World Executives Digest | How to Recover Gracefully from a Financial Emergency | Emergencies. They happen no matter how hard you wish they didn’t, and when they do, they tend to bring chaos to your budget. The problem is, emergencies are rarely cheap. They usually involve costly repairs or bills, or they upend your life with a sudden illness or layoff that keeps you from working.
It’s enough to cause serious stress in your life. You might even feel like these bills are holding you hostage.
But what if you didn’t have to? That’s the kind of confidence an emergency fund gives you.
What is an Emergency Fund?
An emergency fund is your parachute when things go wrong. You can rip the cord the next time you’re in financial freefall, and it helps you get back onto solid ground safely.
More practically, it’s simply a savings account stocked with anywhere between three to eight months’ worth of expenses.
In the worst-case scenario, like let’s say you lose your job, you can use this fund to pay your bills until you find a new job. But it can help you in less dire situations, too, like when your car breaks down, and its repair exceeds the cash you have on hand.
Save Your Funds Online
The trick is to choose a savings account that a) you can access online and b) has a decent interest rate.
- Having it all online makes it easy to set up automatic deposits straight from your bank account. This way, you won’t “forget” to pay yourself and use up your available cash on something fun. It also makes withdrawing cash easy, too. You can move around funds to different accounts, or speak to someone in person to get actual cash.
- The typical savings account doesn’t earn a lot of interest right off the bat. But the more you save, the more leverage you have. Eventually, you may have a big enough balance to qualify for a competitive interest account.
What if You Fall Short?
Your burgeoning savings account may not be ready for its first emergency if it arrives too soon. As soon as you realize your fund falls short, take a moment to regroup. Running around in a frenzy won’t help the situation. It will only make things worse.
While it’s normal to feel a little anxious about your finances, try to focus on what you can do to remedy the situation. You’ll feel better when you have a plan of action.
You may be able to go online to get a personal line of credit to make up your shortfall. A financial institution like CreditFresh makes it easy to request a personal line of credit amount online.
You may also consider speaking with the individual or company that you owe. Although your emergency may feel deeply personal and embarrassing, it’s not the first time someone has fallen short of their bill. It won’t be the last either. There’s a high chance that your creditor will be understanding of the situation.
While they may not delete your debt altogether, they may collaborate with you to create a payment plan that works for both of you. You won’t know until you ask!
No matter how stressful your emergency is, never give up. Be grateful for those who choose to help you, but most importantly, choose to help yourself. Look for ways you can create an emergency fund.