One of the hallmarks of good financial planning, or at least from people who claim they are teaching it, is to avoid going over your budget. The budget itself should be carefully developed based on known monthly expenses, they say, and they’re right.
The problem is, the world doesn’t know what monthly expenses it’s going to throw at you.
Things happen. And while we can budget for a flat tire or a broken hairdryer, we can’t always anticipate some of the disruptive things that force us to dig deep into our bag of financial tricks to survive.
Keep in mind that no matter how well you plan, sometimes you have to be resourceful and figure out a solution that the self-proclaimed experts don’t advocate. You can be in a situation where you must ask yourself a simple question: Am I better off dealing with this problem, or better off sticking to a self-imposed budget? And of course, sometimes you have no choice. You have to figure out a way to get through.
So here are some of the things you can do to handle an unexpected expense.
You’re not buying a fancy car here, okay? So there’s no need to take on a complex process that looks a lot like auto finance. Forget the acres of paperwork and search for installment loans online, and then take a deal that gets you the money you need.
The great thing about these loans is that they are short-term, usually a year. It’s all spelled out when you initiate the loan, so you always have the end of the tunnel in sight. That differs from a credit card, which charges you a minimum monthly payment that decreases, making your payoff horizon even further away.
Of course, plastic isn’t the worst possibility. If you’ve managed it correctly, you should have a couple of thousand dollars readily available on your credit card for that have-to, HAVE-to situations.
Sure, the minimum payments can extend your payments much longer, but if you continue to pay the amount of the first payment even as the required amount drops, you’ll be on a payoff schedule that’s more in line with an installment loan.
In other words, if it requires $50 this month, then $48 next month and $46 the month after, hold steady at $50 and you’ll speed things up. Try a few examples for yourself. After all, if you could afford it for one month, you can afford it every month.
Bust The Piggy
The best thing to have is emergency savings, of course. This option would have come first, but it’s a little too obvious. If you’ve managed to store up enough money to handle the situation with a cash payment that requires no additional debt, do it. This is an emergency. That’s what an emergency fund is for.
Of course, there are times when you may not want to do this. If that emergency fund doubles as your account for another purpose that’s coming up soon as well, leave your piggy bank alone and explore another option.
Selling unneeded items is an obvious solution for quick cash, but some people think that a weeklong online auction or time-consuming yard sale is the only way to do it. That’s not necessarily the case.
Many people sell valuable items online through social media. You can also take tools, musical instruments, or other collectibles to a pawn shop for cash on the spot. Just make sure that the offer is satisfactory.
There’s madness in borrowing money for something you do need without getting money out of things you don’t need, so think about selling things to finance your emergency.
Nobody likes unexpected expenses, and it’s impossible to anticipate their exact timing or amount. But what is possible is to keep an ace in the hole for these events so that you don’t feel vulnerable when they inevitably come up.