No matter how well you budget or how skilled you are at stretching a dollar, everyone is hit with unexpected expenses from time to time. Recent statistics suggest that approximately 57 million Americans don’t have money set aside to pay for an unexpected expense. But whether or not those expenses are the start of a downward financial spiral is up to you. Here are some tips for handling unexpected expenses.
Evaluate the Expense
Not all unexpected expenses are created equal. For example, there’s a big difference between getting a necessary car repair and hopping on a flight to go to your college roommate’s bachelorette party. In other words, you decide what’s worth it and what isn’t. If the expense is truly urgent and unavoidable, the following tips can help you put together the funds necessary to pay for it.
Sell Some Assets
Direct selling apps such as Let Go and Offer Up make it easier than ever to sell items for quick cash. Look around your house for unused electronics, exercise equipment, tools and other items you no longer need or use. Get them listed and before long, you’ll have offers rolling in. Just be sure to follow these tips for avoiding scams on those platforms.
Freeze Your Spending
Cut back on spending as much as possible until you get past this financial emergency. Purchase only the bare minimum of necessities to free up money to pay for the unexpected expense. Make meals from pantry staples and food you have in the freezer. It might not be gourmet cuisine, but it will help you get by until your finances can stabilize.
Develop a Strategy to Pay it Off
If you end up using a credit card to pay for the expense, make a plan to pay it off quickly to avoid racking up interest charges. And don’t let it be the start of a charging spree. You many think that a few hundred dollars more won’t matter, but it can kick off a cycle of revolving debt that could take years to pay off.
Plan Ahead for Next Time
When it comes to unexpected expenses, it’s not a question of if they will happen. It’s simply when. Appliances will break down. Vehicles will need repairs. Do your best to be prepared for them by starting an emergency savings account. Even if you have to start small, setting aside money from each paycheck will begin to add up and eventually, you’ll have a sizeable cushion to fall back on when you need it.
Many people think they simply don’t earn enough to set aside money for emergencies, when it’s really a matter of not budgeting efficiently. When you complete our free Credit Counseling, you’ll receive a complete budget that includes a line item for emergency savings.