Whether it’s an illness, a job loss, an unexpected home repair or some other financial emergency, nearly half of Americans faced a money crisis in the past year, according to CIT Bank’s savings survey.
What’s worse: More than half of Americans aren’t prepared to handle one when it does happen. According to the survey, a quarter of consumers have no emergency fund and another quarter save less than 5 percent of their monthly income.
In fact, another survey by BankRate.com found that one in four Americans actually have more credit card debt than money in the bank to cover any unexpected expenses.
If you’ve just been confronted with a financial emergency -- and don’t have the resources to quickly recover -- here are the steps you should take right now.
Prioritize your expenses
Take a long look at all your bills -- from your mortgage or rent to your car payments, food costs, utility bills, cable bills and credit card payments.
Which expenses are necessary? Your basic living expenses would fall into this category, including your rent or mortgage, car payment and power, water and food costs.
What can you cut back on? Your cable bill, gym memberships and other dining and entertainment costs all may be obvious victims.
Other options might include
Ask for help
If you’re facing a job loss, find out as soon as you can whether you qualify for unemployment. Unemployment benefits are provided to workers who are out of a job through no fault of their own, but the benefits do vary state by state. The federal government’s CareerOneStop.org lets you quickly pull up information about what might be available to you in the state where you live.
Worried about foreclosure? A reduced mortgage payment would help, so ask your bank for a loan modification. A modification could cut your monthly payments by extending the number of years you have to pay back the loan or lowering your interest rate, for example, according to the Consumer Financial Protection Bureau.
If you’re wondering how to pay for other living expenses, the federal government also lists groups that help cover telephone, medical and home energy bills, along with prescription drug costs.
It’s time to clean out your closets. Could your old baseball card collection be worth something? Or your grandmother’s silver that you never use? Could you consign the clothes that your children are too big for at a local consignment store -- and earn store credits to get clothes that fit them at no cost to you?
Would family or friends be willing to loan you some money? If so, be sure to make the loan agreement official to ensure there are no arguments down the road about who owes what and when. Sites like Lending Karma and Loan Back let you set up a loan and payment schedule with people you know.
If you’re able to earn more money, consider picking up a part-time job or signing up for a new gig through sites like Uber or TaskRabbit to supplement your income.
Talk to an expert
If things seem to be spiraling out of control, the best thing you can do is seek professional help with your bank, a financial advisor or a debt consolidation expert, including those at CESI. They can help you come up with a debt consolidation plan that will help you pay off everything from credit cards and medical bills to personal loans and more.
Take a breath
Any kind of emergency can throw life into a tailspin. That’s why it’s important to take a moment -- and take a breath. Assess how well you’re doing to cut your expenses and frugally celebrate the small wins as you travel down the road to financial recovery.
If you are experiencing financial difficulty and are looking for a solution, non-profit credit counseling can help you make sense of all your options. Contact us today for a free financial assessment with one of our certified credit counselors.
Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY