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8 Tips To Handle An Emergency That Costs More Than Your Emergency Fund

8 Tips To Handle An Emergency That Costs More Than Your Emergency Fund

So you’ve been super-frugal, you’ve got your emergency funds in place, you are paying down debt, and suddenly your boiler shuts down again. Even worse, it’s several decades old and beyond repair. Unfortunately, you will need to replace it, but a quick Google search proves that a new boiler is a lot more expensive than the £1000 in your emergency fund. So what do you do? Check out our list of eight tips to help you cover your emergency when the cost exceeds your funds available.

1. Remain Calm

Do not let your emotions get the best of you. Stress and anxiety can seriously cloud your judgment. If you panic, you will likely choose the first solution that appears which may very likely be the most expensive. Keep yourself relaxed, level headed, and put your problem-solving skills to work.

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2. Make Sure This Is a Genuine Emergency

Remember that a real emergency is a situation that affects your safety, heating, plumbing, ability to eat or get to work. We call this the four walls concept, which are the basics needed for survival within your home and your access to work. A broken television is not an emergency. A broken washing machine can be solved with a trip to the launderette. It can be an inconvenience, but not necessarily an emergency.

3. Shop Around

When looking for a repair service, contact as many people as possible. Don’t automatically agree to work with the first person you speak to because you are desperate. You may only need to spend one extra hour making some phone calls to find a better price. Make sure you request the ‘bare-minimum’ fix until you can save up for the full repair. Extra tip, it’s wise to do some pre-research before an emergency arises, that way you already have a shortlist of potential vendors to call. Ask your friends or co-workers whom they call on for heating, plumbing, and car repairs.

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4. Consider A Second-Hand Option

If you need to replace an essential item like your boiler or tires, used items will always be the cheaper option. You can find plenty of sellers online offering used car parts, boilers, or anything else you need.

5. Negotiate

Always ask about discounts or a payment plan that you could cash flow for a few months. When haggling a one-time payment, remember that cash is king. If your emergency cost is £1200, show them your £1000 in cash and tell them it’s all you’ve got. They will likely take it.

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6. Find More Cash

Is there anything you can sell to gather up some more money quickly? A quick rummage around your home will likely turn up items you no longer use, that are still in great condition. Consider selling a few things to make the extra money.

7. Consider A Loan You Can Afford

If you have exhausted all other resources and borrowing seems to be your only option, compare your costs to borrow. Do not take out a loan, if you have no intention to pay it back or mathematically cannot pay it back. There are various types of loans that are available and depending on where you get the loan the amount you repay.

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We strongly recommend using financial comparison sites to see where you can get the best rates. Using popular sites such as ‘Money Supermarket’ and ‘Compare The Market’ will give you guidance on the best bank loan lenders. This will help you determine which company to apply with.

8. Absolute Last Resort

If a bank loan is difficult to obtain because of your credit history, the absolute last resort maybe a payday loan or an installment loan. Payday loans are high-interest credit and should ONLY be used to cover an immediate short-term emergency and not to be squandered because of the high repayment.

Again, with any type of loan you should use authorised comparison sites to see where you can get the best rate. Using payday loans comparison sites like The Lenders List or www.money.co.uk will display authorised lenders and will offer comparison tables based on the different APR’s and circumstances to see which loan fit’s your current status.

Featured photo credit: http://uk.businessinsider.com/ via uk.businessinsider.com

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Last Updated on April 3, 2019

How to Nix Your Credit Card Debt in Less Than 3 Years

How to Nix Your Credit Card Debt in Less Than 3 Years

Debt is never a fun thing to be in. But, there are many actions that you can take that will help you rid yourself of the burden of debt once and for all.

By coming up with a set plan, eliminating your debt can feel much easier than constantly thinking about it.

This post will provide some tips on how you can do this to help you nix your credit card debt in less than 3 years.

Hint: there are ways that are easier than you think.

1. Consider Consolidating Multiple Credit Cards If Possible

This may not be applicable to you, but if you have multiple cards – it is something to consider. Keeping up with multiple bills is time consuming.

It will depend on the balance you have on each. Consolidate ones you can but do not do it to the point that you get too close to the maximum limit. Also, it is ideal to pick the card with the lower interest rate.

Consider if there are any fees or alternatively, rewards, with transferring a balance to another card. Watch out for fees. Note that some cards offer rewards for transferring a balance to them. This is extra cash that can help go towards paying off your debt.

