Whether you’ve lost your job or have been hit with a barrage of unexpected costs, financial emergencies happen to the best of us. While having money troubles is incredibly stressful, knowing how to deal with them will make the recovery process much more manageable and get you back on your feet sooner rather than later. Here’s what you should do if you find yourself in a tight financial situation:
Diagnose the Problem
The first step to dealing with a financial emergency is figuring out exactly what caused it. If you’re guilty of frequent overspending, now’s the time to re-evaluate your fiscal habits and figure out a budget. If your emergency has come about as a result of urgent repair costs or medical bills, look into low-interest small loans. The terms on many of these loans are much more flexible than the high-interest repayments associated with credit cards, which can put you at risk of further debt in future.
Negotiate with Lenders
One of the most essential steps in navigating a financial crisis is getting in touch with your lenders as soon as possible. It’s in their best interests to help you pay your bills – from their perspective, late or partial payments are better than none at all. More often than not, your credit card company or utility provider will help you devise a plan if you inform them of your situation. This can mean offering lower interest rates, extending terms, creating a payment plan, or even temporarily delaying your payment due date.
The next step is to make an outline of all your upcoming expenses and prioritize them based on the level of urgency. This process can assist you in knowing exactly how much to put away to cover them. Having a list of all your expenses in front of you is also the best way of seeing where your money’s going, and help you decide where to cut costs. Cancelling your cable subscription may not be a lot of fun, but if doing so will enable you to cover your rent or mortgage costs for the month, then it’s a necessity.
Now’s the time to tighten your belt and change your living habits while you get your finances in order. If you rely on take out for dinner a few nights a week, cut back and opt for a home cooked meal instead. It’s easy to whip up a big batch of curry, pasta or soup that’ll last you the week if you freeze portions of it to reheat for lunch or dinner. Instead of filling up your car with gas, take the bus or ask to carpool to work with a colleague. While these costs may seem insignificant, every spare dollar will be useful while you get back on your feet.
Plan for the Next Emergency
When you’re back in the clear, consider starting an emergency fund to fall back on in the event of another financial crisis. Ideally you should aim to have at least three months’ salary set aside against possible future misfortunes. Having a solid plan in place will take a significant weight off your shoulders the next time you find yourself in tough financial waters.
As stressful as they are, financial emergencies are manageable when you know how to handle them. Keeping the above tips in mind will get you back on your way to smooth sailing in no time.