What to do when you have a financial emergency

By Citizens Staff

We understand that financial emergencies can happen unexpectedly, and many people are looking for ways to improve their financial situation when things go off course. While it’s ideal to be prepared, sometimes life throws curveballs - whether its a job loss, medical expenses or another significant event.

At Citizens, we’re committed to helping you navigate these challenges. If you’re facing financial difficulties, know that help is available and there are steps you can take to regain control of your situation.

Here are a few steps you can take right now to help you start feeling more confident about your financial circumstances.

1. Step back, get organized and assess your financial situation

One of the most important things you can do to help yourself is to try not to panic. That might seem easier said than done, but instead, try to focus on steps you can take to solve the problem.

A good first step is to lay everything out and take an objective look at your personal finances. Make a summary of all the basics, like your income, savings accounts, retirement accounts, ongoing expenses, and any liabilities or debts (medical expenses, student loans, etc.). Once you have these clearly organized, you can start working toward developing a plan.

2. Set a budget and find ways to cut costs

Setting up a budget will help you understand what's flowing in and out; from there, you can start looking at ways to cut costs. To make things easier, Citizens has a monthly budgeting calculator you can use to input your bills and expenses to gauge how much you're spending and on what. When you have your monthly budget, you'll be better able to prioritize your expenses. Think about what's really essential and what needs to be paid right away. What are some things that you can do without? Are there services or subscriptions that you can cancel or reduce?

Once you determine which expenses can be eliminated, you can go back and adjust your budget to have enough money on hand. Break down larger categories, like food, and find specific ways to lower your costs or substitute less expensive options. Think about what it will take to get you to a manageable place.

3. Proactively contact creditors and service providers

It's not easy to ask for help. You'd be surprised, however, to learn how many businesses — including banks and credit card companies — are more than willing to help out, especially during uncertain times. The key is to contact these companies as soon as possible; don’t wait for them to reach out to you.

4. Talk to family and friends

Asking family or friends for help could be a viable alternative to taking on high-interest debt or other borrowing arrangements that might hurt you in the long term. The people closest to you may be in a position to help you make ends meet — and they’d rather support you than see you struggle.

Always take care of your personal relationships and set yourself up for success when borrowing money from a friend or family member. You can help the conversation go more smoothly by being prepared with a detailed repayment plan and offering a reasonable interest rate. Be sure to put everything in writing so everyone understands what’s expected of them and feels good about it.

5. Carefully consider your borrowing options

Through some employers’ benefits portals, you might find paycheck advances, emergency loans, or other financial assistance options or tools. These short-term loans and advances could have lower interest rates. Often these solutions use your employment and income data instead of credit history to underwrite the loans. This is a good option to explore if possible. Also, check with your bank about personal loan options. It can be a much smarter option than taking on high-interest credit card debt.

Tapping into retirement accounts, such as a 401(k) or IRA account, is generally not recommended as it could have long-term consequences for your financial future. Before withdrawing funds, consult a financial advisor to ensure you understand the penalties and tax implications involved.

6. Investigate government assistance programs

There are many federal and state government programs that provide support in financially difficult times, such as unemployment benefits or healthcare coverage. Each state is different, so check with your state to find out what's available and what you might be eligible for. To find information about unemployment insurance, you can visit the Department of Labor’s website for your state.

We’re here to help

Perhaps the most important thing you can do is to take the time to seek out sound financial advice. Short-term financial decisions can have long-term effects, so it's critical to think clearly and plan as best as you can.  And, in time, you may want to think about creating an emergency fund for the future.

Our colleagues are ready and available to help you explore solutions tailored to your situation and find resources to help you get back on track. If you’re facing financial hardship, please contact us to explore how we can help.