Obviously, if you are reading this article, it means that you are in some form of a crisis and you do not have the emergency fund to get yourself out of it. While we cannot promise you that it will be easy (because it will not), we want you to know that it is not impossible to overcome this.
It seems that it does not matter if the economy is growing steadily. A lot of Americans have yet to implement the lessons they should have learned. One of that involves the emergency fund.
In a USAToday.com article, they discussed how savings have become less of a priority across all levels of income. It does not matter if the consumer is earning $50,000 or $75,000 and more. They all have percentages of people who does not have enough savings to tide them over an emergency situation. The article blames the stagnant income that cannot keep up with the rising cost of living. This pushed savings aside and kept it from being the priority of consumers.
While this is true, it still poses an important question: if another financial crisis will strike, how can you cope to survive it?
3 steps to survive an unexpected situation despite the lack of savings
You have to expect that your lack of preparation will make it difficult than it has to be. This should be an important lesson for you. Do not let this happen again. Having no emergency fund is worse than your expected. You can survive it – there is no doubt about it. But you have to make a lot more sacrifices along the way.
But enough of the scolding. We are here to help you. While you may feel like panicking, try to keep your head calm. There is nothing that we can do about the emergency fund right now. We just have to do without it. There are options that we will discuss later on. Right now, we have three simple steps that we want you to follow to help you survive this time in your life. As much as possible, try to work on this as soon as you can.
Step 1: Analyze the gravity of the scenario
So step on is naturally, an analysis of the situation. Ask yourself the following questions:
What is the cause of the emergency? You want to answer this first because of two reasons. One is you want to identify what got you in this situation so you will never fall under the same trap. The second reason is to understand what is affected in your life. For instance, if you lost your job, that means your income is affected. If you or someone in the family is in need of an expensive medical care, then your expenses are directly affected. It will be easier for you to draft a plan later on once you have analyze the situation.
Is it a permanent thing or a temporary setback? The answer to this question will also help you craft the solution to get you out of this situation. If it is temporary, you know can borrow the money to help you finance the emergency need. If it appears to be permanent, you may not only have to borrow money, you should also think about revising a lot of things about your life to accommodate this change.
Step 2: Find out where you can get financial aid
Once you have a firm grasp of what you are facing, it is time for the dreaded questions about your finances. Expect that the answers will not be too good because of the lack of emergency fund. But let us go through the questions one at a time.
Do you have money coming in? If you still have a job or any source of income, you may want to take note of how much money you have coming in. If this is the only money that you have, then you need to find a way to stretch it. You want it to cover your monthly expenses and the additional expense that is brought about by the emergency situation. If there is not money coming in, proceed to the next question.
Do you have money in your savings account? This is just worth taking a look. You may have stashed something unknowingly and it might still be there. Or it may just be wishful thinking. But it’s worth the effort.
Do you have assets that you can sell off? Not including the retirement fund, check if you have assets that you can sell off. Even if that means you have to sell your car or everything in your attic or basement – just find ways to get the money that can finance what you need to pay off.
What are your options to get financial aid without getting in debt? Approach family and friends to ask for help. This may seem embarrassing but it beats being in debt if you have people around you who are willing to help. There are also organizations and charity groups that can help people like you. You should also look up what the government offers for people in your situation. For instance, there are organizations that provide free medical care or even financial aid for certain ailments. If you are unemployed, you may want to get unemployment benefits or food stamps.
What can you downsize to lower your costs? Regardless if you have a lower income or a bigger expense, you have to look at where you can downsize. This is most helpful when the emergency situation will lead to a permanent change in your life. You can opt to live in a smaller home, give up certain expenses and live frugally. Given that your income cannot cover all of your expenses right now, you have to lower your monthly expenses.
After going through all of these questions, you will know if you need to borrow money or not. In case you do, make sure that you only borrow what you need. Also, look for a lender that will give you the least interest on your loan.
Step 3: Create and implement the plan to overcome the emergency
Now that you have seen where you can get the finances that will help you overcome this situation, it is time to map out the plan that will guide you out of this emergency situation. You have all the details with you – just organize them properly. Here are some of the things that we want you to do in this step.
Talk to the people involved. If your current situation involves creditors, you may want to talk to them to let them know about your current situation. That way, you can negotiate any debts that you owe them. Working on your debt will help you lower your expenses every month. Also, you may want to talk to your spouse or children about your situation. It is best to have them all on board so you can all make the effort to get past this emergency situation. As mentioned, you can get help from family and friends so you need to talk to the people you know can help you out.
Prioritize what is important and lower costs. This mainly refer to your expenses. You want to keep them low so that you can pay for the bills that are important. Spend as little as you can. If you can work on something to cut back on costs, then that is what you should do. Cook your meals at home or brown bag your lunch. Bake your own bread and concoct your own household cleaning materials. There are many things that you can do to help remove certain expenses from your spending list.
Keep your motivation up. Emergency situations are usually stressful and filled with disappointments. Try to keep yourself from feeling too low because that could leave you discouraged and left unable to complete what you started. If it seems like a long journey, take it one step at a time.
Your next steps after surviving the emergency situation
Now that you have gone through the steps to get out of your crisis despite the lack of an emergency fund, it is time to clean up the mess that you made. You have to start working on your reserve fund so you will never have to go through this stressful situation again.
An article from USNews.com mentioned s study that revealed how consumers usually stress about having enough money in the bank to pay the bills. You know that the solution for that is to just build up your emergency fund. Here are some tips that we have for you.
Decide on how much you need. The most common is 3 to 6 months but the article in US News mentioned that when there is a crisis, you need around 6-9 months worth of emergency fund. That means you get your total expenses every month and multiply it by 6 (or 7, 8 or 9).
Figure you out how you will reach this target amount. Creating a budget plan usually helps.
Determine where you will put it. Most experts advise against placing it in investments.
Cut back or stop accumulating debt.
Have an emergency plan.
Change the habits that got you in this crisis.
Make this a lesson learned. Never ever be without an emergency fund.