Everyone runs in financial trouble at some point in time. Whether it’s losing a job or an unexpected illness to a loved one, you are forced to raise cash in a short amount of time.
Here are some strategies you can use.
1. Tap into emergency savings
Hopefully, you have an emergency fund with 3 to 6 months of expenses saved for situations like this. If you have an emergency fund, use funds from this account before exploring other options.
2. Ask Family And Friends
It is difficult to ask a friend or a family member for help. But as long as you ask for a one-time financial need, most friends or family will be happy to help. This is a much better alternative than borrowing from a payday lender or getting a cash advance from a credit card.
Always pay back as promised to keep your relationships strong.
3. Hold A Garage Or Yard Sale
Most people have things in our homes that we don’t use. You can sell those items in a garage sale.
Buyers in a garage sale will try to bargain for a good deal, so you will not get the maximum value for your items.
4. Get A Side Gig
More people are working in the gig economy than ever before. One in three US workers are freelancers. Depending on your interests and skills, you can make money with a side hustle.
Most common side hustles:
- Drive for Uber or Lyft
- Deliver for Postmates
- Sell services on gig websites such as Fiverr or Upwork
- Do micro tasks (surveys and other small tasks) on Amazon’s Mechanical Turk
- Tutor over Skype
- Walk dogs
5. Liquidate Investments
If you have liquid investments (stocks, bonds or mutual funds and CDs), you can sell them quickly to convert them to cash.
The downside is that once sold, these investments will no longer compound, and generate a return for you. It might take you a while to build your portfolio back to the original level.
6. Cash Advance On a Credit Card
You can borrow available balance on your credit card in the form of a short-term loan. Know that your credit card may charge you cash advance fee (3% to 5%), and a higher interest rate (than regular purchases).
Taking a cash advance on your credit card can get very expensive due to high-interest rates, and daily compounding. It will also increase your credit utilization ratio, which can hurt your credit, and reduce the available balance for regular purchases.
7. Personal Loans
If you have good credit, you can borrow money from a bank without collateral. The interest rates for personal loans are much lower than what credit cards charge. You can pay off the loan over a set period of time.
Other Ideas
Cut Your Budget
Take a look at your budget to check if there are areas you can cut expenses.
- If you eat out often, consider cooking your own meals to save money.
- Do you have magazine or video subscriptions that you cancel?
- Delay high dollar purchases if you can.
Bottom Line
No one likes a financial emergency but the reality is that it happens more often than we assume. Have an emergency fund, and have a plan in place in case it happens to you. Review your options and costs when considering an emergency loan, and ensure that you can repay the loan.