Are you ready for an unexpected expense, such as a sudden car repair or a medical bill? For most people, the answer to that question is no. In fact, about 40 percent of Americans have less than $400 in their bank account right now to cover an emergency. If you’re one of them, you should definitely start building an emergency fund as soon as possible. In the meantime, however, you should think about how you’d cope with the unexpected expense. Here are five ways to cope with the unexpected without an emergency fund.
1. Adjust Your Budget Rapidly
If you’re suddenly hit with a major expense out of nowhere, the first thing you should do is review your budget and see if you can find a way to cover the bill. Check your cash inflows and outflows; there may be a way to adjust them to handle the new expense. For example, perhaps you can skip a payment into your retirement savings account this month, or just pay the minimum amount on your monthly credit card bill to cover it. If you can hold off on paying some bills altogether for the month, and pay them instead the following month, you may be able to free up the funds to cover the unexpected expense. However, if you do forego paying bills or make minimum payments on credit cards to cover an emergency, ensure that you keep track of them and catch back up as soon as you can, as failing to do so could negatively impact your credit.
2. Use a Credit Card
You could also consider using your credit card to cover an unforeseen, sudden expense. If you have the credit available, simply pay the unexpected expense with your credit card so that you’re covered. However, be cognizant of the impact that paying an emergency debt with your credit card could have. You’ll be carrying a larger balance on the card after covering the expense, so your balance will likely continue to grow. It may be difficult to pay down the card’s balance afterward, depending upon how much you earn each month and how much other bills are. Therefore, while a credit card may work in a pinch, you may be dealing with the aftermath of using it in an emergency for many months to come.
3. Get a Cash Advance
If you need the money right away to cope with the unexpected expense, one option to consider is a cash advance. You could ask your employer to advance you the funds from your next pay period so that you have money to cover the sudden bill. If an advance from your employer isn’t an option, you could also consider an advance from a reputable payday lending company. While many payday lenders have a bad reputation for taking advantage of borrowers with unfavorable terms and high interest, some good options exist for borrowers who are in a bad situation and need the funds right now.
4. Sell Your Valuables
If the unexpected occurs and you’re critically short on cash, another option is to start liquidating your personal belongings. If you have some valuable personal merchandise, such as jewelry, computers, phones, other electronic items, or tools, you can likely sell them quickly, and then use the cash you generate to cover your emergency expenses. Depending upon the size of the emergency, you could also consider selling larger, more valuable personal items, such as cars, boats, or motorcycles. However, it may not be as easy to offload these larger items as quickly as you need. While parting with your valuables can be difficult, the cash you get can help cover the emergency, and you won’t owe anyone after you’ve dealt with the crisis, either.
5. Work More or Get a Side Gig
If you have a bit more time to cover the emergency expense – perhaps the home or car repair bill won’t come due until the end of the moth – another thing to consider is simply working more. Perhaps you can pick up overtime at your job, or at least work a few more hours each week to earn the cash you need to pay off the emergency expense. Another option is to get a side gig or part-time job to earn the money to cover the unexpected expense. Driving for Uber or Lyft or working as a freelancer on sites such as Upwork can help you set a flexible schedule to earn additional money when you’re available.
6. Borrow from Your Friends or Family
Another option you could consider for coping with an unexpected expense is to ask your friends or family for a loan. In many cases, the people you’re closest to will approach you and ask how they can help you get through an emergency. A loan from a family member may be just what you need to cover an unexpected expense and get back on track, and it won’t require you to talk to a bank or ding your credit, either. However, keep in mind that money matters can often affect relationships, so make sure you discuss the matter carefully with your friends or family before accepting their financial assistance.
If you’re facing an unexpected expense right now, any of these six contingencies are worth considering in an attempt to get the funds you need. However, if you’re not currently dealing with the unexpected, you should start building an emergency fund right away. An emergency fund will give you peace of mind knowing that you’re ready for any contingency, and it’ll help you get back to normal should you need to cope with the unexpected.