Life can be unpredictable, so we must always be ready for unexpected expenses that can arise, such as unanticipated bills or car repairs that might need immediate attention, as well as medical expenses that necessitate taking out personal loans to cover.
Unexpected expenses can be difficult to plan for, but with proper preparation you can avoid major hits to your wallet.
1. Set up an emergency fund.
Planned emergency funds are key for financial wellbeing. Without an emergency fund, unexpected expenses could force you into high-interest debt if they can’t be covered immediately.
Saving for an emergency fund requires setting a goal and then working toward it regularly with each paycheck. Automated recurring transfers from your checking account into savings or money market accounts is an effective way of making sure you’re meeting this goal on schedule.
Your emergency fund can also be built through selling items you no longer use such as furniture and clothing, or by adjusting your tax withholding and redirecting any extra cash received through paychecks to this savings vehicle.
2. Get a personal loan.
If you need an instant cash infusion, personal loans may be the right solution. They’re typically available online and approved and funded within days.
Emergency loans can also come in handy for unexpected medical expenses or roof replacement. Some loans allow you to use them to pay off credit card debt while also lowering interest payments.
To effectively utilize a personal loan, it’s best to only borrow what is absolutely necessary. Doing this will prevent overly extending the repayment period and incurring more interest than necessary.
Lenders will want to understand how you plan to pay back a loan, including details about your income, credit history and debts. Therefore, it’s vitally important that your application be filled out completely and truthfully.
3. Pick up a side gig.
If you’re having difficulty saving or paying down debt, or looking to expand your savings and investments, earning extra income through side gigs may be the perfect solution to help meet your goals. Just remember that like any business endeavor, side gigs require time and dedication before seeing results.
Therefore, it is vital to choose a side gig that suits your personal and financial circumstances. Furthermore, be honest with yourself regarding why and how much additional stress this endeavor will add to your life.
Find a side gig that will help you meet your financial goals while still being enjoyable and fulfilling – choosing an enjoyable side gig increases its likelihood that it will remain as such for years to come.
4. Don’t max out your credit card.
Planning for unexpected expenses is a key component of any sound financial strategy and can help protect you against becoming saddled with credit card debt.
Maxing out your credit cards can be disastrous for many reasons, not least of all its devastating effect on your credit score.
Furthermore, debt can make achieving other financial goals challenging such as saving for vacation or paying off mortgage loans.
Prevent this from happening by compiling a list of your past “unexpected expenses,” and creating savings plans based on this list.
Once you’ve created your list, create a budget for any months with specific expenses like car repairs, vacations or last-minute travel costs that require savings to cover them. Your budget should help determine how much should be put aside monthly to cover these costs.