A financial emergency can strike without warning, leaving many individuals and families scrambling to manage unexpected expenses. Whether it’s a sudden medical bill, car repair, or job loss, these situations demand swift and effective solutions. Too often, though, people are not in a position to deal with the costs related to any of the surprises that life throws at them.

The outcome is often quite bleak.

Financial planning is a topic that we are passionate about, and to that end, we have compiled a number of practical tips that you can use in order to handle financial emergencies effectively. Our hope is that by following these strategies, you can mitigate the impact of sudden financial setbacks.

Step 1: Assess Your Financial Situation

The first step in handling any financial emergency is to assess your current financial situation. Sit down and take a close look at your income, expenses, and savings so that you have a clear picture of where you stand financially. Essentially, you need to see where your money is going so that you can identify non-essential expenses that can be temporarily cut or reduced to free up cash for more urgent needs.

Wondering how to do this ? Simply list all your sources of income, including your salary, freelance work, and any other earnings. Next, create a detailed list of your expenses. This should include both fixed costs like rent or home loan payments, utilities, and insurance, as well as variable costs such as groceries, entertainment, and dining out. This makes it easier to identify areas where you can make adjustments.

Step 2: Prioritise Your Expenses

During this financial storm, you need to take care of your primary needs in spite of the unexpected costs that have come your way.

These primary needs include expenses, like your housing costs, utilities, groceries, transportation, and other expenses that you must cover to maintain your basic living standards. The non-essential expenses are those that can be minimised or cut altogether during a financial crisis, like dining out, entertainment subscriptions, luxury items, etc.

That said, there are some emergencies that might put you in the position of not being able to pay some of your essentials. In those instances, you could consider reaching out to service providers who are willing to work with customers during tough times.

Step 3: Use Your Savings Wisely

If you have long-term savings or retirement savings, we urge you to avoid dipping into these, if possible, as this can seriously jeopardise your financial future. Instead, if you have built up a financial cushion then rather use this to pay for something like your vehicle unexpectedly breaking down. What you can do is use steps 1 and 2 to determine your most urgent financial needs and allocate your savings accordingly – because if your savings are limited, you’ll have to prioritise.

Step 4: Explore Financial Solutions

There are tools, financial products, and other types of resources that can be invaluable in helping you cope with a financial emergency. Some need to be invested in beforehand in order to be any help to you.

For example, a car warranty. Warranty plans take the sting out of an unexpected vehicle breakdown by handling the related costs and some will even include roadside benefits. Not only can this be dangerous, but depending on how far you are from your destination or home, the towing alone could cost a couple of thousand rands. Most South Africans don’t typically have this kind of money lying around.

Alternatively, an AA Membership can help you plan for the unexpected roadside related costs. From as little as R109 per month* you can get an AA Membership that gives you access to Roadside Assistance, Medical Response, Legal advice, and more. And importantly, gives you peace of mind knowing that you won’t have to use your savings or take on additional debt to cover costs.

Step 5: Bring In Some Extra Cash

This may seem like an obvious idea – to simply make more money to help you manage the unexpected costs that have come your way… but if you find yourself in a tight enough spot where you need to generate extra money quickly, then we have a few suggestions.

Ideas to make money fast:

• Explore online platforms to take on a part-time job or freelance work to bring in additional income, such as through writing, graphic design, or virtual assistance.
• Sell unused items around your home on platforms like Yaga or Facebook Marketplace to get extra cash to be used to cover immediate expenses.
• Leverage any skills or hobbies you have to offer services in your community, such as tutoring, pet sitting, or home repairs.

Feeling Informed?

Financial emergencies are extremely challenging situations, causing tension, fear, and of course, a blight on your financial journey. We trust that these tips will empower you with a practical approach to handling unexpected financial crises and help you regain control over your finances.

Remember, the AA Inform team are here to provide you with reliable and helpful information to overcome any situation of this sort.