A lot of people don’t know how to manage situations, especially when its an emergency. Financial Emergencies are unplanned situations that involve spending money. No matter how good you are when it comes to managing financial related issues, sometimes emergencies surface. When these situations arises you need to handle it as smooth as possible.
The following tips will open your knowledge on how to deal with Financial Emergencies, when they surface;
1. Be Prepared
The key is preparation. When you are prepared for a situation, when it surface it wont affect you much. Unlike when you are not prepared for it. That is why you need to build a financial emergency fund. This money should always be available in your savings account. In as much as no one is praying for emergencies, you need to prepare for it. So as not to be caught unaware.
Many people get confused or ask questions about the amount of money they should have in their emergency fund. The answer is save as much as possible. You do not know the kind of emergency that will come. So you need to be prepared for it.
2. Don’t Touch Your Long Term Assets for Emergencies
The main reason why you need to have an emergency savings fund is so you wont have to touch your long term assets when short term needs arises. The assets you might have prepared for long term purposes like retirement, you should not touch it because an emergency has occurred. You need to have an emergency fund saved separately.
3. Adopt the Principle of Opportunity Forgone
In Economics there’s a term called “opportunity forgone” this is sacrificing the money for a particular need or want for another purpose. You might find yourself squeezed in a tight corner, what you need to do is check your budget and decide which expenses you can reduce or eliminate, so you can use the money for your emergency. You can also cut down on some expenses as this is very effective.
4. Remember Later
One of the problems most people have is the ability not to remember tomorrow. Your present situation should not make you forget later. For the fact that you are faced with emergency today does not mean you should default your credit card because it will only make your financing options limited and more expensive at the long run.
5. Try not to Owe too much Debt
Some emergencies might require incurring debt, however you need to try as much as possible to reduce it. Do not go for debts that has too much interest like mortgage or credit card. Go for the less expensive ones so that it wont starve you of your liquidity.
6. Save Again
After you might have cleared your emergency, you need to build up another savings. A situation helps you to learn and prepare you for another one. You cant always anticipate for situations but when it come your way, you get to learn from it and be a better manager when next it surfaces.