency savings. But then, it may also help you pay for some unexpected expenses or cover essential bills. You can also use online loans direct lenders that can issue loans to pay off some bills, and then you can work out a repayment strategy that suits you.
4. Take a look at how the government and insurance can help.
The government has created programs that are designed to help people overcome sudden financial hardships. If you happen to lose your job, you’re entitled to unemployment benefits. The government set out relief for people who lost income during the pandemic.
If your job provided health insurance, ensure you look into COBRA to see if you can maintain affordable insurance. If you were injured in the workplace, there are options like workers’ compensation. In other situations, you may qualify for federal benefits like Social Security Disability or Medicaid.
If your vehicle was damaged in an accident, check with your car insurance to see if they can help cover the repairs’ cost. Insurance may also cover rental expenses while your car is in the repair shop. If any natural disasters damage your home, your home insurance may cover the repairs. It’s also essential to know your cover’s limitations; for example, your policy may not cover flooding.
If you’re renting out a property or subletting, renters’ insurance may help cover things like property damage or temporary living expenses if you happen to be displaced. Your taxes fund these programs, so ensure to take advantage of them when you need them.
5. Explore extra income streams.
If you’re dealing with unemployment and bills piling up, finding extra income streams might offer relief. Looking for a side gig or hustle while dealing with a financial emergency can be challenging, but it may help get you back on your feet faster and clear some of the bills that keep piling up.
Explore options like freelancing and use your writing skills, graphic design, captioning, etc., that may help you earn some extra cash. Some of these side gigs are great because you can do them remotely.
Financial emergencies come unexpectedly, but it’s also advisable to plan for them. Having a plan in place will take a lot of weight off your shoulders. An emergency fund and savings will make it easier to cope with your next stressful situation.
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