An emergency fund is a valuable tool you can use when you face unexpected expenses. However, it can be difficult for some people to build one or they may not have as much money as they need in their emergency fund.

So, what can a person do if they find themselves in this situation? Fortunately, you have plenty of options. Check out these and decide which could help you stay afloat while you cope with unexpected financial expenses.

Borrow from Friends or Family

Even if you don’t want to do this, it may be a good option. Often times, you can borrow without interest and your friends and family may give you ample time to repay.

Only borrow what you need after you’ve cleared out your savings. Don’t take advantage of this option either or you may not have the resource to use again. Also, squeeze what you can out of your budget before you borrow.

Tighten Your Budget

Most people believe a budget is a rigid way of managing your money. Luckily, it doesn’t have to be that way. Creating a flexible budget can help you if you don’t have an emergency fund. Plus, it’s easy to do:

  • Start by adding up all income sources.
  • Next, list your fixed, essential costs such as rent/mortgage payments, groceries, utilities, insurance, healthcare, taxes, minimum debt payments, etc.
  • Now, deduct your fixed costs from your income. The remaining money can be allocated to your emergency needs, debt repayment, or discretionary costs. If money goes towards your emergency, you will have to spend less elsewhere.
  • Look at how much extra you have to work with. If you need to pay emergency expenses, it can come from this money. However, you probably won’t have much for discretionary costs. Discretionary costs include things such as dining out, entertainment, hobbies, travel, and fashion clothing, jewellery, and electronic gadgets. These are things that you don’t need to survive.

If you aren’t earning enough to even meet your basic needs, you’ll have to find additional income sources. If you’re spending a lot of money on discretionary costs, you will have to cut back. That doesn’t mean you can’t have fun once in a while, but important needs come first.

After that, repaying debt should be your priority. When you pay off your debts you have more money to work with. You can put it towards savings, a holiday, or your children’s education. As a first step, you should prioritize your payments. That way you make the most out of your money.

Prioritize Your Payments

If you’re in a financial bind, one of your first thoughts could be that you could skip a debt payment. However, that isn’t such a good idea since your payment history makes up 35% of your credit score, more than any other factor. Clearly, there must be a better way than damaging your credit.

Instead, make your required minimum payments on all your accounts. Then prioritize which debt you will tackle first to reduce your debt load. The two best known methods to do so are the avalanche method and the snowball method.

Avalanche Method

The avalanche method prioritizes repayment based on the interest rate of the debt. You pay off the balance of whatever has the highest interest rate and then move on to the next.

One potential disadvantage of this method is that large high interest debts take considerable time to pay off. You can lose your momentum, especially if you have multiple high interest loans or credit cards to repay. Still, this method can save you a lot of money in interest.

If you just have one high interest rate debt, this is a good choice. However, those with many large high interest debts may want to try the snowball method instead. It can free up money quicker so you can deal with your emergency.

Snowball Method

This method is favored by many people, because they see results quickly and stay motivated. Sort through your debts and start by paying off the account with the smallest balance. Pay the minimum of all other debts to maintain your credit.

After you’ve paid off the first debt, move onto the next-smallest debt. Continue until you have the money you need to cope with your financial emergency. Obviously, this takes some time so you may need to combine this strategy with other tactics to get the money you need as soon as possible.

Earn Extra Money

This can be a way to get the cash you need in a hurry. You don’t need to earn more money forever – just until you deal with your emergency.

If you’re thinking that you don’t have anything to offer or the time to do more, that may not be true. There are so many ways to earn extra cash nowadays and many do not require advanced skills.

Examples of unskilled possibilities include pet sitting or pet walking, running errands for people, babysitting, cutting the lawns of the elderly, washing cars, painting fences, and more. You can also sell items that you no longer need on free platforms (we all have stuff we hang onto for no apparent reason that can turn into quick cash).

If you have skills you can translate into cash, even better. Typists can transcribe documents, writers can craft articles on freelance websites, drivers can earn money through rideshare apps, seamstresses can mend clothes, and handy people can repair homes. Knitters can sell their unique clothing and gardeners can sell excess produce. Musicians and teachers can also tutor.

Consider an Emergency Fund Alternative

Of course, everyone would like to have three to six months of funds to cover emergency needs, but that doesn’t always happen. If you’ve tried to do what we’ve mentioned above and you still need money, consider these other options.

All have advantages and disadvantages you need to consider before you decide. Luckily, an emergency usually doesn’t require instant funds. You have a few days to get the money together to pay the mechanic who’s fixing your car or the plumber who’s changing your hot water tank. Don’t make rash decisions about borrowing. Think about your options.

Take a Cash Advance on a Credit Card

A cash advance on a credit card is a quick solution, but it also comes with plenty of disadvantages.

First, maxing out your credit card limit can lower your credit score and affect your ability to borrow later.

Second, cash advances on credit cards start accruing interest the moment you withdraw the money. There’s no grace period like there is with your purchases.

Third, cash advances are calculated at a much higher interest rate than usual. Credit cards also charge compound interest, which leads to added interest on your unpaid balance every month. Essentially, you end up paying interest on interest which can make it very hard to repay your debt.

Fourth, you may pay a fee for taking out a cash advance. Normally, this is between 3% to 5% of the cash advance amount or $10, whichever is higher.

Finally, credit card cash advances are usually limited to smaller amounts. For instance, a card with a limit of $7,000 may only allow a cash advance of $500. Financial institutions often limit how much you can withdraw from an ATM in one day too.

Fortunately, many online lenders now offer installment loans of all sizes. The process is quick, safe, and reliable and a far better option when compared to a credit card cash advance.

Borrow Using a HELOC

If you own a home, you may be able to borrow against it. For instance, a HELOC (Home Equity Line of Credit) offers revolving credit like a credit card, but it is backed by your home equity.This option can work well for short-term emergency needs, but interest rates can change.

Check Out Other Loan Options

You also have other loan options, but you need to understand how they work before you commit. As an example, payday loans are easy to get, but also one the most expensive choices on the market.

Tap into Your Retirement Plans

Generally, this isn’t recommended since you could face taxes, penalties, and lose growth in your funds if you dip into your 401(k) or traditional IRA early.

Luckily, some 401(k) plans do let you borrow tax and penalty-free, providing you pay back the money. Some plans also provide exemptions in certain circumstances. You can also withdraw contributions, but not earnings, from a Roth IRA tax and penalty-free, regardless of your age.

Still, borrowing against your future may not be your wisest option. Use this option if you must, but remember you have to repay what you borrow and you’ll compromise growth.

Consolidate Your Debts

Many people have multiple debts they can combine. This not only makes finances easier to manage – it can also save them money.

As an example, a person with multiple high interest credit card debts could apply for a personal installment loan. If they qualify for a decent interest rate, they would pay less interest and the new debt would only involve a single payment. While consolidating, the applicant can also tack on the extra money they need to handle their emergency. Applying for an online loan also makes the process fast and simple.

Installment loans aren’t your only choice, but they do offer many advantages. For instance, they have fixed terms, set interest rates, and equal payments. That makes it much easier to budget your expenses.

Another option is balance transfer credit cards, but beware. They often offer temporary introductory interest rates that increase significantly after a certain period.

FlexMoney for Emergency Fund Needs

FlexMoney is a supportive, flexible financial resource for those who are experiencing temporary financial strain. Connect to a network of reputable U.S. lenders offering online loans of between $200 and $35,000. Our process is safe, easy, and fast.

Complete one application form, compare interest rates and terms on online installment loans through multiple lenders, and find what’s best for you in just a few minutes. Apply today and discover why so many people choose FlexMoney for their emergency needs.