Do you have enough money to cover an emergency expense? Roughly 60% of Millenials say they wouldn’t be able to cover even a $1,000 emergency.
Financial emergencies come in all shapes and sizes from unexpected medical bills to losing your job. The impact of these money problems can range from relatively minor to you literally have no idea how you’re going to survive the next few months.
It’s okay. Take a deep breath, and let’s look at some strategies for handling a financial emergency.
Squirrel Money Away
First up, prepare for it. Become one of the ones who can handle a $1,000 emergency. Set up a savings account and make automatic deposits, treat it like a loan that you have to pay, do whatever it takes to build an emergency fund.
Then, don’t touch it! It’s only for emergencies. Your summer vacation isn’t an emergency and neither is a new car (provided your current one is doing just fine). Even if you don’t have an emergency come up anytime soon, this slush fund is part of what you need to secure a bright financial future anyway.
What if you’re already confronted with a financial crisis and you don’t have emergency savings? Don’t worry, you have options.
The first is to look for easy credit. Do you have a credit card? You may be able to charge the expense if you have a high enough limit. However, keep in mind that the interest on credit cards tends to be quite high. Only go this route if you feel reasonably sure you can pay it back quickly — otherwise you could watch all your finances go up in a fiery mushroom cloud of interest.
You can also look at loan options. If you think you can pay it back quickly, but don’t have a credit card, a payday loan may be an option. However, keep in mind that payday loans are somewhat expensive upfront and the interest rates are typically even higher than credit cards.
A personal loan from a bank or credit union can be a better option. If you have good credit, you can typically get a loan with decent terms (i.e. enough time to pay it back easily) and low interest rates. However, if you don’t have good credit, it is a little harder to qualify. Plus, you won’t qualify for the best interest rates, which can push the cost of your loan up substantially.
Another option is to look into specific loans such as property tax loans. Property taxes probably aren’t your financial emergency (they’re not unexpected after all), but you may have money set aside to pay them. By taking out a loan to pay your property taxes, you can use the money you had saved to take care of your emergency. It’s easier to qualify for this type of loan (often credit isn’t even a factor) and you can take advantage of competitive interest rates and reasonable terms.
Dealing with Life’s Financial Emergencies
Life likes to throw us a curveball every once in a while and even the most prepared among us can find ourselves facing unexpected financial emergencies. These tips are some great ideas of what you can do to get through it.