When You Run Short: Do You Know What to Do When Emergencies Arise?

How do you react when a financial advisor in the media talks about saving money? Whether it’s a retirement fund or emergency fund, many can’t help but wonder how it is that we’re supposed to be saving such substantial sums. In fact, approximately 70% of all adults in the United States have less than a thousand dollars in savings.

What’s an Emergency Fund for? 

One interesting statistic involves how people anticipate paying for future expenses. Nearly 25% of Baby Boomers report that when they retire, they expect to get money from their children. However, Gen Xers and Millennials have fewer pensions, and less money in general than their parents did.

When it comes to planning for an emergency, it may not be best to just assume you’ll borrow from a loved one. But what constitutes an emergency, anyway? It’s a great question you should sort out immediately.

Simply put, an emergency involves the loss of something you have serious trouble sustaining yourself without. Your car, your home, health, and especially a paycheck. An emergency is not an unexpected expense, such as a pair of shoes for a special event.

An emergency also isn’t money that you could have reasonably expected to have to pay, such as insurance payments, taxes, or vehicle registration. While a lot of us come up short when it’s time to pay these, this doesn’t meet the criteria for emergency spending.

Therefore, it is said that the ultimate goal is to save enough money to live on for six months should you lose your source of income. In the meantime, what do you do when your insurance deductible is too high in a medical emergency? Or when your car’s transmission quits?


How to Cover Financial Emergencies in a Pinch


The first thing to do in a financial emergency is to remain calm; cooler heads prevail here. You don’t necessarily need to rush out and get fast money from King of Kash, with extremely high interest rates that require rapid repayment. Instead, before reaching for any loan you can get, sit down and assess what you currently owe.

When you see what you’re dealing with monthly, there may be some funds you can reallocate toward your emergency. Housing and food should never be compromised, but your cable bill isn’t absolutely essential right now. Extras like subscription boxes, or monthly charitable contributions, can be diverted for the time being as well.

If your situation is such that housing and food funds are compromised, look into social programs that can help you get back on your feet – we all pay into them for this exact reason. If you’ve lost your job, your first step should be to see whether or not you qualify for unemployment benefits.

Many people confronting a substantial emergency get additional jobs or sell nonessential belongings. This too is a good strategy, and a great opportunity to finally start that emergency fund.

Sell a little extra, work a bit more temporarily, and snag enough extra money to cover your current emergency, and a bit of the next. And through it all, remember that your situation, while very important, isn’t some unique failure. Most of us do the best we can financially, and still come up short from time to time.


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