The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
Unexpected Expenses: How to Handle Financial Emergencies
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For this blog, we’ve teamed up with our partners at Fairstone.
“What can I do in a financial emergency?” – Don’t worry; it happens to all of us. Even if you’ve tried to prepare yourself for the unexpected, we’re often faced with larger expenses than anticipated. Luckily, our partners at Fairstone shared some advice on how to handle financial emergencies and unexpected expenses.
Cut out expenses to create more room in your budget
You might have more room in your budget than you think. Try to cut out any unnecessary or ‘luxury’ expenses for the month. Yes, this means you might have to sacrifice going out for dinner, your morning coffee run or buying new clothes, but you’ll be relieved to find some extra money to put towards your unexpected expense.
Find a way to increase your income
An even better way to cover expenses is finding a way to earn some extra money, so you don’t have to cut as much from your budget. Depending on the extent of the expense you’re facing, you can sell items you don’t use anymore, do freelance work, or even get a part-time job.
Homeowners – take advantage of the equity in your home
If you’re strapped for cash, the value of your home can help you secure a loan and gain access to a lower interest rate. A home equity loan or a secured loan can help you cover emergencies like home repairs, car repairs, medical bills and more.
Using credit cards for emergencies? Consider debt consolidation.
While it may seem like a good idea at the time, charging unexpected expenses to a credit card can add up very quickly. Credit cards only have a 21-day grace period before you’re charged interest on the balance. Unfortunately, this isn’t always enough time to bounce back from an unexpected expense, and if you’re not paying off the full balance you may get into a cycle of accruing interest.
If you’re carrying a balance on your credit card, a debt consolidation loan may help you get back on track. Debt consolidation can help you save money on interest, and give you confidence that your debt is decreasing. Rather than making only minimum payments you’ll pay back the loan through a set number of payments on a schedule that works for you.
Prevent emergency expenses from happening in the future
It’s important to make a plan to tackle different types of unexpected expenses. You may be faced with anything from home and car repairs, to an expensive dentist bill, or even a sick or injured pet. Does your car always need repairs? It may be cheaper to buy a new car or consider finding a different mode of transportation like biking or walking. Additionally, make sure your insurance deductibles are affordable. While insurance may increase if you opt for a policy with a lower deductible, it will help if you’re ever faced with damage or accidents in the future. On that note, insurance is useful for more than just cars and homes. Pet insurance can help cover unexpected vet bills or procedures for your pets.
Learn how to budget for future financial emergencies
Fairstone’s blog has several articles to help you learn about and prepare for financial emergencies and unexpected expenses. Here are some articles that may be of interest:
- What you should know about filing bankruptcy
- How to build a budget
- How to save money on your vet bills
Lastly, the biggest mistake you can make when it comes to unexpected expenses is thinking they’ll go away on their own. While it may be hard to dig yourself out of an emergency, it’s better to make a plan and act as soon as possible. If you tackle expenses head-on, you’ll be back on track sooner than you think.
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