Do this When Your Emergency Fund Runs Out

Things to do When Your Emergency Fund Runs Out

 

     Millions of Americans are facing financial hard that are draining the emergency funds they had saved to get them through difficult times.

An emergency fund was created to be a financial lifesaver when the unexpected happens. But what happens when the unexpected doesn't subside? A lot of people were still in trouble, so what could they do now?

The Right Amount Available in an Emergency Fund

A simple requirement for an emergency fund is saving:

6 month fee when:

- You're self-employed.

- It's hard to find a job in your field.

- Only you make money in the family.

3 month fee when:

- You have a job where you can quickly find a job for the same income.

- You and your partner make approximately the same amount of money.

Revisit Your Budget when Your Emergency Fund is Exhausted

It's important to keep reviewing your budget when you're out of an emergency fund.

Your money now must cover current and future unforeseen expenses. Life doesn't stop when your emergency fund is empty. You still have car repairs, home repairs, and other unexpected expenses.

Make a "Crisis Budget". This is the minimum that you need to survive if you experience a decrease in income. It should cover what's referred to as the "Quad of Stability:" food, shelter, transportation, and medical protection.

Simplify Your Spending

You've probably already cut costs by shopping smarter for groceries, and cutting back on paid monthly services (cable, satellite radio, gym membership). Some of the additional cost-cutting steps include:

- Increase deductibles for insurance coverage to reduce premiums

- Negotiating new plans for mobile phone and internet services.

- Reducing your withholding taxes at work

Retirement Account

If you have an individual retirement account (IRA), or 401(k), tapping into those assets may be an option, but only as a last resort, but, as much as possible, not.

Depleting your retirement account can have significant negative consequences for your long-term financial health.

When you withdraw to your retirement fund early, you lose out on compound interest. Even if you pay back later, you may not have enough time to make up for lost growth.

Sell Things You don't want Anymore

If you're short on funds but you still need to keep the lights on and get food on the table,

Most experts suggest taking a look through your valuables.

There are websites such as Ebay and Poshmark that can turn the stale items in your home into extra cash.

Many financial advisors agree that selling your "stuff" is the best solid first step, and he recommends the NextDoor website as a smart way to trade real estate for cash.

Anything you can sell to get out of a tight budget is worth considering, whether that means getting rid of sports equipment you rarely use or selling your family car.

Take Side Hustle

Cutting your spending can help you stay afloat, but you shouldn't forget about the other side of the equation. Often times, "side jobs" or part-time gigs can keep you from sinking in at a time when you can't work at your regular job.

Home Equity Credit Line Access (HELOC)

If you don't already own a HELOC, and you're currently unemployed, it's unlikely that you'll be eligible to get one. But if you already own a HELOC, now is a good time to see how much you can borrow from it. (forbes.com)

Because HELOCs let you borrow against the equity you have in your home, they tend to come with lower fees and interest rates.

However, still, HELOC should be used "as a last resort. However, this type of loan can help provide a comfort level until the funds can be reimbursed.