What to Do When You Exhaust Your Emergency Funds

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It has been said time and time again that everyone should have an emergency fund in case of unexpected circumstances that can affect their finances. But what if the money you’ve saved for rainy days runs out? Even if you’ve had enough tucked away for months, it may not be enough to take care of all of your needs until you get back on your feet again.

If you find yourself in this situation, all hope is not lost. Here’s what you should do when your emergency fund runs out:

1. Talk to your lender

The mortgage is one of the biggest household expenses there is, and if you can’t pay it on time, you should let your lender know right away. Explain your situation to your lender and tell them when you expect to make regular payments again. Lenders are more willing to help you out than have a house foreclose, so don’t be afraid to approach them when money gets tight.

If you don’t know when you’ll be making a steady income again, however, you may want to consider refinancing or debt consolidation. In any case, talk to your lender before making decisions with your mortgage.

2. Start selling stuff

Doing this may be difficult, but when you don’t know when your next paycheck is coming, parting with the things that you don’t want nor need may be more than necessary. Start by looking through your belongings to find anything of value that you can sell. Then, post them on online marketplaces like Facebook Marketplace or eBay. The key here is to price your items at a point that they would sell fast, but not too low that you’d be incurring significant losses. In this way, you can generate income for your household expenses.

3. Look for financial assistance

You may qualify for financial assistance programs, especially if your financial hardship is due to COVID-19. Look for assistance programs in your area that can help you out with the bills, specifically with groceries, utilities, and mortgage payments.

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4. Reach out to friends and family

When your emergency fund runs out, your first instinct may be to take out a personal loan to help get you by. However, it may be easier and more cost-effective to reach out to your loved ones first. By borrowing money from your friends and family, you won’t have to pay interest and you can negotiate terms more freely. Moreover, you won’t have to go through an application process, which may not be ideal when you’re extremely pressed for cash.

However, keep in mind that borrowing money from people you know puts your relationship at risk. That said, set clear expectations on when they can expect you to pay them back. And when you can’t pay them back at the agreed time, let them know in advance.

5. Take out a personal loan

If borrowing from loved ones is not an option, consider taking out a personal loan from a bank or a trusted lender. If you have a good credit score, you may be able to qualify for a loan without collateral. Otherwise, you’d need to post collateral to get a personal loan or find a cosigner that has good credit standing.

However, keep in mind that personal loans come with interest. You don’t want to add any more debt to your plate than necessary, so it pays to shop around for a personal loan that has the lowest interest rate.

6. Find a side hustle

If you still have your main job, picking up a side hustle can help you add more income to your depleting sources. Try finding a part-time job that works with your schedule. But if you can’t commit to set hours, you can pick up odd jobs here and there to help you get by, such as doing lawn work or helping people move out.

You can also use your skills to earn extra money. For instance, if you’re a writer, try doing freelancing gigs online. If you’re a master baker or sewer, you can charge people to partake in lessons. Or if you’re great at doing hair, you can offer hair styling services to friends, family, neighbors, and strangers who are willing to trust you.

As you can see, there are a lot of other ways you can stay afloat when your emergency fund runs out. But when worse comes to worst, you can consider tapping into your retirement fund or accessing your home’s equity. However, use these options as a last resort, and only if you are sure that you won’t be gaining a steady income anytime soon.

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