Decisions You Can Make Today, Including Help from Your Local Bank
Financial emergencies happen. At one point or another, most working Americans will experience a time when money is tighter than ever, and you don’t know what to do.
You never want to end up in a situation where you have to go deep into debt because you don’t have the money to pay for an unexpected expense. The unexpected is already stressful enough, but you can manage these circumstances much better if you’ve been preparing and have the resources available to overcome it.
There are many resources available to help you through financial challenges with advice that will serve you well during any crisis, whether it’s medical bills, job loss, or damage to your home.
The tips below come from reputable sources that have your best interest in mind, so you know what to do and where to turn. You don’t want to be caught off guard by a financial disaster. Each of our tips also includes recommendations for best bank accounts from your local bank. Why? Preparing well for an emergency means having a financial partner at your side.
1. Start with a Budget to Avoid a Financial Emergency
Before we get into specific ways to avoid an emergency, starting long before disaster strikes will help more than it seems. If you develop a budget that includes a plan for savings, you’ll be less likely to lack cash on hand when you need it the most.
You may have heard of the 50, 30, 20 budget. NerdWallet recommends those specific percentages as you budget out your income for the month:
● 50% of your money should be spent on necessities, including your mortgage or rent, utilities, groceries, insurance, and transportation.
● 30% of your money should go to your wants, such as date nights, treats, hobbies, entertainment, or a streaming subscription.
● 20% of your money should go to your savings or debt.
This is a sensible way to ensure your needs and your wants are met, while also saving money or chipping away at loans, bills, or credit card debt. A financial emergency may come at an unexpected time, but if you’ve already been saving 20% of your income, you’ll have built up a lot of savings in advance with that consistent 20%.
Consider saving that 20% with a local bank that offers one of the best bank accounts for savings: an interest-bearing savings account. The more money you save, the higher interest-rate tier you can benefit from. This allows you to add extra money to your savings account simply by depositing it with the right bank.
2. Know How to Access Funds When You Need Them
It’s important to know how you can access your money when you need it, including sources that you typically would not depend on.
In an emergency, you may need to take actions that aren’t typically a part of your lifestyle, but will come in handy if you’re desperate:
● Lines of credit: Know what kind of line of credits you have access to and whether you can access credit quickly from this account. A call to your credit card company will give you the details about your account.
● Local bank options: You should also know what options your local bank provides, including wire services, online payments, and how much cash you can withdraw from your account. Ask your bank about the best bank account for withdrawing money precisely when you need it without paying additional fees.
● Home equity: Understand the equity you’ve put into your home through mortgage payments. In many cases, you can use your home equity line of credit (HELOC). While most people think a HELOC is used solely for home repairs or money to roll into a down payment on a new home, this source of revenue can be used for nearly anything, including emergencies. Check with your loan company to understand the terms of your HELOC, as well as the interest rates, which are typically lower than credit cards.
● Your retirement accounts: In addition, find out how to quickly access your 401(k) if you must. Although most financial advisors would not recommend withdrawing these funds because of the penalty you pay (as well as the loss of long-term growth potential), you may be in a position where you need money immediately, and this money is yours in an emergency.
● Use your insurance: Lastly, much of the sound financial advice online, including Ready.gov, reminds people to consider your insurance policies. Do you contribute money to special insurance policies offered by your employer for unexpected health emergencies? Does your homeowners' insurance cover the damage or disaster you’re currently facing? Knowing what benefits are available, and even considering adding new policy riders in advance of a crisis, can protect you in an emergency.
3. Rely On People and Community Resources in Financial Emergencies
Aside from ensuring you have financial protection, it is also important to know who to rely on. To get by in times of distress, it is essential to have people on your side, whether they’re neighbors, friends, family, or clergy.
● Trust in the people around you: Rely on anyone who is willing to help or steer you in the right direction when you’re facing a money challenge. You’ll be surprised how people respond when you’re in need, even if you weren’t necessarily close before. As evidence of how people rise to the action for others, look outside after a big storm and notice the people coming outside to help their neighbors with branches and power outages. People helping each other after a crisis happens more than you think, even if you don’t see it every day.
● Rely on the community: Your community resources are also critical forms of help. Food and clothing banks are vital resources when you need to cut expenditures. State, city, and community-focused organizations have lists of resources, including this downloadable pamphlet from Missouri’s state government. These resources offer everything from free medical care, to childcare, support groups, legal assistance, and much more. While you may not have realized it, there are many people working daily to take care of those experiencing emergency situations.
● Your local bank: Your bank can also be an essential resource during an emergency. When you bank locally, you’ll get the personal touch that many corporate branches lack. If you work with a caring banking team, they’ll be able to provide advice and assistance about the best ways to get through the challenge you’re experiencing. They can show you the best bank account to open now, so you’re prepared for the future, and they can also talk you through options when disaster strikes.
Learn more about a local bank that puts people first.