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How to Cope with Unexpected Expenses

Whether you have an unexpected hospital bill or your car suddenly breaks down, costing you hundreds or even thousands out of nowhere, unplanned expenses unfortunately are a way of life.  The average income earner often struggles in the face of such financial emergencies and unexpected expenses are a major reason why many low to middle-income earners end up severely in debt. Regardless of how dire the financial emergency is, there are ways to manage the situation without risking your overall financial security.

Have an Emergency Savings Fund

The best way to avoid going into serious debt due to financial emergencies is to have an emergency savings fund that you can tap into during time of extreme need, typically of a few months’ worth of expenses.  You will need to exercise caution when taking out money, however, and have a clear definition of what an emergency is (the Cyber Monday sale is not an emergency) and control your spending impulses that might deplete the account prematurely.

Try to Negotiate

It could be possible in some scenarios to negotiate your outstanding bill to a more affordable option. Take hospital bills for example, as medical costs are rising at an astonishing rate in America, according to the Centers for Medicare and Medicade Services, currently averages almost $10,000 per person each year.  This is a remarkable amount of debt to take on.

Medical expenses are largely unexpected, however, financial resources like DebtConsolidation offer valuable tips to minimize such costs, one way is to negotiate with the hospital. The administration may be willing to reduce or write off some parts of the bills considering your financial situation. Likewise, when facing a sudden and massive expense, always try to negotiate with the other party first to bring down the overall cost.

Generate Extra Money

Devise a quick source of income to pay what you owe in financial emergencies by selling off possessions. Take a look around the attic or in storage boxes in the basement for valuable items you can sell or auction online. If you have jewelry of value, you can consider pawning to earn some quick cash. Online auction sites like eBay have made it possible to sell unused and unwanted items around the house. Even if you don’t currently value a particular item and want to throw away, there is a chance that someone online might, so it’s worth taking the time to sell.

Request an Advance from Your Employer

Your employer might be willing to write you an advance from your paycheck if you are facing a financial emergency. You may have more success getting an advance depending on the type of emergency, such as a medical matter or a natural disaster and probably would be a much lower interest rates compared to borrowing from a loan shark later on.

Borrow from Your 401(k)

While you may miss out on the compounding factor when you borrow from your retirement fund, taking out a loan against your 401(k) plan can be an option with your employer that can offer a low interest rate and bi-weekly payments that come directly out of your paycheck. Since you are borrowing against yourself, make sure you are only using during an emergency, otherwise it could severely jeopardize your potential income later on during retirement.

Request Help from Family and Friends

Though it may not be ideal, you can ask your family or friends for financial assistance. Some may try to avoid mixing business and pleasure, but keep in mind that a loan from a trusted loved one will come with little to zero interest, so may be worth asking, compared to higher interest rate from a lender.

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