Whether you’re on a high income or are barely making ends meet, there’s one looming threat that you likely lose sleep over – the possibility of unexpected expenses.
From boiler breakdowns to emergency car repairs and even unexpected traffic tickets, the smallest expense stands to capsize your monthly finances when it creeps up on you like a ghoul in the financial dark. Forget imaginary ghosts – this is a very real, and very frightening prospect.
Understandably, you’ll want to do whatever you can to batten down your finances to better cope with such a scare. But, most articles on the subject are…well, we’re sorry to say it, a little useless!
We’ll get into why exactly that is in a little while, but the simple fact is that you need real, hard advice to help you stay afloat financially no matter the waves that come your way. And, that’s exactly what you’ll get if you keep on reading!
Why the ‘Emergency Fund’ Isn’t Necessarily the Solution You Need
Remember when we said that most articles about managing unexpected expenses aren’t much help? Well, this is why. The need for an emergency fund is the first thing you’ll see whenever you search this subject, but guess what – it’s dud advice.
Of course, an emergency fund is going to help you weather sudden financial blows. You don’t need the internet to remind you of that, especially not when you’re staring down the barrel of a major unforeseen payment.
But, let’s be frank – there’s no time to get your emergency funds in order when the worst happens, which we’re guessing is the case considering you’re reading this article. So, while you’ll want to take this as a lesson that yes, you do need to get on top of money management that leaves room for a rainy day moving forward, you also deserve advice that’s applicable right now. And that’s what we’re hoping to give you.
# 1 – Explore Your Credit Options
Recent studies have found that 43% of low-income households are unable to weather even seemingly small expense shocks without additional credit. Even the 77% of households that can cover surprise costs of up to $400 may turn to short-term credit to do so.
We know what you’re thinking – isn’t credit a bad financial trap to fall into? Yes. But it also has its uses. The trick to avoiding ongoing debt problems is to simply consider the credit options available to you.
Of course, you could just pay that bill with a credit card, and that’s certainly an option if an expense is small and easily payable in a short period. But, if unexpected costs exceed the $500 mark, it may be better to look for short-term loan options that are ideally zero interest, or at least offer low-interest rates if you’re eligible.
By factoring in a fast repayment plan in the coming months, you can then clear that debt and quickly weather this storm without the worry you might’ve faced otherwise.
# 2 – Find Ways to Lessen the Blow
Unexpected expenses are inevitably changeable. This is what makes them so slippery to get a grip on, but it’s also a reality that you can use to your advantage.
Of course, some financial blows are harder to shift than others. For instance, that broken boiler or car isn’t about to go anywhere. But the same isn’t necessarily true for an expense like a traffic fine, which you could lessen or otherwise avoid altogether by simply seeking professional help to dispute a traffic ticket. The same can be said for unexpected expenses like sudden rent increases. If your landlord hasn’t given you due notice (which we’re guessing they haven’t if this is unexpected), then you may have legal grounds to at least avoid the increase for the next few months while you get things in order.
But, do you want to know the real secret about lessening the blow? You simply need to stay calm. It’s all too easy to get stressed when sudden money troubles rear their heads, especially if you thought you were spinning those financial plates just fine. But, the clearer you manage to keep your head, the better able you’ll be to see options like these moving forward.
# 3 – Balance it Out
Sometimes, an unexpected expense is here to stay, and you may already be so maxed out on credit that you couldn’t possibly shoulder any more debt. Is this the end for your financial prospects? Not necessarily. Lucky for you, there are always ways to balance it out.
In its most simple iteration, balancing it out simply means reducing your discretionary spending to cover a sudden payment need. For instance, the fact that the average American spends as much as $3,008 eating out each year highlights that even small changes like making your own lunch could free up a surprising amount of money when you need it the most. Equally, canceling rolling subscriptions like a Netflix, Disney+, and NowTV account for even a month may help you to cover a cost that’s crept up on you.
If all of that isn’t enough, balancing it out could also refer to your credit options themselves. Even if you feel like you’ve reached your credit limit, considering options like debt consolidation could see you securing another loan without it necessarily over complicating your finances. While that is a far from ideal option and depends entirely on whether or not your loan eligibility, it is an option that would buy you time to make cutbacks until you’ve successfully ridden the worst of those financial waves.
Takeaway
Unexpected expenses aren’t good news. You don’t need us to tell you that. But, are they always going to capsize your financial boat? Well, that fact is debatable. Emergency fund or not, there are always options for seeing yourself through even high sudden expenses. Simply keep a calm head, bear these pointers in mind, and choose the best path forward based on your unique cash flow situation.