In an ideal world we would all be prepared for financial emergencies. At least six months of living expenses would be stashed away to serve us in the event of a job loss, sudden illness or urgent home expenses. However, this isn’t always the case. If something comes up that you’re not prepared for, you need to know how to respond. Emergencies are stressful, and they can be even worse if you have no idea what to do. Here are five things you should do when the unthinkable happens.
When panic sets in everything seems worse than it really is. Determine the cause of the emergency and then think carefully about how you should respond. Did you suddenly lose a source of income? Are you or a loved one now critically ill or disabled? Did a natural disaster severely damage your home? Each of these requires a different response and you need to have a clear head.
Get your priorities right
Some expenses are more important than others. There are likely to be some bills or purchases that you can forgo to free up some cash. Defaulting on your cable bill isn’t so bad if it allows you to pay for medical tests or groceries. Maybe you can cut back on your cellphone plan or terminate your gym membership until you have successfully navigated the emergency.
Get a loan
If there is absolutely no other option and you know you will be able to pay back consistently, you can apply for a loan. Be sure to get all the necessary loan information from your banker so you know the payment terms. There is no doubt that getting quick cash can help in a financial emergency but if loans aren’t properly managed, you can find yourself in an even deeper hole. If you have a steady job with regular income but you need to make emergency house repairs, a loan makes sense. However, if you lose your seasonal job and have no immediate prospects on the horizon, borrowing money may not be the best option.
If a new loan is a bad idea, maybe you can approach your existing banker or other lending institution to revisit the terms of your loans. You may be able to extend the payment period and reduce the amount you have to pay each month. Some entities may be able to offer you a lower interest rate or even a moratorium on your payments. It helps if you were paying on time up until this point and if you approach them as soon as you run into difficulty.
Seek out information
You may be eligible for benefits you didn’t even know about. Many states and countries offer unemployment and disability benefits. Your insurance company may also have some form of assistance available. You may also be able to get assistance in finding a new job via agencies in your community. You won’t know unless you ask around and do your research.
Financial emergencies can throw anyone in tailspin. It is important to carefully assess your situation before you act. Time is of course of the essence, but you don’t want to make decisions you will regret later. Once you know exactly what you’re dealing with, seek out all available means of assistance.