What to Do if Your Emergency Fund Runs Out

Sep 27, 2023 10:11:19 AM

The experts say it’s a good idea to keep three to six months of living expenses in an emergency savings account. But what happens if your emergency fund runs out? Read on for a few tips on how to move forward smartly and, eventually, rebuild your emergency savings.

1) Call Your Creditors

A dwindling emergency fund is often the first sign of trouble for upcoming credit card or loan payments. Take a good hard look at all your accounts, and compare your current funds against the bills you’ll need to pay for the next six months. If you anticipate any chance of not being able to make a payment, get in touch with your credit card company or lender immediately. Reputable creditors may provide various options for managing debt, including credit card hardship deferment or skip-a-pay. HUECU, for example, lets eligible borrowers skip two payments per loan during a 12-month period.

2) Prioritize Debt Payments  

If you’re paying off high-interest debt, often associated with credit card spending, prioritize these payments before you worry about rebuilding your emergency fund. Getting this debt paid off as soon as possible will mean fewer interest payments in the long run and help your credit score to climb more quickly; which means that in the future, you can qualify for better (and far less expensive) credit card and loan terms. Unsure how to balance debt payments and an emergency fund? Check out this blog, which explores the ins and outs of when to prioritize saving and when to pay off debt.

3) Automate the Rebuild

One option to help rebuild your emergency fund is to set up automatic payroll deductions into a savings account, so that a certain amount of your monthly pay automatically goes into your emergency account. Check in with your credit union or bank to see what options might be available. The benefit of automatic transfers is that you get to rebuild your emergency fund without the hassle of organizing monthly deposits, or the temptation of spending this money elsewhere.

4) Make a Plan

It’s normal to feel stressed if you’re living without the safety net of an emergency fund. One important way to combat that stress is to make a plan for what you’ll do if a large and unexpected expense does occur in the meantime. Having a credit card on hand might be a good idea. Just make sure your card comes from a reputable lender, with no gimmicks or hidden fees. Some cards offer a 0.00% Intro APR, which means fewer interest payments for a certain amount of time. A personal loan is another option to prepare for. Decide ahead of time which lender you might approach, making sure to research their interest rate and reputation. Avoid payday or cash advance loans wherever possible, which are typically easy to get but charge sky-high fees and interest.

5) Get Creative About Budgeting

Budgeting and saving doesn’t have to be a slog. In fact, it can be pretty fun! Watch some cooking videos on YouTube and see if you can go an entire week without buying a meal. If you’re in the market for new clothes, try organizing a clothing swap with friends instead of heading to the mall. Or, boost your income by taking on side jobs via a platform like TaskRabbit or UpWork. When it comes to saving money, the small stuff really adds up—and the best way to track what you’re spending and what you’re saving is to create a budget. If you need support on the best ways to build a budget, track your spending or boost your savings, there’s plenty more info on the HUECU blog!