You have made the decision to grow up financially and do things right this time. However, some unexpected events have happened and you do not have enough to cover the bill. Whether you are just starting to take control of your money or have been working your plan for a while, not having enough money to cover an emergency can be frustrating. What can you do so you do not go further into debt?
The first thing you need to do is ask yourself if this is really an emergency. Sometimes the pressure of life can overcome you and little things that you can live without can seem to be an emergency (i.e. a faster computer). If you have determined that your emergency is really an emergency here are some ways you can avoid going into debt, even though you do not have the cash on hand.
- Wait it out – This is a good step; especially, if you are a month or two away from some extra money. Why tap into your emergency fund if something can wait a month or two. Maybe it is a kitchen appliance that is on its last leg. Take the time now to begin looking around for some bargain deals. Then when you get your extra money, take care of it.
- Get some help – I talked to someone just this weekend that asked for help in putting a starter in his car. If he had taken it to the mechanic, he would have paid for the above market value for the part and labor. Instead he just had to pay for the part and had a chance to bond with his friend. He even said he is more interested in learning more about fixing cars.
- Cash flow using your budget – Whenever you have an emergency, you should first see if there is any way you can cash flow your emergency (even if that means temporarily stopping your debt snowball for one month). You may have to combine both your emergency fund and cash flow for larger emergencies. Let’s say you have a $1,500 emergency and only $1,000 in savings. On top of that you have been paying at least $500/month towards debt. Take the money that would’ve went towards debt (with your emergency fund), and pay for your emergency.
- Sell something– Maybe you have a $1,200 emergency and you only have a $1,000 emergency fund. Find some things around the house and put on Craigslist or EBAY immediately.
- Payment plan (last resort) – You do not want to have to do this last option, but it is available under some worst case scenarios. For instance: You’re heating and air system in your house completely goes out and you cannot just fix one part (the whole thing needs replaced). You have a $1,000 emergency fund, but you need $3,000 or more to replace your system. In this case the only option you have is to put the balance due on payments. Now, just because you do not like the efficiency of your system does not constitute as an emergency to replace it. But you do need to keep a basic level of heating and air if your system completely shuts down.
The good news is if you are working your plan (doing a budget monthly, having extra money at the end of every month going towards debt and you are sacrificing to win) this should rarely if ever happen. But if it does, you now have some options to help take away some of the stress that emergencies bring.
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