There you were, feeling good, or at least competent, about your money situation — and then an unexpected bill arrived in the mail. If you work within a budget and have wiggle room to pay it off, handling the cost won't be fun, but overall, it'll feel like a blip in your financial picture. But if you're living paycheck to paycheck and are struggling to make ends meet with what you have, even a small financial setback can be dire.
According to a recent survey by the Federal Reserve, 40% of Americans can't afford to cover a $400 emergency. Everyone has been through a cash shortage at least once in their lives. Here are five ways to tackle common, unexpected expenses without getting caught up forever.
1. Work Out A Payment Plan Or Lower Bill
We can't underscore the value of trying this out enough. You might feel uncomfortable with the idea of haggling over a doctor's bill, but paying it off in full won't exactly be thrilling, either.
Not enough people realize they can get discounts on medical bills by paying in cash or setting up an installment payment plan on the full cost. Many hospitals and collections agencies just want their money, fast, so if you show you're good for it now and can pay some later, they'll be satisfied with you making a dent. Here are a few ways to make that request.
2. Ask The Government For Help
So much emphasis is placed on how to buy a home that the issue of paying for inevitable repairs is left behind. Once you're your own landlord, you can't delegate those problems to someone else — and fixes often need to happen fast. A 2016 survey by HomeServe found that as many as 25% of homeowners don't have savings set aside for household repairs, but nearly half have needed an emergency repair in the previous 12 months.
The Simple Dollar looked at the most common home repairs and how much they tend to cost; they included roof work (typically $5,000-$12,000) and water heater problems (with new heaters priced at $300-$900 and up to $250 for installation). Experts typically advise setting aside at least 1% of your home's purchase price for repairs over the long-term. If you come up short before you meet that goal, consider applying for a grant from the U.S. Department of Housing and Home Development. Per SF Gate, the HUD awards grants through local housing agencies and charities, often for senior citizens, but also to help finance home repairs. The HUD also issues FHA-insured loans that can be used for "major repairs, or even for appliances and other household items that 'make your home more livable and useful,'" Nerdwallet adds.
3. Level With The Tax Man
There's nothing fun about owing the IRS money, especially if you haven't set aside cash throughout the year to pay the bill. Freelancers and self-employed people in particular (who pay taxes quarterly) have to be aware of several tax seasons. (Heads up: the next deadline is on June 15th!)
If you owe a chunk of money, can't cover it with savings, and would rather avoid putting it all on a credit card (and rack up a bunch of interest if you can't pay it off at once), don't panic. Keri Danielski, a consumer finance expert and spokeswoman for Mint and Turbo, advises that people who fall in this camp explore the IRS' payment programs.
"Call the IRS," she says. "There are a number of options they can offer, such as a reduced installment payment or a compromise offer." With the latter option, the IRS agrees to settle the taxpayer's "liability" for less than the full amount owed — pending certain criteria.
4. Seek An Expert-In-Training
Like home repairs, car trouble can't be ignored for too long without ballooning into a catastrophe. If you're on a meager budget with little-to-no savings, Credit Sesame offers the creative solution of going to trainees for help.
Some people go to beauticians-in-training for cheaper haircuts; others dine at cooking schools for sumptuous dinners that don't cost a utility bill. Likewise, going to a local technical or vocational school for car services might save your bank account. "Ask whether the instructor will assess your car and let the class work on it, what they will charge for parts, and what happens if they can’t repair the damage," Credit Sesame suggests.
5. Get A Personal Loan
Your emergency may not fall under a specific category, but you still need cash fast. Some people might rely on family members giving an interest-free loan, but not everyone has kin with money to spare. You could also put the total on your credit card — just know that doing so will cost you more in the long run if you don't pay the balance off in full before interest kicks in.
Others who are in really dire straits might seek out a payday loan, but those are woefully predatory options — so much so that Google finally decided to ban those ads from lenders on its search engine. (Payday loans can charge $10-30 for every $100 borrowed — equating to an APR of almost 400%.)