When life throws you a curveball, how do you respond? Some people get down in the dumps and look for pity while others take action to solve the problem at hand. Let's face it - nobody is immune from emergencies or being thrown into unexpected situations. That is the nature of life. When an emergency situation involves money (most do), the stress level often rises exponentially. This is why you need viable solutions when emergencies arise.
You may have heard the term "emergency fund" before but haven't put too much stock into the premise due to the unpredictable economy that seems to fluctuate on a whim. Many economic analysts recommend opening a dedicated checking or savings account with the goal of storing away the equivalent of three to six months of expenses. These funds are meant to tide you over in the event of a job loss, health issues or any other unexpected financial strains.
The U.S. Department of Labor estimates that the average annual expenses per individual in a household are $48,109. This means that a well funded emergency fund should contain approximately $12,0000 to $24,000 to satisfy the three to six month estimate. In a perfect world, these might be realistic figures, but the fact is most consumers can't possibly afford to save this amount in the near future. Furthermore, it takes time to establish a savings plan and you will most likely be unable to fully fund it for months or even several years. If an emergency situation arises in the meantime and you need money to cover expenses, what can you do? This is where it is important to sit down and map out your options.
The "it never hurts to ask" mentality applies very well in certain financial emergency situations. If you don't have the money to cover the expenses, consider contacting the billing agency. Some companies (particularly when the economy is in a rut) will work with customers to establish a payment plan or reduce the balance to make repayment more feasible. After all, most companies want to avoid bad press and being tough on customers that are going through tough times doesn't read well in the headlines. If it turns out the billing agency won't budge, it is time to consider your other options.
Many consumers turn to short-term loans when an emergency or unexpected expense appears. They certainly aren't for everyone, but those looking for a fast solution might find these loans to be very beneficial. The premise is simple. You apply for an emergency short-term loan (sometimes called a payday loan) at a local store or through a reputable online resource. Many online lending sites have moved towards a completely electronic process, which means there is no faxing of documents required - hence the name faxless payday loans. While they may not be instant, an online emergency loan is arguably more secure than dealing with cash because there are records of deposits and withdrawals.
Upon approval, you can typically receive a loan up to $1,500 depending on the lender you go through. Depending on the lender, these emergency loans are typically delivered in cash (usually from a local establishment) or directly deposited into a checking or savings account. Most loan recipients pay the loan back by their next payday. This allows the customer to cover emergency expenses before they escalate. These loans do come with an interest rate that is higher than most secured loans, due to the fact that they are much easier to qualify for regardless of credit history.
You now understand the importance of establishing an emergency fund as well as the loan options you have when unexpected bills come your way. Here are a couple other ways to protect yourself from economic headaches:
A health savings account (HSA) allows American taxpayers enrolled in a high-deductible health insurance plan to put extra money away each month that can be used to cover expenses during a health crisis. As medical expenses continue to skyrocket, this is not a bad idea to consider.
Work diligently to free up your finances by paying off debt. If you own a house or car, work to build equity. The more equity you have, the easier it will be to cover emergency expenses.
