It’s never a good feeling to need more money when your finances are already stretched thin. But as food prices climb, interest rates remain high, and housing costs feel increasingly out of reach, it’s becoming more and more difficult to make ends meet, especially when hit with an unexpected expense.
So, what options are there for those whose budget is already near the breaking point when they’re faced with an unplanned bill? Fortunately, there are several different ways to tackle the problem and provide the funds you need to handle a financial emergency.
Start with your emergency savings
Ideally, you’ll have put some money aside and deposited it into a ready-made emergency fund. Financial experts typically suggest saving enough cash to cover three to six months’ worth of expenses, but any amount you can save is helpful.
Your emergency savings account is always the first place you should turn—take what you need now and try to replenish it once your current financial crisis is over.
Generate spare cash by slashing spending
If you’ve been putting money aside for another reason, whether it’s a family vacation or a home improvement project, you may have to put those spending plans on hold to get a better handle on whatever hardship you’re facing in the present.
At the same time, examine your budget for any costs that can be cut out or trimmed down. That may mean temporarily pausing or cancelling some subscriptions or memberships, doing comparative price checks when shopping, and rethinking non-essential purchases. Redirect the savings from whatever spending you eliminate towards your financial emergency.
Take out a loan or open a line of credit
Whether you borrow money from a financial institution, a family member or a friend, a loan could be the answer to your financial struggles. Needless to say, of course, the loan will have to be paid back, likely with interest.
While the terms may be more favourable, loan arrangements between friends and family can often strain the relationship, especially if the repayment schedule isn’t followed. Be careful about who you borrow from and be clear about expectations.
Depending on your emergency, a line of credit may be a better option than a loan, because it allows you access to the credit you need when you need it. Explain your situation to a trusted financial professional and evaluate the options.
Sell off assets to raise more money
Take stock of your possessions and determine whether you have anything that could be sold for cash. Used cars, spare electronics, watches and jewellery, clothing, and even gift cards can all be sold relatively easily. Remember not to undervalue your own stuff—check online listings and see how much other people are charging for similar items before picking a sale price.
If you don’t want to part with something for sentimental reasons, consider pawning it to cover your emergency situation and buying it back when you’re able.
Consider a side hustle
Thanks to the proliferation of app-based gig work such as food delivery and ride-sharing, it’s easier than ever to find flexible job opportunities that fit around your schedule, letting you earn much-needed additional income. You may also be able to find more traditional part-time work or take on short-term gig work in another field, such as landscaping or agriculture.
Sell investments or withdraw from long-term savings
If you’ve got money invested in non-registered accounts, consider cashing out on your investments to fund your emergency needs. Ideally, you’ll only sell investments that have grown in value. Be aware of the capital gains tax implications of selling stocks and bonds, mutual funds and ETFs, or other types of investment products.
While you don’t want to touch whatever you’ve saved for retirement in an RRSP, you might consider accessing money held inside a Tax-Free Savings Account (TFSA). As the name suggests, there are no tax implications for withdrawing from these accounts. Plus, once your emergency passes, you can repay the amount withdrawn in the following calendar year and get your long-term savings back on track.
