Even if you’re usually careful with your money, there’s a chance that you’ll be in a tough financial position someday. You may be stuck with significant, unexpected bills to pay, or you may be dealing with job loss. Whatever the case, you’re strapped for cash and you need some way to make ends meet until you can get back on your feet.
How do you make it happen?
First, you need to know what not to do. It’s important not to take drastic action or put yourself in a worse position financially. In desperation, many people are willing to turn to payday loans or other predatory financial offers — or they simply max out their credit cards. Unfortunately, these high-interest forms of borrowing only provide short-term relief — and they may put you in an even worse financial situation in the coming months and years.
Instead, it’s important to be patient and act with more fiscal responsibility. Do your due diligence before moving forward with any option.
Before getting much further, it’s a good idea to evaluate your situation. Why are you currently having a hard time paying your bills? How did you get here? How much money will you need to make a difference? Hopefully, this is an opportunity for you to learn an important financial lesson. At the very least, you should understand exactly what you need to move forward.
Early on, it’s a good idea to establish a hierarchy of needs. You don’t have much money, and you might have many different expenses to consider, so how do you figure out what to pay first?
Your most important needs are your kids, food, shelter, and healthcare, so take care of those first. After that, you’ll need to think about the repercussions of not paying; are these immediate consequences to not paying a bill, like having your electricity shut off? What kind of interest rate are you paying on this debt? Could this put you in a worse financial situation over time?
Depending on your circumstances, you may qualify for special options that can help you get through this period. For example, if you’re embroiled in a personal injury lawsuit, you may be unable to work, with no cash coming in. With pre-settlement legal funding, you can get immediate access to the money you’re owed — and you won’t owe interest on the loan until the lawsuit is finished.
You may also qualify for various special grant and funding programs, depending on a number of factors.
Your next step is to sell valuables you don’t strictly need. For example, you might be able to sell your car and start taking public transportation or riding a bike to run your errands. You could sell a piece of artwork, or electronics that you no longer need. Look around the house and see if you can find items worth selling that you no longer need; you might be surprised at what you can find.
If you’re currently out of work or if you’re just not making enough from your current job, consider picking up odd jobs in the meantime. For example, you could walk dogs in your neighborhood, babysit kids you know, or help with minor repairs or handyman jobs.
Another option is to borrow from peers or family members. It’s awkward to ask for money, but if you have a solid repayment plan and you take the matter seriously, there are probably several people who would be willing to help you out.
You could also cash out a retirement account, like a 401(k). However, this should be treated as a last resort. Think of it as borrowing from your future self; you don’t want to leave your future self in ruin.
Finally, it’s your responsibility to make sure this situation doesn’t happen to you in the future. While unexpected events can always interfere with your best-laid plans, the majority of tough financial situations can be overcome with the right combination of forethought and strategy. For most people, the first step is putting together an emergency fund — a few thousand dollars (or more) of savings that you can tap into if you ever need it. From there, you can work on paying down your debts, establishing multiple streams of revenue, and making investments so you can grow your wealth over time.
Mastering your personal finances is an endeavor that often takes a lifetime. Remain patient as you achieve the fundamentals and work to grow your position. In the meantime, these strategies can help you get past an initial burden or a tough situation — without making things worse.