Are you prepared to handle a financial emergency? We’ve all made mistakes with money and it won’t be a big surprise if one of those mistakes lands us in trouble! If you have kept some money aside for such situations, great! But in case you haven’t, you need to do something about it, buddy. If luck isn’t on your side, you could find yourself in the middle of a serious financial crisis. You could end up exhausting your emergency fund completely, with nothing left to help you sail through your troubles. Yes, a financial crisis can be disastrous and not being able to deal with one even after having an emergency fund in place is even worse.
Additional Reading: How To Build An Emergency Fund
How to deal with situations like this?
First of all, you must start saving and keep a good amount (equivalent to at least 6 months of your salary) handy in case of an emergency. You mustn’t take things lightly, especially if you’re the sole bread winner of the family. Emergency fund in place? Great! Now we move on to the next problem. What to do if you exhaust your emergency fund in the middle of a financial crisis?
Here are a couple of tips that can help:
- Don’t panic!
Are you beginning to panic? STOP right there! We know it’s a difficult place to be in, but panicking will just make things worse. You don’t want that, right? So, take in a deep breath and clear your mind. Making bad decisions is something you can’t afford at this point. We know how badly you want this phase to fade away. But if you let stress and anxiety cloud your decision-making capabilities, you’re inviting trouble. Don’t just choose the first option that pops into your head. Consider all your options before making any kind of decision.
- Evaluate the emergency
Ask yourself if it really is an alarming situation or you’re panicking for no reason. Sometimes, we get so overwhelmed and carried away merely by the thought of trouble that we tend to misjudge the situation. Been there, done that? Well, don’t do it again. To evaluate whether your situation classifies as an emergency or not, you need to keep a few pointers in mind. Is that situation directly affecting your daily life? Is it manageable? If the answer is a yes, to the first and no to the second, you have a problem. Do you have an emergency fund to handle it? If the answer is a no, you need to pull up your socks and put a savings plan in place. In the mean time, consider doing the following.
- Look for alternate sources of income
Sometimes, no matter how much you earn, your salary isn’t enough to handle a certain crisis. Moreover, if you’ve already exhausted your emergency fund, you need extra cash, don’t you? Where to find that? Definitely not under your mattress! Now’s when those technical skills will come in handy. Start looking for freelancing opportunities to open doors to some extra cash. Want to do something you love and make a few bucks out of it? The good news is that you can do that as well! Love pets? You could foster a couple of furry kids. They’re fun to be around, the best stress-busters, and sometimes considered to be better than human company! Love DIY crafts? What’s stopping you? Get into the groove and start being artsy. You can sell your crafts online and make good money. If you’re into photography, build a creative portfolio and start hunting for projects. There are a plenty of ways to earn more. All you need to do is analyse your skill set and start hunting for opportunities.
- Second-hand isn’t a bad option!
Are you going through a bad phase with your electronics? Damaging too many phones, refrigerator on the fritz, and even your latest gadgets aren’t doing so well? The first thing you need to do is identify which of these appliances are ones that you ‘need to have’ and which ones are ‘nice to have’. Once you do this, you can consider settling for a second-hand option instead of giving your Credit Card bills a hit! If you dropped your precious smartphone in water and you don’t have it insured, look for cheaper replacements. Yes, in such a bad situation, there are plenty of low-cost phones (even smart ones) available. If you look in the right places and know what you’re paying for, the chances of making a mistake are less. It won’t only help you save more, you’ll also get a good deal at a lower price. That’s cool, right?
- Did someone say discounts?
Most of us go gaga over discounts, but when it comes to actually hunting them down, we give up! When people say patience yields a sweet fruit, they’re right! When you’re going through a rough financial patch, it becomes all the more important to look around before making a purchase. Technically, if you’re facing a financial crunch, you might not think about buying something new. But in situations where you’ve no other option but to buy a replacement, hunting for some discounts is the best idea. You’ll sure have to invest time looking for the best deal, but as long as you’re getting to save a few bucks from your emergency fund, why not! Don’t wait for any situation to turn into an emergency. If you know that your TV/laptop is acting up, start looking for solutions right then. Something that needs a minor repair now could turn into junk soon, resulting in more unnecessary expenditure. Acting on time could help you save a few bucks.
- Negotiate and re-negotiate
No matter how big or how small the bargain is, try your hand at it. Whether it’s getting the best deal at an electronics shop or renegotiating the interest rates on your loans, give it your best shot. When you’re already finding it difficult to handle a financial crisis (that too with the possibility of exhausting your emergency fund), you better start cost-cutting. Try talking to your lenders and see what you can do. You’ll most likely get the option to extend the loan tenure and reduce the EMI. Emerging from a financial crisis is all about taking the right decision at the right time.
Additional Reading: How To Get The Best Interest Rate On Your Personal Loan
- Debt consolidation
If you’re facing a great financial crisis because of debt, it’s time to think about measures like debt consolidation. Not sure what that means? It’s all about taking one loan to pay off many others. It makes your life simpler by reducing the complexities of paying different EMIs for different loans.
A financial emergency can wreck your life. But if you know how to handle it right, you’re all set! The first step to handling a bad situation is analysing it well enough. Once you’ve done that, you get a clear idea of the real situation. It helps chalk out the best possible plan without further hurting your pocket.
A personal emergency disrupting your life? Maybe it’s time to explore our Personal Loan rates.