What to Do When You Don’t Have an Emergency Fund

Whenever financial experts are telling us how to budget, they also tell us to put some money away in an emergency fund. However, unless you have a high-paying job or a trust fund, you probably know that sometimes saving for emergencies just isn’t possible. If you’re already trying to decide between paying for food or a utility bill, you’re definitely not going to have $20 to put away in a savings account for something that may or may not happen. But what if an emergency does arise and you don’t have the savings for it? Here’s what to do when you don’t have an emergency fund. You can even combine some of these methods to scrape together the money you need.

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Find out if your province or territory provides emergency assistance

Your province or territory may provide short-term emergency assistance for certain situations. For example, in Ontario you can get $733 if you are single and need to pay for food and shelter. You also need to meet certain eligibility requirements, for instance having lost your job due to Covid-19 or trying to leave an abusive relationship. The assistance is usually not for much more than a month but can be enough to help you get back on your feet again.

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Give your budget a quick redo

By rearranging your budget you may be able to find the money you need to cover the emergency. For example, you may have to forego the fun money in your budget this month, skip a payment into your retirement plan, pay only the minimum on your bills this month or even arrange to hold off on paying some bills until next month. Remember though that whatever you don’t pay now, you’ll still have to pay later, and probably with interest too.

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Use your credit card

If you’ve been using your credit card wisely, you may have enough credit to cover the emergency. However, keep in mind that your monthly repayments will increase until you’ve paid off the debt, so it’s good to start thinking about how to reduce credit card debt before you even go this route.

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Pawn something

If you have something you can do without for a while — the toaster, your gaming console or your drum kit, for instance — you can pawn it. This means that you take it to a pawn shop, where you’ll get a loan more or less to the value of the item, and the pawn broker will keep the item as collateral until you pay back the loan. It’s a way to get quick cash without credit checks but if you don’t pay back the loan on time, though, you may lose the item. It’s also worth remembering that pawn shops don’t automatically accept any kind of item.

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Sell something

It may not be the most expensive jewellery ever worn to the Oscars but that gold necklace your ex gave you and that you never wear may bring in a few dollars. Go through your stuff and see what you can sell for quick cash: even little things like clothing or books can add up and give you enough money to cover the emergency.

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Apply for a loan

If you have a good credit record, your bank may be willing to give you a short-term or personal loan to cover the emergency. When you go for this option, however, remember that you’ll have to be diligent about paying back the loan instalments every month. If you miss a repayment, it will affect your credit record and you’ll also have to pay more in interest.

RELATED: This is how to understand your credit score in Canada.

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Get a side gig

If you have the right skills for a side hustle, this may be a way for you to get the extra money you need. However, it might not bring in the dough as quickly as you need it. Still, it’s an avenue to explore, even if it’s after the emergency to help you repay that loan faster.

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Ask your employer for an advance

Your employer may be willing to advance you part of your next paycheque to cover the emergency. However, that will mean that when payday comes, you’ll get less money than usual. If you’re lucky, your employer may be more understanding than you’d expect. FreshBooks, for instance, has one of the best perks Canadian companies offer: a compassion fund to help employees with that unexpected vet bill or whatever other curveball life has thrown their way.

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Borrow from friends and family

The people who care about you won’t want to see you suffer through an emergency, so they may be happy to lend you some money to help you out. They may even do this interest free or let you pay them back when you can, rather than according to a strict schedule. While this may be an easy way out, bear in mind that money owed can have a negative impact on your relationships, so make a point of paying it back sooner rather than later.

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Crowdfund

People have been using crowdfunding platforms to get money for everything from paying legal fees, medical bills or funeral costs to buying the ingredients to make potato salad. You can appeal to the compassion of strangers to raise the money to see you through the emergency. If you’re lucky, you’ll get much more than you need. However, keep in mind that you also may not reach your fundraising goal at all.

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