Five Tips for Overcoming a Financial Emergency

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Most of us will face a financial emergency at some point in our lives. Perhaps your income isn’t enough to cover your basic needs right now, or you have an unexpected expense that you can’t cover.

Whatever you’re facing, you don’t have to push through it alone. Here are some tips and resources you can use to help you overcome your biggest financial obstacles.

1. Tackling food insecurity

Putting food on the table is essential. Still, it’s something so many Americans struggle with. The good news is there are organizations fighting the problem at almost every level.

On a national scale, the federal government offers multiple food assistance programs through the U.S. Department of Agriculture (USDA) and other agencies, including:

Locally, you might have access to a variety of food banks that supply food to those in need. You can visit Feeding America to find your closest and best option. 

2. Dealing with loss of income

Having reliable income is arguably the key to financial security. Getting laid off — or even just having your hours scaled back — can throw your budget into disarray.

There are many steps you can take to get through this tough period, but first and foremost, start your application for unemployment. Even if you’re unsure if you’re eligible, you should take this step ASAP, since it can take time for your application to be processed and to receive your first payment.

Next, reassess your budget, placing your expenses in order of priority. When money is tight, it’s important to prioritize these necessities:

  • Shelter
  • Food
  • Utilities
  • Essential medical care
  • Transportation (if needed to get to-and-from work)

Be proactive about cutting as many costs as you can, so you can free up cash for the necessities. For example, contact your utility companies, creditors and student loan servicers right away to ask if you can go on a special payment plan. Additionally, read through your financial statements to see if there are any subscriptions or recurring charges you can cancel.  

3.Covering mortgage or rent payments

Much like with your creditors, it’s best to inform your landlord or mortgage lender of your situation immediately. Call them to see what assistance is available and ask how you can apply.

If you have a government-backed mortgage, such as a VA loan or FHA loan, there may be special assistance available to pause or reduce your monthly payments. For renters, call 2-1-1 or visit the to get a rundown of rental assistance programs available through your state, city or county.

4. Dealing with credit score damage

Building good credit isn’t easy — especially when you’re in a financial bind. There’s a chance you’ll have to make decisions that keep you financially afloat but cause your credit scores drop. For example, you’ll want to stay current on your mortgage payments in order to keep your home, even if you can’t afford to cover your credit card payments.

As we mentioned above, you should always inform your creditors and lenders of your hardship immediately. Doing so can potentially open up options, delay eviction or foreclosure and help minimize late fees and credit damage. Once your financial hardship is over, you can take steps to rebuild your credit scores. For example:

  • Open a secured credit card, which is a card you can qualify for by making a refundable deposit, even if your credit scores are low.
  • Take out a small credit-builder loan from your local credit union. 
  • Find out a family member or spouse has good credit, and become an authorized user on one or more of their credit cards. 

For more personalized tips on how to preserve and recover your credit scores, talk to an NFCC-certified credit counselor.

5. Running out of emergency savings

An emergency savings fund exists to be used, but it can be scary to see the money disappear. If your emergency savings is non-existent, you might be tempted to make high-risk choices in order to cover your needs, such as taking out a 401(K) loan, car title loan or paycheck advance.

But all of these options put you at risk of prolonging your financial emergency, since you have to pay back high fees and high interest on these loans. Instead of making a choice that creates more problems down the line, consider these safer options for covering your emergency expenses:

  • Borrow money from friends or family
  • Rent out a room in your home 
  • Sell old electronics, a vehicle, jewelry or workout equipment
  • See if your credit union offers emergency loans
  • For servicemembers and veterans, check to see if your military aid society can offer you a grant or loan

Once you’re in a more stable position, you’ll want to work on replenishing your emergency savings fund. One way to jump-start the fund is to stick to your emergency budget for a few extra months (or even longer) after things get stable, and put your extra cash into savings.