It is not impossible to get into a financial emergency at the start of the year because situations like these do not really have a schedule. It can show signs where you get to prepare for it and there are times where it can catch you off-guard. When you least expect it, you could be looking at an emergency just as the new year is about to start.
What makes this a tough situation to be in is because your mind could be conditioned that new years are synonymous with a fresh start. Emergency situations where you are just starting out can knock the wind out of you and make it harder to regain your focus. This is the reason why a lot of people find it difficult to weather through tough situations at the start of their journey.
A financial emergency is varied in nature and can come as an unexpected repair on a household item or even losing your job. This is one of the main reasons why you need to make sure that your emergency money is funded and strong at any point in your life. You can even have a separate rainy day fund meant to address small concerns. This is meant to help you preserve your emergency fund for bigger needs.
However, a challenging situation at the start of the year can be very tricky. As your mind gears up for a whole year of plans and thinking of ways to achieve them, you get sidetracked and shift your focus somewhere else. If you find yourself in this dilemma, here are a few things to consider to help you manage through it.
Avoid knee-jerk reactions
If you are going through any form of financial emergency, the one thing you need to avoid is a knee-jerk reaction. This is easier said than done but you have to work on it. The reason for this is that you might only make matters worse because you did not think things through. Rather than looking for the best possible solution, you jump on the first one that you think of.
If you suddenly need money for a medical emergency, you might quickly reach for your credit card to get the payments out of the way. You might overlook the fact that you have some emergency savings tucked away in a savings account because you reacted as quickly as you can. You could have avoided putting your finances at risk if you just stop and think things through.
When you are faced with any unexpected situation in life, it is seldom that you have to react quickly. Unless it is a matter of life and death such as getting into a car accident where instincts and will to survive will take over. For the situation where your finances are concerned, it is always advisable to stop and assess the situation and look for the best course of action.
Identify the root cause
It is relatively easy to identify the main cause of the problem when you go through a financial emergency at the start of the year. If your roof needs sudden repair, then the problem is just that – your roof. The same thing when you need to replace the wall or a part of your car’s engine. However, it would help if you assess your situation a little closer.
The repair on the roof is the problem you have to face but is there any other reason why that had to happen? Was there an old tree that fell down or was it just an old part of your house that gave in? If it was a tree, you could have cut it down to prevent the accident. The same thing with the repair or replacement of old parts. The idea is to be proactive next time to prevent the same thing from happening.
Address the concern with urgency
If your reserve funds to cover for the emergency, then use it for that purpose. This allows you to move forward faster and put you back on track. Remember though that you have to make sure you put back the money in our emergency fund as soon as possible. This is because you never know if another emergency is lurking in the corner.
As mentioned earlier, you do not have to always be quick to the draw but it does not mean that you take your time with it as well. Doing so can put you in a deeper hole and it would be a lot more challenging to get out of it. If you need to get repairs in your basement because of flooding and wait, it would be harder to clean as molds and other problems could start to manifest.
Look for ways to prevent a repeat of the problem
Once you have overcome your financial emergency, it is time to look for ways to prevent the same problem from happening all while trying to rebuild your fund. If the problem was because of poor home maintenance, be sure to keep a schedule of things to check in the house with you. It can be the roof, the pipes, the sink, or even just putting oil in your garage door. NY Times even shares how important home maintenance is such as your gutter which not only controls rainwater flow but protects your foundations, siding, and the roof.
It is also important that you make sure that you bring your emergency fund back up as soon as you use it. This will help you cover any incident that may come your way and some might be sooner than you expect. It might take time to bring it back up to what it was before but this is better than not having an emergency fund to speak of.
Identify the lessons that emergencies teach you
You will have to understand that going through a financial emergency is a fact of life and preparing for it should be a financial priority. However, you also need to look at the lessons that these situations are teaching you. If you discern these life lessons, they can help you make better decisions later on and make you a smarter money manager.
Take for example situations where you lose your job or be forced to cut down on your hours at work. Although CNN shares that 9 out of 10 Americans believe their employer values their work, job loss can still be a possibility. If this happened to you, the best course of action is to look for another job as fast as you can to make sure you bring in the same amount of money every month. However, this challenge will also teach you how volatile your source of income is.
Knowing this, you can start looking for ways to help you strengthen your income. You can diversify and look for other ways to earn money like getting a side hustle. This is a great way to either make use of any downtime you have or simply earn off from your hobbies. This way, you get to do something you love while earning extra money.
It is not ideal to go through any type of financial emergency at the start of the year but it can happen and you need to prepare for it. More than that, you also need to make sure that you learn from the situation so you can better manage your finances as the year progresses and help you reach your goals.