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Having one or two cards can make nixing your debt much simpler than keeping up with the balance of a bunch of cards. Keeping track of paying the minimum towards a bunch of cards is time consuming. Spend the time to consolidate instead to make the overall process simpler going forward.

My tip: Have one main credit card. Have a second one that you use for necessities – such as groceries or gas – that offers rewards for those purchases (a lot of cards do) and set the second one on auto-pay. You should be able to pay off a smaller amount on auto-pay if it is a necessity. If you think you cannot, then you may need to cut down a lot on expenses.

Why do I suggest doing this? Having one thing set to auto-pay is one less thing to think about. One less thing to waste time on. Same idea with consolidating to one main card. Tracking down too many is a hassle.

2. Try to Pay the Full Balance You Spent Each Month at the Very Least

You need to pay off the amount you are spending each month when that bill comes in. This is the amount you spent THAT month.

Do not let the debt keep accruing while you work on paying any unpaid debt that has accrued. It will become a never-ending battle. Try as best as you can to be current on paying for each month’s expenses when that month’s bill comes out.

If this is a strain, consider why. You may need to cut expenses. Or you may need to consider other cards. Or look at where this money is going.

3. Pay Extra When You Can – Every Small Amount Counts

This cannot be emphasized enough. If you are looking at a lot of credit card debt, it can look daunting, but each extra amount that you can put towards the debt will really add up – no matter how small it is.

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It does not just reduce the principal amount that you have left to pay off, but it reduces the amount that is collecting interest. You will always save money with that reduced interest.

4. Create a Plan on How to Pay Extra

Back to the main point, having this plan is giving you one less thing to think about.

This plan should be a plan that works for you. If it does not work for you, your spending habits, and your views on debt, then it will not be an effective plan.

For instance, if a set plan of an extra $50 (or another amount that you know you can afford) works for you, then do that. Set that aside every month and pay that extra amount. Treat it like a bill. Choose an amount that works for you and pay it like clockwork as though it was a bill you had to pay each month.

Little amounts will not nix it entirely, but they will help tackle it and having a set plan can make it less of a chore. Creating a new plan of how much to put towards it each month is an unnecessary added stress.

5. Cut out Costs for Services You Do Not Use

If you are signed up for subscriptions that you do not use because of some free trial or for some other reason, cut it out. Your overall financial position will look better.

In turn, that will make cutting your credit card debt easier. Look at your statements to find these expenses. If you do not use them, you may forget you are paying some unnecessary amount each month. Cutting it out can really add up in savings that you can put towards other needed expenses.

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6. Get Aggressive About It

Consider these points:

Depending on the interest and the level of debt, you may need to give up a few indulgences. For example, instead of ordering delivery or going out to eat, cook at home. Everything adds up.

Other things may be more of a sacrifice. It may be a trip you wanted to go on, or a daily latte habit you’ve picked up. In these instances, consider how important it is to you and if it’s worth the sacrifice. And if it is a costly expense, think whether you can wait to indulge.

Cutting an extravagant expense can really help make a dent in your overall debt. Try not to add to debt when you are trying to pay it off. It will be a never-ending battle. Make it less of a battle with these tips and it will feel easier.

Bottom line: Do what you can to make this process easier for you. Implement steps that do this. It takes time now, but will help overall. Also, keep track of your spending and paying down of your debts. Which is the next point.

7. Reevaluate Your Progress at Set Intervals

Doing a regular check-in can help you see your efforts pay off or maybe indicate that you need to give this a bit more effort. If you check every 3-6 months, it will not feel so much like a chore or feel so daunting.

By doing this, you will be able to better understand your progress and perhaps readjust your plan. Bonus: if you see it pay off, it will feel great to do this check-in. You will get there.

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Finally (and most importantly)…

8. Keep Trying

Do not get discouraged. Pushing it off will make it worse. Just keep trying.

Once your debt becomes lower, each monthly payment will reduce the balance more. Why? You are paying less towards interest. It will be a snowball effect eventually and it will become much easier to manage. Just get to that point. And know once you do, it will feel easier and motivating.

Start Knocking out Your Debt Today

The best way to eliminate debt is to get started right away. Begin by implementing the above steps and watch your debt just melt away. Try out some of the above strategies and see what works best for you. Soon you’ll be on your way to a debt free life.

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