Life has a way at throwing curve-balls at you, and nobody is immune to this. To prove this point, I would like to share my own recent money issue and tell you how I handled the situation without taking out an expensive emergency loan.
It all began with a sudden loss of income. This is nothing new these days, especially with the changes to the economy brought on by the pandemic. Having a great deal of my income come from the party industry, I was particularly vulnerable once people stopped gathering in numbers. When you lose income in such a way, you can either give up or adapt. Here is what I did.
Assessed My Situation
Before I went into panic moved, I took a step back and assessed my situation. When you are facing money problems, the last thing that you want to do is act off of a knee jerk reaction. Unfortunately, that is far too often what most people do.
So, what I did is sit down and see exactly how much money I was still taking in and could foresee myself taking in moving forward. I then took into account my financial obligations so that I could see how far this money would stretch. Lastly, I identified where cuts could be made, if needed. Realizing that even the tightest budgets could be slimmed down, I looked for the dispensable expenses and made not of them.
Cut Expenses
This is one of the most crucial steps in dealing with a money emergency. If money is tight and your budget is not balanced, you need to make some changes.
Your first step in doing this is to negotiate with creditors and the companies you spend with. Most creditors fully understand that if you miss even a single payment your chance of defaulting is great. Using this logic, it is better for them to take a reduced payment than to take no payment at all. I was able to call credit card companies and negotiate reduced payments, put some memberships on hold, lower services such as internet to cheaper service levels and place utilities on average billing.
You would be amazed at just how many budget cuts that you can make when you have the motivation to do so. Once I had my expenses cut, I looked at how many expenses could be cut entirely. Even some of the expenses that I just reduced were still on the chopping block. For me, this meant cutting subscription television entirely and switching to a cheaper prepaid cellular plan.
Tapped Into Emergency Savings
With all of the budget cuts, I still had some issues with making ends meet so I would temporarily need to turn to my emergency savings. You should always cut expenses before raiding your emergency fund, but sometimes you have to dip into it.
Luckily, I had built up an emergency savings that was large enough to sustain me for 6 months of normal spending. Since my income was not totally eliminated, I found that this fund would be enough to make up my income shortfall for around 18 months. Ideally, this would be plenty of time to replace lost income and it turned out that this was the case.
Summing It Up
As you can see, nobody is immune to money problems and most of us will face one at some time or other in pour lives. Almost all of these money problems can be handled successfully, without loans, if you act thoughtfully and responsibly. Obviously, I had the advantage of an emergency savings, but everyone can and should have this advantage. No matter what your income level, there is always room to save. Those of you who disagree need to look harder. If you lack an emergency savings, make it a priority to get one.
