What counts as a financial emergency?
A financial emergency can be many different things, some may have more severe of an impact than others. It is important to note that a financial emergency is different from a financial crisis. A financial emergency could be a job loss, or a family member falling sick, it could also be home expenses or car repairs that were not expected. It could easily be something that you never expected to happen that hit you suddenly and now, you are stuck and have no idea how to cope with this sudden blow to your financial security.
There are several ways that you can cope with this, and the best thing you can do is plan ahead, however, if a financial emergency has already happened, and you have not planned ahead, you can still start planning and try to work around your current situation.
Ways to survive a financial emergency.
Surviving a financial emergency seems impossible when the situation arises. It fills you with stress and anxiety to find out how you will make it through this. There is much you can do, and if you are not yet in this situation, you can easily start preparing now. However, if you have been hit by an emergency, take three deep breaths, get out a pen and notepad, and read on. You can still plan to get through this.
#1 Save and keep an emergency fund.
Keeping an emergency fund is a great idea. This is something that you cannot do if you are already in an emergency, but it is something you should consider for your future. When the economy dips and our jobs and income are on the ropes, an emergency fund can keep us going while we try to find a way to fix it.
An emergency fund is just money you have saved up for the sole purpose of helping you get through your day-to-day life should you hit hardship. A great thing to do is put this money into a savings account over time. If you can find an account plan with a good interest rate, your savings will grow faster, and you will find that this will help.
If you have an emergency fund, and you are in an emergency now, do not be afraid to dip into it, that is why it is there.
#2 Start budgeting and managing debt.
This is something that you can do whether you are in an emergency or just preparing for the eventuality. Budgeting is a great tool, and knowing how to budget well is a great skill. Always prioritize the necessary things, rent money, gas, electric, insurance and water bills, and of course your food expenses. Then think about TV and subscriptions to streaming services, and everything else after that. If you are cutting it close, there is nothing wrong with cutting out your Netflix subscription until things are looking better for you.
Also consider any debts. If you are struggling to pay your home bills, your debt is going to spiral. Try to manage your debts before an emergency hits and prioritize this as well. Netflix can wait, debt cannot.
#3 Downsizing.
Downsizing doesn’t mean moving house, it simply means defining what is necessary and what is necessity in your life. Distinguishing between the two can save you a lot of cash and help keep you afloat during an emergency situation. If you have two cars, is it necessary? Do you need a subscription to both Netflix and Amazon Prime Video? These are things to think about. What can you cut back on until things get better?
#4 Plan ahead- consider loans.
If you are struggling with making ends meet, there is nothing wrong with taking out an emergency loan, especially if you are in a dire position. Do be cautious though and figure out how much you need to borrow and what type of repayment plan will work best considering your current situation.
Never take out a loan you cannot pay back. Check out quick cash loans in these situations, as this is the best option in an emergency.
#5 Diversification.
If you have not yet been struck by an emergency, consider the proverb ‘do not put all your eggs in one basket’. This speaks true, having two jobs, or one full time and one side project. In the case that you lose your income, having something on the side to help get you by is a smart play. In this case you could lose your job but still have a little security and less stress.