It’s always when you’re not expecting it that you are hit with a financial curve ball: your car breaks down; the air conditioning goes out; lightning wipes out your computer. Or maybe you get laid off or incur significant medical expenses. These events are certainly upsetting, but the stress can be minimized with advance planning.
Don’t let the unexpected throw you off your game; learn to hit those curve balls right out of the park. Plan for the unforeseen by setting aside some money every month, and avoid using your credit card as a “plastic cushion” for emergencies.
1. Save your money for a rainy day
Set up an emergency savings plan. Experts recommend you save between three and six months’ salary to cover a sudden loss of income, but having even $1,000 set aside for smaller expenses can lessen the blow.
2. Don’t run up your debt
If you don’t have emergency cash, you are stuck between a rock and a hard place. You may have to borrow money at high rates. Then you’ll have a debt burden in addition to the original problem. Resist the temptation to put the expense on your credit card—the interest rate can be as high as 32%, making the amount you owe that much larger and hurting your credit score.
3. Start small with an automatic savings plan
Arrange with your bank or your employer to have a small amount (for example, $50) deducted from your pay each month and deposited into a bank savings or money market account so that you can access it easily if you need to. If you can afford to save more, that’s even better. You may want to shop around for the best interest rate to help your money grow. And you shouldn’t have to pay any fees to open an account.
4. Check out sources for financial assistance
If you find yourself with bills you can’t pay all at once, talk to the creditor, and see if they will work out an affordable payment plan. Some banks, hospitals, utilities, and colleges are willing to work with you to help you pay down your bill. Or consult a financial counselor to help you work out a solution.
5. Network with others who have been there
Talk to friends and family who are, or have been, in the same position as you are. Others who have managed to deal with financial curve balls can provide you with not just information, tools, and ideas, but also the support you need in a stressful time. Ask them for suggestions and connections, contact your employee assistance program for free programs and services, log onto online forums and chat rooms. You may be surprised by how willing others are to help.