Are you one of these people who always have unexpected expenses?
Some of us can go through life with few challenges and are always prepared, but some of us are always in for a shock. The unexpected always seems to happen.
So what should you do? If you have bills that you need to pay or you are hospitalized and need money to pay for medical expenses, here are some top tips on how to pay an unexpected bill.
5 Simple Ways to Pay for Unexpected Expenses
Always Have Savings
As the global pandemic has shown, everything can become unstable overnight—even when it seemed that everything was fine. Many people have already lost their jobs and more might follow suit as the tourism and hotel industries show no sign of recovering.
Around the world, many people have also been furloughed or sent on unpaid leave while the situation sorts itself out. They can’t afford an unexpected bill right now. Those who suffer most are the ones that don’t have savings.
People with savings can better stand their ground and cover any emergencies they might have.
You should always have savings that you can access within a few days. Property or assets are not always the best forms to keep them in—actual money in a physical savings account is better.
Have a Good Credit Card
Of course, nobody likes getting into debt. While there can be lots of perks from having a reward-based credit card, it’s also good to have a credit card with good terms if you need emergency money.
Increase your credit limit if possible so that you have access to at least $5,000 in an emergency (or even $10,000). Try to negotiate longer periods to pay back your card, along with lower APR rates. You could also ask for an option to delay your repayment, interest-free, for a set period in case an emergency happens.
Be sure to do some research on different credit cards and don’t just apply the first one you find on the internet. There are many instant payday loans that could also be a good solution if you need to get money fast.
Have Items You Can Sell
We all have extra stuff lying around our home, and it can be hard to part with some of it. At the same time, it’s good to be aware of how much these items are worth so that you can sell them if you need to.
Electrical goods, if kept in good condition, can easily be traded in for cash. Jewelry is the best item you can trade in as its value doesn’t deplete over time. Cars, on the other hand, lose value quickly.
Make sure you get them valued regularly so you know how much you own in terms of assets and can draw on these if you need to.
Make a list of all the items you can survive without if you really had to. It’s great to have a smart kettle that you can operate from your phone, but is it really necessary when you could instead sell it and boil water the old-fashioned way?
If you have a top-of-the-line vacuum cleaner, could you sell it and instead use a broom and a mop to clean by hand? Even small sales add up over time, leaving you better prepared for a financial emergency.
Put Some Money Into an Account You Can’t Access
If you have your savings in your regular checking account, chances are you will always dip into those funds to treat yourself. With digital or fintech banks, it’s all too easy to see what is in your savings and what isn’t.
Instead, create a separate account for your emergency savings. It’s easier than ever to set up a bank account now—you don’t even have to go into a physical branch to open a new account.
Try to avoid having a debit or credit card for this savings account. If you don’t want to go entirely without a card, place it in a locked drawer or a safe and forget about it.
Another tip is to give your credit or debit card to a friend or family member that you trust. This way they can access the account in the event of an emergency, but you won’t be tempted to spend it in the meantime.
Two Savings Accounts
It’s good psychology to have two savings accounts. One should be for savings that you could spend on something or invest. The other should be set aside solely for emergencies.
If you have all your funds in one account, then it can feel too easy (and too tempting) to spend everything. But it could also be frustrating as you feel as if you have no useable savings—just emergency funds and your everyday checking account.
The solution? Allocate a sensible sum to your emergency funds, perhaps half of your everyday savings. Then you could spend your normal savings without fear of needing them one day.
There Are Many Ways to Cover Unexpected Expenses
If you are thinking about how to cover unexpected expenses, refer back to the list of tips above.
If possible, it’s always a good idea to have some savings in place. Have a separate savings account and an emergency funds account that you can access.
Also, be sure to have a good idea of how much you own in terms of assets. This way you know what you can sell if there is an unexpected bill. A credit card and separate savings account for emergencies might also be useful.
Are you interested in reading more about how to cover unexpected expenses? Be sure to check out the rest of our site for more great financial advice.