Overview
Everyone is going to experience budget shocks at one time or another. When we are hit with unexpected expenses, we may resort to several different methods to cover them. In this article, we will review five different methods to pay for unexpected expenses.
Method #1: Use an Emergency Fund
Almost half of Canadians (45%) don’t have an emergency fund, one poll finds. This means an unexpected expense could have them dipping into their RRSPs or taking on debt. Having an emergency fund is an essential strategy for dealing with unexpected expenses. If you have one, now is the time to use it.
If you don’t have one, consider setting aside a small amount of money per month – even $10 per month would amount to $120 saved in a year.
Method #2: Reconsider Your Budget
Review your budget. This may involve looking at your needs versus your wants. Are there any expenses you can cut? Perhaps you can stop buying coffee at large coffee chains or dining out several times per week. Cooking at home and brewing your own coffee at home may result in considerable savings over time. Minimizing your frivolous spending over a sufficient period may free up funds to cover budget shocks.
In addition, you can start building savings for occasional and unexpected expenses. Occasional expenses may be seasonal i.e. holiday gifts, while unexpected expenses may involve a major car repair or a medical bill. Having an emergency fund is the ideal option for covering unanticipated expenses, as you avoid costly borrowing options.
Method #3: Ask Family or Friends for Help
It is never ideal to ask family or friends for money. Yet sometimes, it may be a decent option, in the absence of alternatives. Friends and family may be willing to offer zero-interest or low-interest loans, which you could repay more easily. However, make sure you repay the loans on time, as money can complicate relationships.
Method #4: Use a Credit Card
If you need to cover immediate expenses and are out of cash, you may want to consider using a credit card. Credit cards can be an expensive option. If you are not able to pay the balance back on time, interest and fees may accrue quite quickly. Therefore, it’s important to budget toward paying off your credit card as soon as possible, if you resort to this expensive option.
Method #5: Apply for a Loan via Friendly Lender
When other options are not viable or available, you may want to apply for a personal loan via Friendly Lender. Personal loans are typically repaid over several installments, including any applicable interest and fees. Make sure you have a realistic repayment plan and strategy and stay on top of your payments. If you need to defer payments, reach out to your lender. The key is to maintain open communication with your lender.
Final Thoughts
While there are different ways to cover unexpected expenses, the method that suits you will depend on your unique financial situation. If you need quick funds to cover immediate expenses and have no better alternatives, apply for a personal loan online via Friendly Lender. We don’t check your credit score or credit report during the simple and quick online application procedure.
