The Secret to Dealing With Financial Emergencies
Life is full of challenges. It’s simply the way it is, and unfortunately many of them come with a hefty price tag. An emergency room visit isn’t only scary because of its health ramifications, but also because it could cost you thousands. Getting fired isn’t just a blow to the ego, it can mean months without an income and possibly having to take a permanent pay cut in a new position. Losing a car to an accident means losing almost total access to any form of transportation that isn’t public or within a bike ride’s distance.
So how do you deal with financial emergencies without letting them debilitate you? The answer is simple: plan ahead. Planning ahead is the single most effective way of making sure that financial emergencies don’t sink your ship.
In this article we’re going to lay out the concrete steps you can take to plan for every contingency and not ever be caught flat footed again.
Somewhat predictably, planning ahead requires a plan. Which is another word for a budget. A budget is simply the allocation of your income, expenses, and where you want your money to end up. Often people are spending money on all kinds of things that not only aren’t priorities, but they don’t even know about.
The easiest way to create a budget is to simply subtract your expenses from your income. When you do note how much you spend each month on various categories: food, health, car, etc. If this feels tedious, there are various apps that will automate the process for you. King of those apps is Mint, but many of the smaller or lesser known ones will also serve you well. They’ll automatically categorize your spending and even display the information in easy to read graphs.
Why is knowing where your money is going so important? Well, once you know where it’s going, you can take control and redirect it. Spending too much each month on eating out? Cut back and you can instead route that money into a savings account.
The idea behind an emergency fund is simple: it’s a savings account dedicated to dealing with emergencies when they arise. Each month you allocate a little of your money to the account so that you don’t have to scramble at the last minute when things go wrong. How much you want in your emergency fund will vary from household to household, but generally the way to find out is to tally up all the things in your life that could go wrong, and then have enough for three of those a year.
Key to the functioning of an emergency fund is that it be separate from both your checking account and savings account. Keeping it separate will ensure that you aren’t tempted to spend it, liable to lose it, or be unable to pull it out because it’s in your retirement. You want your emergency fund to be an agile and separate part of your finances.
If you feel like you’re having trouble keeping your emergency fund funded, then the best way to handle it is to go back to the previous step and really look and interrogate your budget to make sure you’re doing everything you can to cut costs wherever possible.
Unfortunately, emergency funds are not all powerful, and you have to be nimble enough to be able to adapt if you either aren’t able to save as much as you need in one, or if it’s simply depleted early by too many emergencies. If an emergency fund isn’t for whatever reason available, another efficient option is taking out an Alabama title pawn.
Alabama title pawns are fast, short term loans that in the state of Alabama may net you up to $15,000 in cash in as little a half hour from door to door. They’re incredibly simple and convenient, and one of the best ways of dealing with emergencies. For maximum efficiency, you should know before an emergency hits where the nearest Alabama Title Loans, Inc. pawn stores are to you, and should also have the few required items you need gathered together: a state issued I.D. like a driver’s license, the lien-free title to your vehicle, and the vehicle you intend to use for the pawn itself.
Another key advantage of title pawns is that for the duration of the process you’re able to continue driving your car as usual, which is key to allowing you to live your life without impediment considering just how important cars are to transportation.
To learn more about handling emergency expenses, read our other financial emergency articles.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.