A major, unplanned expense would put most Americans in a difficult place financially. Even with savings, some unexpected events or emergencies may call for immediate payment. This can cause stress and budget problems that last for months, even years. These situations may include:

  • Health emergencies
  • Car problems
  • Home repairs
  • Relocation
  • Pet emergencies
  • Births or deaths
  • Dental emergencies

When faced with unexpected expenses, there are two things you should do. First, figure out how to take care of the bills you need to pay. Then, take steps to make sure you are prepared the next time an unexpected bill arrives.

How do I pay for the expense right now?

Setting aside money for future expenses is a task most of us can probably handle when we put our minds to it. But what about the payments that need to be made now? A study by The Pew Foundation found that 41 percent of respondents wouldn’t have enough cash readily available to cover a $2,000 emergency.

How do you pay for a relocation, health emergency, or major repairs if you haven’t saved the money? Here are some common ways to seek financial help if you don’t have an emergency fund.

Ask for a payment plan

Before exploring other financing options, you could contact the company that you need to pay and explain your situation: You don’t have the money today, but you’re working out a way to pay them as quickly as possible. A number of companies are willing to work with people to find suitable payment arrangements. Sometimes, spreading the payment out over two or three months, or delaying payment for 30 days, could be all the time you need to pay the amount owed without resorting to other financing options.

Carefully consider credit cards

While a credit card is a great everyday financial tool, you may not have a large enough credit limit to use to pay for a major unplanned expense. Also, in some situations, a credit card may not be the best payment option if it has a high interest rate or if it doesn’t come with rewards. You’ll likely want to explore other unsecured loans before making a decision.

It’s important to know your card’s interest rate. The amount of interest you pay is based on your annual percentage rate (APR) and the balance on your card. Do your best to pay off all or most of your credit card bill(s) every month to avoid paying too much interest. The lower the balance, the less interest you pay. Many people only pay the minimum amount due each month which can cost them more in their total interest paid over time.

If you choose to use a credit card to fund an unexpected expense, make sure to look at all your options to find the best fit for you. You could look for zero percent or low interest rate options, or a card that offers cash advance checks. Responsible use of credit cards has a number of benefits.

Cut your expenses

Taking a long, focused look at your spending is always a good idea. And when you’re faced with an unexpected expense, it is critical. You can start by prioritizing which bills to pay first, then look at how big the debt is, as well as how much interest you may be paying on that debt. Next, examine your monthly bills and determine where you can make cuts. Yes, TV is entertaining, but with monthly bills that can climb quickly, cutting the cable can be a quick way to start saving money.

Some families choose to sell one of their vehicles and share a single car between the household’s drivers. Maybe you don’t need a vehicle at all. It may seem like a big lifestyle change to sell your car, but if the unexpected expense is truly an emergency, this short-term sacrifice could help you be better off in the long run. Also, if riding a bike, or taking public transportation is a viable alternative, you could see benefits for both your finances and your health.

Once the emergency passes, you may even like your new situation. For example, less TV could mean extra time to work on a side business, more quality time with the family, or even just having one fewer bill to worry about.  

Borrow from friends and family

Your friends and family love you and many of them would probably do anything for you. But should you borrow money from them? Would you be comfortable with that? Would they?

You can look to borrow from friends and family, depending on your financial situation. Before reaching out to someone, consider how borrowing their money could change the dynamic between you. Will they hold it over your head? Will they question you if they see you spending money on things they don’t approve of? Will they keep reminding you about how they were the hero long after you paid them back?

Then, should you decide to ask, and they agree, be sure to clarify and agree on the terms of the loan. For example, will they charge you interest and, if so, how much? Iron out the details, make sure you’re both comfortable with it, and then fulfill your end of the deal.

Earn extra money

Many of us could make extra money if we put our minds to it. Some people could pick up an extra shift at their current job, while others may seek out a second job that can provide additional income. Seasonal jobs are especially popular; for example, a lot of employers hire extra workers during the winter holidays to handle the increase in business, while beach towns and other popular tourist destinations need incremental workers during the summer.

Another option is to start a side hustle. This is typically something that you’re passionate about and can earn money doing, but it may not have anything to do with your day job. Opportunities range from being a vacation rental host to driving for a ridesharing company to becoming a notary public. You could cut grass, walk dogs or pet sit. Some people put their creative juices to work by selling their creations on craft websites.

Sell items of value

Look around your home. Are there some items of value you can live without? Clothing, jewelry, handbags and purses, electronics and even unused gift cards can all be sold for some quick cash. An old-fashioned garage sale or selling items online through different marketplaces may be an option for you.

Apply for a personal loan

A personal loan is usually a fixed-rate loan that is unsecured, meaning you don’t need to put up collateral to get one. Personal loans can range from $2,500 to $35,000 or more. For those who need quick access to funds to cover a large unplanned expense, a personal loan could be a good solution. With some lenders, such as Discover Personal Loans, you can choose to have the money sent to your bank account or directly to your creditors as soon as the next business day after you are approved for and accept the terms of your loan.

One benefit of a personal loan with a fixed rate is that the interest rate and your monthly payment never change. A personal loan also typically has a set payoff date, and you know the total amount owed from the beginning of the loan. Interest rates can also be lower on personal loans than what is charged when your credit card balance, making it a potentially better option.

If you go the personal loan route, there are some key product features to consider before choosing a lender. You should understand the total cost of the loan to ensure you can pay it back. That means adding up all the potentially hidden fees that some lenders have. Your best option is to find one, like Discover Personal Loans, that doesn’t charge application fees, origination fees or pre-payment penalties.

How to avoid the “unexpected”

Now that the immediate concern of how you’re going to pay for the unexpected expense is taken care of, let’s focus on decreasing the chances you’ll have to face this situation again.

Is that expense really unexpected?

Sometimes an unexpected expense is really just one we didn’t properly plan for. We know that certain bills come due at the same time every year, but it’s much more fun to eat a nice dinner with your spouse than set aside money for a bill that seems so far away. Don’t fall for that trap!

For annual bills, consider putting money away monthly into an online savings account. This can help cover bills that may pop up less frequently like property taxes and home or auto insurance policies.  

Save for periodic maintenance

Some bills seem unexpected because they don’t happen every year. Replacing a roof, buying new tires or major medical expenses are all types of major bills anyone could face.

One of the rules of thumb for owning a home is that you’ll spend, on average, one percent of your home’s value in repairs each year. The key words here are “on average” because some years the expenses will be very low, while other years they may be quite high, like when you need to replace the roof, or buy a major appliance, such as a fridge or washing machine.

Car ownership can come with similar costs. Even if a car is paid off, it doesn’t mean expenses will be low. While new vehicles may cost, on average, $1,186 per year to maintain, some drivers may find themselves spending more on routine maintenance, repairs and replacements. You may not spend thousands on your car in a year, but brakes and tires wear down, gaskets and seals dry up and electronics stop working. It’s best to be financially prepared.

Medical expenses can also fluctuate from year to year. In an ideal world, you would have enough money set aside to cover the out-of-pocket maximum that you could face in a medical emergency. Then, as you need to pay medical bills, you would pay them out of that fund, and then replenish that money over time.

When the unexpected happens

When the unexpected happens, it’s wise to take care of the situation immediately. Assess everything, then figure out the quickest and easiest way you can pay for the expense. Once you’ve taken care of the amount owed, put an action plan together to identify the expenses that could be preventing you from saving more money. Put your budget plan into action and gain confidence that you can handle the unexpected.

Want to learn how to spend less and save more? Read How to Manage You Money Better.