Having a clear monthly budget is the first step towards regaining control over your personal finance. By allocating portions of your income to certain needs, you can be more meticulous in managing your expenses and keeping your monthly spending in check. It is also easier to keep track of your progress when you have a predetermined budget, especially now that there are plenty of apps to help you.
Even with the best plan in hand, however, things can still fall apart. You may be faced with an unexpected expense or an emergency that leaves a big gap in your budget. More often than not, this happens well before your next pay check, making it more difficult to maintain a healthy cash flow.
When not dealt with properly, a gap in your monthly budget can quickly turn into a vicious circle. You’ll start falling behind on your credit card payments or other bills. Those late payments will result in additional fees, which will leave an even bigger gap in your monthly budget. So, what can you do to stop a simple emergency from turning into a bigger problem?
Work on Your Expenses
As soon as you know that there is an unexpected bill that needs to be paid, do a quick review of your expenses. This is the time when you need to be ruthless when it comes to cutting unnecessary expenses. Forget about getting a cup of coffee on your way to work and make one yourself at home. Cancel unnecessary subscriptions and delay getting a new phone until you are back on track.
No amount is too small to save; like I said, now is the time to be ruthless and cut unnecessary expenses immediately. You can always find ways to save money and cover a portion of that emergency expense and ease the blow a little bit.
In most cases (usually when the emergency expense is sizeable) you may need to avoid some expenses for several month. There is nothing wrong with that. Make the necessary adjustments and budget for the following month differently. You will return to a healthy cash flow sooner than you think and you can start spending money on non-essential things again.
Check Your Savings
Withdrawing money from your savings account or your emergency fund is the second step to take, and it is in no. 2 for a good reason. Even when you can cover the unexpected expense immediately with the money you have saved, you still need to get your savings or emergency fund back to its ideal level, which is why you still want to save more and make adjustment to your monthly budget as needed.
Covering the emergency expense is the easy part when you already have an emergency fund or savings set aside all these months. You can also keep up with other bills until the next pay check without running into issues either.
Know Your Options
What if you don’t have the money to deal with the emergency expense? If this is the case, it is time to review your options. If the emergency expense is not something you can delay, then that expense is priority. You now have different financing options to turn to in this situation.
Don’t just apply for any loan. You still want to be smart with the decision you make even when you are in a rush. Take some time to compare loans and other quick financing options so that you can use one that costs the least. Don’t worry, you have the internet on your side.
Using comparison tools and web apps, it is easy to get quotes from multiple lenders with just one search. You can also visit the websites of lenders directly in order to get quotes, all while reviewing the available financing options. After finding the right loan to use, do a quick calculation on repaying the loan based on the changes you made to the monthly budget earlier.
The actual task of applying for the loan (and getting the money you need) can be completed in minutes. Some lenders will review your personal information and decide whether to grant you the financing within a couple of hours, and you can get the money deposited into your account soon after the loan is approved.
Sticking with the Plan
The biggest challenge of them all is sticking to the plan you have created so far. You now have an extra loan to repay, so it is important that you stick with the adjusted monthly budget and continue saving money on non-essential expenses. The more you can save, the sooner you can return to your old budget.
Dealing with financial emergencies is always a hurdle, but these tips will help you face the situation better. By knowing exactly what to do, you can continue making sound financial decisions and maintain control over your personal finance.