“Oh my gosh! The shoes I’ve been wanting are on sale. It’s an emergency.” Wrong. A financial emergency is often a misused term. If you’re trying to create a financially sound life, you need to know the best ways to respond to a financial emergency.
Ask Yourself If It’s REALLY an Emergency
What is a financial emergency? Many people think it’s a blown tire or a leak in the roof. The truth is a financial emergency is something that was unexpected. Car and home maintenance should be expected expenses of owning a car or home. You should have funds set aside for this. A real emergency is getting laid of from work or getting in a car accident that leads to large medical bills that aren't covered by insurance. It’s something you never could have anticipated happening.
Cut Unneeded Expenses
When a financial emergency occurs, you need to cut expenses. For example, if you’re laid off from work, you want to drop your cable TV, gym membership, and anything else that isn’t vital for survival. This will allow you to make the most of the money you have.
Sell Things You No Longer Need
A financial emergency is a great reason to put together a yard sale, list things on eBay or Poshmark, sell things through the Facebook marketplace. You can make more money than you might expect. Sell the items you no longer need, but don’t sell something you truly treasure to fix a temporary situation.
Find Another Source of Income
If you’re laid off, hit the pavement and apply to as many jobs as possible. The important thing is to find employment as soon as possible. Don’t hold out for the perfect job. You will probably get some form of unemployment while you’re looking for work, but it’s usually not much money at all.
If you’re in a situation where you need a bit more money in addition to your average expenses, create a second source of income through a part-time job, running errands for others, making crafts to sell, etc.
Dip Into Savings as a Last Resort
You should only dip into your emergency savings account if you have to. Yes, the money is there for emergencies, but you want to make it as long as you can before you have to use it. When you do start using it, make sure you have a streamlined budget that will make the most of that money. This means you’ve cut unneeded expenses, you know that your groceries will be only what you need, etc.
Knowing how to handle a financial emergency can help ensure that you don’t panic. You want to be smart about how you use the money you do have and how to come up with more money before you decide to dip into your emergency fund.