Many people live paycheck to paycheck. In fact, according to a study done by CareerBuilder, 78 percent of U.S. workers live paycheck to paycheck, and more than 1 in 4 workers do not set aside any savings each month.
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Having savings set aside each month or creating an emergency fund is not only necessary, but is vital to the pursuit of financial freedom. Living paycheck to paycheck means that things are tight when everything is status quo, so imagine how disruptive it would be to your well-being if an emergency were to happen. Even those who don’t live this way have to review their finances on a regular basis and ensure that if a crisis happens, they will be able to recover.
But let’s say it’s too late and an emergency has happened: what do you do? Here are eight tips for getting through an unexpected financial emergency.
1. Stay Positive
During a financial emergency, the last thing you want to do is to panic. Many people get upset or discouraged when an unexpected financial emergency happens, but reacting in this manner will only stress you out and make matters worse. It is important that you remain calm, cool, and collected so that you have the right mind frame necessary to assess the situation and come up with the best solution to rectifying it.
2. Get Your Financial Life in Order
The first thing you will notice during a financial emergency, aside from money being tight, is that things start to come up out of nowhere. Before you can begin to bounce back, you must first be aware of where you are financially and put first things first. It is important to recognize what your needs are and what your wants are, and start to prioritize based on these different categories. You must put your needs first and then focus on your wants. Knowing this in advance will help you decide how to best allocate the funds that you currently have.
3. Look at All of Your Options
After you get your financial life in order and understand your needs and wants, it is a good idea to look at all of your options before letting any of your bills go past due. Many lenders offer options to defer payments when you cannot pay your bill. All you have to do is call and ask, rather than pay late and have the payment jeopardize your credit. You’ll be surprised at how many of these requests get approved.
4. Cut Your Spending
This should go without saying, but sometimes we don’t recognize how a small leak can sink a big ship. Once you have a financial emergency, the odds that you have extra money to spend are very slim. In order to get through your financial emergency and back to a place of financial wholeness, you may need to temporarily cut down on your spending. This short-term cutback will allow you to recover from this emergency and give you the necessary funds needed to either build or replenish your emergency fund. Make sure as you’re cutting back on your spending, you keep in mind what we talked about in the previous step, which is the difference between your needs and your wants. Then, use this information to set up a budget in which you are paying yourself first.
5. Ask for a Raise
After a financial emergency, it is a good idea to find ways to increase your income. Asking for a raise is one way that can be viable if you follow the right steps. Make sure you are confident, know your value proposition, and are ready to articulate why your request should be granted. Remember that “no” is just “yes” to a different question. So if you are not granted your raise at first request, make sure that you ask and understand what you need to do in order to qualify the next time around.
6. Start a Side Hustle
Technology has become the great equalizer when it comes to starting a business and building wealth because of the ease in use and access to so many people. When you find yourself in a financial emergency, starting a side hustle is a great way to earn extra income and rebuild your emergency fund. This is a great option because not only will it allow you to make extra money to build your emergency fund, but it also can help you avoid financial emergencies altogether in the future. The best part of this option is that you will not owe anyone or be at the mercy of anyone, either.
7. Get a Loan
Loans may be a good option if you need cash right away. Make sure to do proper vetting and research, and select a reputable loan such as BankMobile Personal Loans. If you have a financial emergency, getting a loan may be as easy as an online application depending on where you are with your credit. My suggestion would be to stay away from high-interest, payday-type loans, which can start a vicious cycle that may be difficult to get out of and can increase financial worries.
8. Ask for Help
If all else fails, then it may be time to lean on your friends and family and ask for help. This may not be ideal for most, but when facing an emergency, it might be your best option. Borrowing from friends and family can put a strain on the relationship, so treat this help with respect and be sure to pay back what you owe as soon as possible.