Unexpected financial emergencies pop up every day. From medical mishaps to car blunders, there are dozens of accidents that could leave you with a big bill to pay. If you’re not financially prepared, those unexpected emergencies could have long-term repercussions.
While no one ever wants to face an expensive emergency, having the finances to cover any bills or needs can make the situation run significantly smoother. Good financial planning can also mean you’re left with your finances intact.
Here are some tips to help you navigate any emergency that comes your way.
- Have an emergency savings account
An emergency savings account is money set aside specifically for emergencies. This could include everything from your car breaking down to losing your job.
In an ideal world, you’d set aside 3-6 months of living expenses into your emergency fund, including money for rent or your mortgage, any bills, and food. However, not everyone can build up an emergency fund to this level quickly. It can take years to get six months of living expenses into an emergency account.
Start with just $1,000. Treat contributing to your emergency fund like a bill you need to pay every month. Before you spend any money on fun activities or meals out, add some money to your emergency fund. You could be surprised at how quickly it grows.
Once you have savings tucked away, only touch it in the event of an emergency. While it might be tempting to dig into your emergency account for a new pair of shoes or tickets to see your favorite football team, this money is reserved for emergencies only. You’ll be thankful for it when an unexpected life event appears.
- Keep your credit cards low
Credit cards can be a real lifesaver in an emergency. While you never want to put too much money on a card that you’d be unable to pay off, a credit card can grant you some wiggle room between paychecks or allow you to charge certain expenses quickly.
However, in order to be able to use your credit card in the event of an emergency, you need to keep available funds high. This means paying off your credit card in full each month.
Keeping credit card bills low also means that in the event you do need to put emergency expenses on your credit card, your bills can remain manageable. You can avoid paying extreme amounts of interest by keeping credit card bills low.
You can also keep a credit card handy specifically for emergencies. Paying a small bill with the card each month, such as a subscription, can keep the card active and ensure you always have room for emergency expenses.
- Take out a short-term loan
A short-term loan can provide you with the funds you need to tide you over in case of an unexpected emergency. However, as with any loan, you need to be responsible about the money you borrow.
Some short-term loans are a great option for emergencies because of the straightforward application process and quick turnaround time compared to traditional bank loans. This means that you can get the money you need relatively quickly – in as little as one business day after approval. But you should only take out a short-term loan for a true emergency, and you should only take out the amount that you absolutely need.
You should also be sure you can handle the payback expectations. If you’re not sure how you’re going to repay a loan, it could cause more issues for you in the long term. Have a clear plan for repaying your loan, including how you’re going to get the money and how you’re going to make the payments.
All three of these financial options are great ways to stay financially afloat during an emergency. Even if you’re not faced with an emergency now, knowing what you’d do to pay for unexpected bills or needs is important. It’s always smart to create a plan ahead of time.
Work on building up your emergency fund and paying off any credit card debt you’re currently holding. If you find that you need a short-term loan, you can apply for installment loan online to get the cash you need to help you through any difficult time.