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Dealing with Economic Emergencies

08/20/2020 | By: Brink's Money

Unexpected financial emergencies are unpleasant to say the least. They can easily leave you feeling completely blindsided and powerless. These emergencies can range from a job loss, to medical expenses, to even an emergency home repair. When these unexpected occurrences happen, they change your financial situation resulting in incredible stress.

As stressful as the situation may be, bills still need to be paid. If you’ve recently had to deal with a financial emergency or want to be better equipped in the case that you are faced with one at some point, there are steps you can take to alleviate stress all while reducing the negative effects.

  • Evaluate the Situation. When a financial emergency does happen and before you start to panic, you must first carefully examine the situation. Panicking will only add stress. Although a bit of panic is inevitable, being able to check your emotions and maintain a level head are important towards making the right choices in the moment. This is also when you try to determine what caused this to happen.

  • Prioritize Expenses. Not all expenses are created equal and that means that some bills need to be paid before others and therefore you need to prioritize. Once you’ve established which bills are the most important such as food and shelter, you can examine your expenses and see which you can cut back on or cut out of your budget altogether. Cutting back on expenses won’t be an easy task but it will help you in your recovery.

  • Negotiate with Lenders. If you’re having trouble with medical bills, credit cards, or mortgage payments, call your lender as soon as possible. If you know that money is getting tight and you might need help, it is a good idea to call them before you get behind on your payments. During a sudden hardship, your credit card company may be willing to lower your interest rate, a mortgage company can lead to a restructuring of your loan, and utility companies often offer programs to make payments affordable.

 

Avoiding Payday Loans

In times of hardship, it may seem as though an easy solution is to take out a payday loan. In commercials, there are always tiny disclaimers which ultimately say that by using the company’s services you agree to an outrageous interest rate and fees which make it difficult to pay back the loan in a timely manner. Payday loans are loans designated for an unexpected expense that you pay back quickly, by your next payday to better avoid the excessive fees and interest rate. From those that opt to take out a payday loan, few are able to do this and later become trapped in the cycle of trying to pay it off.

If you find yourself in an emergency situation where you need money immediately, there may be alternatives to payday loans that could help you stay away from the cycle of debt that payday loans can cause.

Assess Your Situation

Quite often if you’re in a rush to get a loan, then you won’t get the best deal. Be sure to take time to consider all your options and determine if your situation is as dire as you had initially thought. A payday loan should be your last resort.

Talk to Your Boss

Depending on where you work, your boss may allow you to take an advance on your paycheck.

Save Now

Even putting the smallest amount away like $2 or $3 a week could mean that when an emergency does occurl, then you might just have enough money set aside to pay for it. Practicing healthy money management could be there to help you in the long run.

Proposing Earned Wage Access to Your Employer

Earned wage access can be beneficial for employees facing financial difficulties and help them overcome a setback without having to take out a bank loan. If you are thinking about asking your employer for early wage access then there are a few aspects to consider for how you ask.

How to Ask for Earned Wage Access

As the name implies, it entails giving employees access to their earned wages in advance. Nowadays, there are countless solutions that allow employers to offer this benefit. If not available at your current company, you may be able to propose this to your manager. Your goal when asking for earned wage access is to respectfully request for the ability to take an advance on your paycheck, with no interests rates, so that you and many other employees are able to meet their financial needs when faced with emergencies. 

Consider the following when making new requests to your employer:

  • Research Your Employer’s Policies. If your employer has offered salary advances before, there is most likely a document that details the company’s policies. This information would be available in the employee handbook or through HR. Make sure your reasoning for requesting earned wage access is considered valid by your employer.

  • Prepare Your Request. To begin the process, you will need to write a detailed request or schedule to meet with your supervisor. Your request should include the reason why you and other employees may need access to this service. 

  • Make a List of Providers. You could research a few earned wage access providers in advance of your meeting and come up with ideas so your managers knows where to start. They will most likely contact these companies to request additional information about features, benefits, and fees before they make any commitments. 

Saving Towards an Emergency Fund

Perhaps one of the best ways to ensure that you can deal with an economic emergency is to have an emergency fund. An emergency fund is a cash reserve that’s specifically set aside for unplanned expenses or financial emergencies. These expenses as mentioned above can include car repairs, home repairs, or medical bills. There are different strategies to get your emergency fund started but overall managing your cash flow and putting away a portion of your tax refund are the easiest ways to get started. Here are some tips to help you:

  • Set a Goal. Having a goal for your savings can help you stay motivated especially when you’re initially getting started.

  • Create a System for Making Consistent Contributions. Making use of automatic recurring transfers is one of the easiest ways to set aside money regularly. Aim to make it a specific amount, and if you can occasionally afford to do more, you’ll watch your savings grow even faster.

  • Regularly Monitor Your Progress. Finding a way to watch your progress can offer gratification and encouragement to keep going, many prepaid and payroll cards have budgeting and savings tools to help you do this.

  • Celebrate Your Successes. Don’t miss the opportunity to recognize what you’ve accomplished. Find a few ways that you can treat yourself, and if you’ve reached your goal, set your next one.

Financial emergencies come in all shapes and sizes and by definition they are obligations that you haven’t planned for ahead of time and will be difficult to pay. We know that it’s never easy to take on an unexpected expense but if the time ever comes, then we want to make sure you’re financially equipped to stay afloat and reduce stress levels as much as possible.