How to Pay For the Unexpected When You’re Broke
How many times has something gone wrong and you have no money in your pockets to fix the problem? Time and time again, you may tell yourself, “I will start saving money tomorrow, or my next paycheck, or whenever.” While I highly recommend saving for an emergency fund, what do you do meanwhile?
Needs versus wants
If you’ve read any of my other posts, you may already know that I emphasize the importance of focusing on true needs over wants. Although folks may differ over what is considered an emergency, I’m sure we can all agree that people can’t have everything they want. We must all make choices about how to spend our money and those choices have consequences.
Priorities also play an important role here. If you have an emergency or surprise expense that can’t be ignored, think about less important expenses you can reduce or live without for a while. This will allow you to cut spending temporarily to free up cash (maybe less eating out, bringing lunches to work/school, cancel pay TV, carpool to reduce gas costs, skip a few movies?) You get the idea.
Consider the problem
The first step is to think about the problem to determine what your options may be. Don’t just panic and rush out to use plastic or borrow a payday loan. For example, did your washer break down? Does your car need new brakes? Or, do you owe money to the local hospital for an emergency medical bill? The solution may be right in front of you. You simply have to take some time to find the best choice for you. Brainstorm all possible solutions This is not the time to cross things off your list. Wait until you consider all your options to solve the problem. Let’s look at the examples above for some ideas. Just so you know, these ideas are not meant to be an exhaustive list; honestly, I’m not that creative.
- The washer breaks down: Can you have it repaired and make payments? Can you use the local laundry, or a friend’s/relative’s washer while you save for one? Can you borrow money from your friends/relatives for repairs or replacement? Can you work overtime or sell something to make some quick cash?
- Your car’s brakes went out: Do you have a friend who can make the repairs if you buy the parts? Will your trusted mechanic take payments over time? Can you use public transportation? Can you borrow a car temporarily while you save for repairs? Can you carpool to work with co-workers? Work more for money to fix the brakes?
- You owe a large emergency medical bill: Can you contact the provider to see if you qualify for Community or Charity Care to reduce the bill? Can you set up affordable monthly payments with the provider? Sell something? Earn more money temporarily? Can you take a loan from a retirement account? (Please use caution with this option, especially if it means liquidating your fund which may lead to higher income taxes and penalties). For more info, check out ‘How do I handle my medical debt’.
Evaluate your options
This is the time to decide which options are realistic. To do so, complete a thorough evaluation of your alternatives by looking at the pros and cons of each as they apply to your unique situation. Write down the good and the bad so you can give the problem careful consideration. Some factors to think about are:
- How much will each option cost?
- How convenient is it for your family?
- Will your personal safety be jeopardized?
- Will you somehow be penalized by the option?
- Can you avoid incurring debt with the option?
- Can you get a 2nd opinion from a trusted friend or family member about your final options?
Make a decision
Look at your final options. Remember, there are no right or wrong answers here. What works for Jane may not work for John – and that’s okay. The idea is to make the best decision for your situation.
Remember, you are not alone when it’s time to solve a financial problem. Let us help! Call LSS at 1-888-577-2227 to talk with a Certified Financial Counselor. We will help you create an action plan to improve your finances and conquer your debt. So don’t wait – take action today.
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Author Barbara Miller is a Certified Financial Counselor with LSS Financial Counseling and she specializes in Bankruptcy Counseling and Education.