Sunday, May 26, 2024

3 Steps To Take When Managing Emergency Financial Situations

In a recent report, less than 25 percent of Britons were found to have £500 saved for emergencies. In fact, in Aldermore’s Annual Savings Tracker survey, 50 percent said they do not have any money set aside to deal with emergencies, leaving them vulnerable and reaching for consumer debt. However, thinking and planning ahead for emergency financial situations like job redundancy or unexpected costs can make things much easier when the time comes for paying off those emergency expenses. Regardless of whether you are new to personal finance/budgeting or a novice financial wiz, the reality is that emergencies and unexpected expenses will occur, and the way you react to such situations can make a huge difference in your financial situation moving forward.

Don’t Panic

Unexpected financial emergencies and bills can instantly increase stress levels. This is understandable and can often leave you feeling rushed to make a decision sooner rather than later. Money issues can also cause panic. However, rushed and panicked financial decisions are often not thoroughly thought through and can leave a long-lasting negative impact on your financial records. Instead, take some time to understand the problem and evaluate the situation. Spending time understanding all sides of the situation- and all of your financial options available- means you can then make an informed decision. 

Assess Your Need And Your Gap

The next step to take is to evaluate your current financial position including your expenses, income level, and upcoming financial commitments. Drafting a household budget can help you with this. Once you have done this, you can then work on prioritising bills or assessing whether you can cover the financial emergency with your savings. This also helps you with visualising what you can afford to repay each month if you do opt to use financing for the emergency costs. You can then move on to comparing the costs of your option. For instance, if you are thinking of applying for a personal loan, My Quick Loan and other lending platforms often offer a free quote calculation on their website which allows you to compare quotes. 

Don’t Feel Pressure To Take The First Door Out

Last but certainly not least, take time to research your options. Many Britons turn to consumer financing in emergency situations. With 27 percent not having any emergency funds, many find themselves turning to the use of credit cards or personal loans. And while it may be a relief to get a loan approval or pre-approval for a credit card, it is okay to spend some time researching alternatives and what they are offering. This can include interest rates, repayment terms, credit scores, and even the terms and conditions the financing is being offered on. 

While you cannot completely get away from unexpected financial emergencies, you can plan for them. Making sure you have an emergency fund in place, a flexible but robust budget to rely on, and a good plan for addressing emergency financial situations when they arise is the best place to start.

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