After more than a year of economic uncertainty, the pandemic has taught everyone one simple rule: you can’t expect the unexpected. Whether it’s a global healthcare crisis that slashes your hours at work or a sudden accident that rushes you to the ER, the unpredictable nature of life can catch you and your budget unaware.
Luckily, you can insulate your finances from these emergencies by setting aside some money in an emergency fund. Having these savings on standby can help you get the drop on life’s costliest surprises, making it easier to weather any financial storm.
But how can you build them when you’re still recovering from the effects of the pandemic? Here are some tips to help you deal with the unexpected.
What to Do if You’re Dealing with an Emergency Right Now
Ideally, you’ll have time to build up these savings before your car breaks down out of the blue. But not everyone gets this luxury. It’s the luck of the draw whether you have to field an emergency before you have emergency savings.
Borrow Money in an Emergency
If your financial luck runs out, don’t worry. While having zero savings isn’t ideal, there are other ways you can cover an unexpected auto repair or a medical expense. You can find online personal loans to act as a safety net.
Online personal loans have fast, convenient applications available 24/7, so you can apply to borrow money when you need it. If approved, you can access and repay your funds online, making it easy to manage with your other online bills.
Take some time to research the pros and cons of getting personal loans online before you borrow. There are a lot of options including cash advances, installment loans, and lines of credit, and each one will have different rates and terms. Choose one that fits your finances the best.
Negotiate Your Bills
Borrowing money only makes sense if you can afford to repay it on time — whether you’ve chosen a cash advance or line of credit. If you realize you can’t afford any personal loans online, it’s still not time to panic.
Reach out to your creditors to see if they’re willing to negotiate on your monthly payments or due dates. Creditors are aware of how hard the pandemic has been on people, so they may already have a program in place.
If they don’t have an existing program, talk to them about refinancing your bills so that they still get paid, albeit in smaller chunks. They’re probably willing to play ball if the alternative is no money at all.
How to Start Saving More Money
Once your crisis is averted, and you’ve paid back your cash advance, it’s time to bring your focus back to your emergency fund. Here are some actionable steps you can take to boost how much you can save each month.
Use a Budget
Saving is hard if you don’t have a plan. That’s why a budget is one of the most important financial tools everyone should use, regardless of age, income, or background. It’s a way to plan your spending around your typical monthly expenses, so you don’t accidentally waste money that could be better spent elsewhere.
According to the 50-30-20 budgeting method, savings is one of those typical expenses that you should account for every month. This method breaks down your budget into three categories and assigns them a portion of your take-home pay.
Under this budgeting style, you should reserve 50 percent of your income for the essentials, like housing costs and food. Discretionary spending (aka your wants or fun money) takes up 30 percent, leaving 20 percent of your income for savings and debt payment.
When it comes to debt repayments, this is considered any additional payments you make above and beyond what’s in your personal loan or line of the credit contract. The minimum payments that keep these accounts in good standing belong in your needs category because you can’t afford to miss them.
Eliminate Discretionary Spending
Building a budget that fits this breakdown may take some time. In many cases, discretionary spending takes up more than its fair share, so be honest when looking at your current spending habits. You might have to say goodbye to your ramen noodle subscription box or cancel all but one of your streaming services to rebalance your plan.
That said, don’t be afraid to look at the essentials to see if you can free up more cash that way. You can reduce what you spend on groceries by following a meal plan and eliminating food waste. Turning to your utilities, you might lower your bills by using less electricity and water. A long-term plan may even involve figuring out what you need to set in motion to move to a cheaper neighborhood.
Don’t Wait to Build Savings
Unlike big bills with due dates, an emergency fund doesn’t come with late fines that can incentivize you to save. You won’t feel the crunch until the next emergency hits, and you don’t have the cash you need to take care of business. And although you can negotiate bills and borrow a cash advance, these options pale compared to having an emergency fund.
It’s entirely up to you to stick with your contributions and make sure you’re on target to save what you need. So, spend some time with your budget and automate your savings. Automating your contributions is a painless way to be prepared for the unexpected.