Say you need money that you don’t have, but it’s an emergency. What do you do?! Here are five things you might do to get started and a few things you may want to avoid:
#1: Assess Your Spending
Is there discretionary spending you can reallocate to your financial emergency for the time being? You can use personal financial management software, like Wallet, to assess your cash flow and see where you can adjust. Wallet allows you to view your accounts in one place, make a budget, track spending, and more!
Also consider ways to boost your income – like making some extra cash by holding a garage sale or establish a more permanent increase in cash flow by getting a second job. Tip: Even skipping your morning coffee run and going for the break room coffee at work can make a difference. A daily $3 latte amounts to $15 a week, $60 a month.
Consider avoiding solutions like payday loans because they have double-digit or even triple digit interest rates, and borrowers who can’t repay the money are charged with additional fees for an extension, which puts them even deeper in debt.
#2: Assess Your Savings
Are there savings you can dip into without hurting your future? Ideally, you would have savings specifically set aside for emergencies like this, but if you haven’t started allocating part of your paycheck for that, look at your other reserves. Tip: If you do use part of your savings to help pay for the emergency, don’t forget to rebuild those savings once you’re back on your feet financially.
Try to avoid dipping into retirement funds because you’ll need that money later on in life. Plus, if you withdraw money from a retirement or other tax advantaged account outside of IRS distribution rules, you may have to pay income tax and an early withdrawal penalty. See your plan document or the appropriate IRS publication for more information.
#3: Talk with Your Significant Other
Talk about the emergency, how much it will cost, and what kind of changes need to be made. This can help you stay on the same page and work as a team to fix the issue. Tip: For a more productive “money talk,” find a neutral place – like a coffee shop or a park – where you can be more relaxed in your discussion.
Avoid distractions like having the television on or keeping your phone next to you – that way, you can better listen to your spouse or partner and concentrate on finding a solution.
#4: Talk with Friends and Family
If the emergency requires long-term changes, talk with your closest friends and relatives who can support you. For example, if you lose your job around the holidays – meaning limited income for the foreseeable future – explaining to family could make them more open to gifts and party plans that will be easier on your new budget.
Avoid the disappointment of saying “no” to pricy events by suggesting wallet-friendly activities or adjustments. For example, if you and your friends like going to the movies, suggest going at a time when tickets are cheaper. While tickets normally cost over $10, some theaters have one day a week when you only pay half of that (or less!). If you go to the theater every week, switching up your routine could mean saving over $20 a month. That’s $240 a year!
#5: Talk with a Money Coach
A financial emergency isn’t as stressful when you have someone looking out for you. Money Coaches can help you through financial challenges. With handy worksheets and calculators, as well as years of experience, they can offer surprising insight.
Even if life is peachy-keen, a coach can still help you improve your finances, whether it’s planning ahead for future emergencies or helping you reach your financial goals, like going on an extended vacation or saving for retirement.
Get positive support and trustworthy guidance from your Money Coach and move towards a better tomorrow. Call 888-724-2326 today.
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