With the rising costs of college tuition and the negative effects of the housing crisis still being felt, many families are finding themselves in financial debt. According to CNBC, eight out of ten U.S. citizens are living in debt. Mortgage payments are the leading cause of this trend. However, young individuals are not the only group at risk. People are increasingly bringing debt into retirement. While there are several steps that can be taken to avoid a financial collapse, these steps aren't practical when the situation has already headed south. Here are a few strategies that can help you deal with a financial emergency.
The most important strategy when dealing with a financial emergency is to maintain the money that is left. In order to do this, individuals and families are advised to prioritize their expenses. First and foremost, all unnecessary or excessive spending must be eliminated. For example, shopping trips and fine dining can be eliminated as an expense. This is when the critical distinction between needs and wants must be made. The necessities such as food, water, shelter, work and transportation should be accounted for first. By eliminating unnecessary expenses, monthly spending amounts can easily be decreased. This will allow for more money to be put towards saving or paying off debt.
One of the safest and most effective ways for handling a financial emergency is to increase work. This can come in the form of more working hours at your current occupation or supplemental income. Most employers would be more than willing to grant an employee extra working hours. Furthermore, working overtime could even qualify some workers for additional compensation. If working extra hours at work is not a feasible option, it is advisable to search for other work. It is best to find a part-time job with hours that don't conflict with any current position. Additionally, odd jobs such as manual labor or freelance services can be a lucrative source of extra income. It is important to remember that this extra work is only temporary until the financial situation improves.
Look for Ways to Save Money
Other than making money and cutting unnecessary spending, it is also helpful to find ways to save money on necessary expenses. One of the largest sources of necessary spending is groceries. No matter how bad a financial situation, people must still eat. Finding ways to save money on groceries is a great way to help keep more money in the bank. Coupons are an effective and easily accessible source of savings. According to The Balance, shoppers saved an average of $1,560 to $2,600 annually when actively using coupons. However, it was also reported that only 1% of families take advantage of Consumer Packaged Goods coupons. State and Federal Taxes are another expense that can cause extra stress to an already crippling financial situation. Fortunately, some people in debt may find themselves qualifying for extra tax deductions and benefits. Conducting quality research online or visiting a financial expert can reveal these possibilities. Perhaps most significantly, some creditors will allow deferred or reduced payments. As credit card debt and payments are a massive burden for people in a financial emergency, delayed or reduced payments can be a godsend.
Ask for Help
While nobody enjoys reaching out for help, sometimes the weight of the situation demands it. Family members and close friends can be a great source for help during a financial emergency. Beyond simply loaning money, these resources can help you find higher paying jobs or offer additional advice on saving money. However, some financial emergencies require the use of loans. When utilizing this option, people are advised to consider important factors such as interest rates, payment schedules and the reputation of the company.
While experiencing a financial emergency can feel like a catastrophe, there are many strategies that can be used to improve the situation. Most importantly, you must take control of spending habits and direct all expenses towards the necessities. It is also helpful to increase financial income during these situations if possible. Tax deductions, grocery coupons and deferred payments are excellent ways to keep extra money in the bank. At the end of the day, some people may find themselves in situations where loans are the best option.