Regardless of how careful you are, emergencies are an inevitable part of life. And when it does come, you and your family should be financially prepared. Alarmingly, most people aren’t financially prepared for emergencies. According to a 2020 study by Bankrate, only 41 percent of Americans would be able to pay for a $1,000 emergency bill. Here are five tricks to help save your family some cash during emergencies.
Hold Off On Non-Essentials
Although this sounds like a no-brainer, many people fail to categorize which purchases/expenses belong in “essentials” and which ones fall in the “non-essentials” category.
Non-essentials include any content subscription services you’re paying for every month, the once-per-day cup of coffee that you buy at the local cafe, designer-brand clothes and accessories, and the parties you go to every weekend. Create a list that you can refer to every time your family is faced with an emergency. Make sure to update that list anytime you add a new recurring expense.
Have an Emergency Fund
An emergency fund should be separate from your savings account. You can draw money from your savings account for spontaneous trips or pick-me-upper purchases. But money on your emergency fund is strictly for dire situations, such as an unexpected hospital visit or cell phone repair.
How much you put in your emergency fund depends on you, but the general rule of thumb is three times your monthly expenses i.e. $1,200 in monthly expenses x 3 = $3,600. Having an emergency fund saves you money by helping you avoid going for high-interest payday loans that prey on desperate borrowers.
Have a Go-To Service Provider
Having a go-to provider of goods and services is another great way to save money when you’re on a financial lockdown. Whether it’s groceries, healthcare services, phone repairs, or other essentials, having a go-to person or business can save you money and time when you’re in a financially stressful situation.
This will require meticulous research on your part to find low-cost but highly recommended stores and professionals. High-stress situations tend to disable people from thinking clearly and logically, and having a list of pre-determined service providers can help you avoid costly on-the-fly decisions.
Contact Your CC Company
Getting hit by monthly interest payments only amplify the effects of an emergency. Use it as an opportunity to renegotiate your terms with your credit card company or lender. In most cases, you don’t even have to visit the bank or credit card company in person; all it takes is a correctly worded email or phone call to get the desired response.
Make sure to emphasize that you’ve been able to consistently pay the monthly charges and reassure them that you still have the financial means to repay the remaining balance. Also consider consolidating your loans and credit cards into one account. The move makes it easier to manage monthly payments and, more importantly, can yield a lower interest rate.
Join the Gig Economy Trend
The “gig economy” pertains to jobs that are usually contractual in nature. Independent contractors, such as Uber drivers and Wag walkers, are the most popular examples of a gig economy job. They are characteristically easier to apply to and secure and offer the ability to withdraw earnings on a weekly and even daily basis.
Gig economy jobs can be a lifesaver during emergencies. It’s best to sign up early and have an active account. Once you do get into a tough financial spot, you can easily secure jobs or assignments and make the cash.
What’s great about gig economy jobs is that they don’t subtract taxes from your payments every time you withdraw, and instead send you a 1099 MISC at the end of the year. This means more usable cash for the time being.
There are many other tricks you can lean on when your family is faced with a crisis, such as having an online yard sale of stuff you don’t use or need, increasing insurance coverages for the time-being, borrowing cash from relatives so you don’t have to pay for interest, and avoiding transaction fees and penalties from your bank or utility company. The trick to saving money in dire times is to be proactive and start early. The better prepared you are, the less damages and faster recovery for your finances.