Chances are you are going to face a financial emergency sometime in the future. But are you ready for it? According to the Office of National Statistics, a staggering 36.6% of Britons said they would be unable to meet an unexpected expense. What if you are one of them? There’s no shame in that. These days unemployment is high, income is volatile, and it can be really hard to keep your head above the water. But what to do when a financial crisis hits? Following these three steps will allow you to handle any financial emergency much better.
#1 Is it an emergency?
Okay, so before you start looking for solutions, it’s important to evaluate whether the situation you are facing right now is truly an emergency.
For example, if you live in an area without a public transportation and you need a car to get to work, then a car breaking down is absolutely an emergency because without it you won’t be able to make a living.
However, if you usually get to work by car, but there’s a reliable public transportation in your area, then a car breaking down isn’t an emergency because you can still get to work without it, although in a way that involves much more hassle.
Now, don’t get me wrong, I’m not saying that your car breaking down isn’t a big deal in the second scenario. It is. You obviously want to have it fixed. But, strictly speaking, it isn’t an emergency, because it doesn’t have to be attended to right now.
Calm down and take a sober look at your situation. Does it have to be handled this very moment or can you find a temporary fix for now and then properly sort it out later when the circumstances are more favorable (say, when you get your salary next month)?
Try not to stress too much if it’s not an emergency. Have patience. You might have to put up with some unpleasant stuff now but everything is going to be alright eventually.
Now, if it is an emergency, then it’s time to get serious about finding the solution…
#2 Where can you trim your budget?
The easiest way to find money for handling your emergency is to take a good look at your budget and all unnecessary expenses.
There’s obviously a limit to what can be done that way (you still have to pay your bills, etc.), but in the vast majority of cases, there’s some fat that can be trimmed, at least temporarily.
Here are three things you can cut in order to free up some much-needed cash:
- Eating out. Most of us spend quite a bit of money on eating out, often more than we realize. And by “eating out”, I don’t only mean fancy dinners, I also mean all those lattes you grab on your way to work, sandwiches you buy for lunch, etc.
- Going out. This is another area where people often overspend without knowing it. Even if you only go out once or twice a week, things like club entrance fees and alcohol add up, probably to a significant amount of money.
- Non-essential purchases. Everyone has a soft spot for something. Maybe it's clothing, maybe it’s books, maybe it’s video games… You get the idea. Whatever your “vice” is, avoid any new purchases.
Eliminating just these three expenses will probably free up a good chunk of cash that you then can use to get things under control.
And don’t feel disheartened if these measures seem draconian - it’s all temporary, you can do it!
#3 Where can you get extra cash?
Finally, you can try and make some extra cash, which is actually easier than it sounds.
Here are three ways in which you can make some extra money:
- Sell something. Have you ever complained about clutter? Most people have unnecessary things lying around the house and taking up space. Why not sell those books you will never read again, or that appliance you never use, or that old phone? You can easily sell items like that on eBay or Craigslist.
- Freelance. You probably have some skills that are suitable for freelancing (writing, coding, web design, video editing, etc.). That means that you can go on Fiverr or UpWork and start making money today. It might seem that these sites pay pennies, but if you do it right, you can make a nice chunk of money!
- Draw from your investments. This might seem obvious, but if you have any investments, now is the time to draw from them. For example, if you have invested with FastInvest in the past, you can withdraw money at any time as all loans are protected by BuyBack Guarantee. It’s super easy to do with our platform!
Do these three things and you will improve your financial situation in a matter of days!
The Long-Term Solution
Congratulations! You solved your financial problem. That was stressful, wasn’t it? Phew!
What should you do now? You should ensure that you don’t have to go through this ever again. And how do you do that? The answer is simple. Savings and investing.
I know that when your budget is already stretched out it might seem impossible to put anything away. In fact, more than 16 million Britons have savings of less than £100. But having no savings is a very precarious situation to be in.
So make an extra effort to squirrel something away each month. Think about: you managed to deal with a financial emergency when you put your mind to it. Why not use the same tactics (trimming your budget, selling things, freelancing) to boost your savings account?
Make it a goal to build a 12 month of living expenses worth of an emergency fund. Then you won’t have to worry about pesky financial emergencies ever again!
The most important thing when you are dealing with a financial emergency is not to let the stress get the best of you.
Stay calm, evaluate the situation, and take the steps to solve the problem.
Then, focus on the long-term solution, and ensure that no matter what life throws at you, you are ready!