Always when you least expect it, your finances can suddenly come under strain and leave you wondering what to do. Unless you have plenty of disposable income or a comfortable savings pot to dip into, settling emergency expenses can be easier said than done. So, is there a way to prepare for financial hurdles like this without putting your bank balance under pressure?

The answer is yes, with a bit of planning and careful use of credit, you’ll be able to overcome financial hurdles effortlessly without derailing your long-term financial goals.

Below, you will find some practical tips for managing any emergency expenses effectively, and know when to use credit such as payday loans to your advantage, helping you have a better relationship with money in the long term.

Initial Steps to Take When Facing an Emergency Expense

When the time comes and an unexpected bill arrives, you’ll probably feel either surprised or frustrated – generally, you won’t be welcoming this with open arms. Ideally, you will want to take the initial emotion out of the situation so that you can assess this in the right way.

Firstly, how urgent is the expense and is it essential? Can it be postponed until you next receive your salary, or is that too far away? It can be a good idea to contact the company it relates to discuss this further and arrange suitable repayment. This is better than ignoring or putting off the issue. 

If it is immediate and cannot wait, what other options do you have available? Explore any non-credit solutions that may be available to you, such as any insurance policies that relate to the issue you can claim on. Is the issue covered by an existing warranty, such as on a car or other product you may have? If these options aren’t viable, you’ll then want to look at your savings and any available credit. Do you have an overdraft or availability on an existing credit card to help? These can all help you avoid further borrowing.

When to Consider Borrowing

If none of these initial options are available and your friends and family cannot help, this is when seeking short-term credit options can be useful. It’s important to consider this option last rather than straight away because it can put further strain on your finances.

Depending on how much you need to borrow, you’ll need to ensure you can cover the repayments for the next few months at least, unless you can settle in full on your next payday. Before you apply, it’s a good idea to check your income and outgoings, especially if you are not sure how much you can afford to commit each month. Most lenders will perform credit and affordability checks as part of the approval process, so they will determine if the loan is sustainable for you.

As long as you use a Financial Conduct Authority (FCA) authorised lender, they will take the necessary steps to check if the loan is right for you. Some short-term lenders can help those with a low credit rating, but cannot guarantee approval. Be sure to check how much the interest charge will be for the amount you want to borrow and choose a repayment term you can maintain without issue.

Financial Planning for Future Emergencies

Whilst you may not have been prepared this time around, that doesn’t mean you can’t be better prepared for next time. Unexpected expenses can happen at any time, so here are some tips to help you manage against this as much as possible:

Maintaining an emergency fund – Setting aside a small, manageable amount regularly until you build a fund that covers at least three to six months of living expenses can be extremely helpful. This fund can protect you from having to borrow in an emergency. It’s a good idea to keep this separate from any other savings to reduce the temptation to spend it on non-emergencies.

Reduce Your Outgoings – Lay out your income and all your expenses each month so that you can fully review any opportunities to reduce your outgoings. You may find lots of small things that can be reduced that can make a big difference, boosting the amount of available funds you have that can go towards your savings. You may discover regular subscriptions or purchases that you can eliminate too.

So, while financial emergencies can be stressful, having a strategy in place reduces this anxiety and prevents rash decisions like unnecessary borrowing, ensuring you remain financially stable and keep your long-term goals in view.

Kelly is the founder of the Cashfloat blog and has been working tirelessly to produce interesting and informative articles for UK consumers since the blog’s creation. Kelly’s passion is travelling. She loves her job because she can do it from anywhere in the world! Whether inspiration hits her while sitting on the balcony of a French B&B, or whether she is struck with an idea in a roadside cafe in Moscow, she will always make sure that the idea comes to fruition. Kelly’s insights come from her knowledge gained while completing her degree in Economics and Finance as well as from the people she meets around the world. Her motto is: Everyone you meet has something valuable to teach you, so meet as many people as you can!