How do you handle unexpected expenses? Here are some tips to deal with unexpected expenses: before, during, and after.
Whether it’s a vet emergency, a leaking roof, or a burst tire, the unexpected can come with costly changes to your daily routine and budget. Planning might help reduce how disruptive unexpected expenses can be. Here’s how you can prepare before, during, and after an emergency.
Before the Unexpected Expense Arrives
Three simple preventative chores can help you approach an emergency with your best financial foot forward.
1. Strategic Budgeting
Budgeting is the single best thing you can do for your finances. It helps you identify your spending priorities, so you don’t accidentally use cash you need for important things, like saving.
Pay close attention to non-essential and fun spending, even if it’s under $20. The little things add up to deliver a powerful blow to your budget.
2. Maximize Emergency Fund Contributions
A well-balanced budget often allots roughly 20% of your income for savings, split across all your savings goals. Your emergency fund should get a good chunk of this amount. How much depends on your lifestyle and risk tolerance.
3. Savings in a High-Yield Account
Elevate your savings game by stashing your emergency fund in a high-yield savings account. This ensures your money not only remains accessible but also earns more in interest. Maximizing your savings potential helps your emergency fund grow faster.
During the Unexpected Expense
You’ll find it easier to keep a level head in the middle of your emergency when you remember these tips.
1. Tap Your Emergency Fund
Your emergency fund is made to handle unexpected expenses, so tap it as soon as you need extra cash to pay for your emergency. Liquidity is essential for emergency savings — this is why you should keep your fund in an account that won’t penalize or restrict withdrawals.
2. Use Loans When Savings Fall Short
Your emergency fund might not contain enough money for your next unexpected expense but don’t panic. You can look into online direct loans to fill in the gaps. Convenience is one of the many benefits of direct loans available online. If approved, you can receive your loan as a direct deposit in the account of your choice, so you can pay for your repair or expense without delay.
3. Negotiating Payments
If you can’t afford an online loan, talk to your creditors instead. They might be willing to negotiate payment plans that align with your budget. Open communication about your situation can lead to more flexible arrangements, preventing further financial strain.
After You Cover the Unexpected Expense
Once the dust settles, it’s time to repair your finances. Here’s what to do following your unexpected expense.
1. Repay Emergency Fund
You need to repay whatever you take out of your emergency fund. Go back to your budget and cut more of your discretionary spending to free up cash, paying close attention to subscription services and takeout.
2. Pay off Loans
Use your budget to ensure you cover all your minimum, scheduled loan payments. If you took out a line of credit, cut more discretionary expenses to boost your monthly payments.
3. Get a Side Gig
The previous two goals are easier when you have more money, so consider what you can do to boost your income. Adding a digital side gig like affiliate marketing, retail arbitration, or any number of these jobs can help you juggle both goals at once.
Follow these tips before, during, and after an emergency. They’ll help you handle the unexpected with more confidence.
