6 Steps to Take in a Financial Emergency

Every now and then, financial catastrophe strikes.

You never know when you will run into a financial emergency.  Sometimes, things are simply out of your control.

When a financial emergency arrives, though, it’s important to take control as quickly as possible.

While you can’t control what happens in terms of an unexpected financial setback, you can control your reaction to it.  When you find yourself dealing with a financial emergency, here are 6 steps you can take to get back on track as soon as possible:

1. Take a Deep Breath, and Evaluate the Situation

Interestingly, your first step should be to do nothing.

Instead, take a deep breath and evaluate the situation.  Rushing off to follow a course of action can easily result in making poor decisions in the heat of a stressful moment.  You probably have a few minutes to assess the situation.  Most of the time, you don’t need to make a financial call right now.

As you consider the emergency, you will need to ask yourself a few questions:

  • What are the likely expenses in this situation?
  • How are you going to pay for these costs? What resources (emergency fund, food storage, sellable assets, diverse income, etc.) do you have at your disposal?
  • Who can you turn to in terms of a support system?
  • Which items can you cut from your budget?

Take a look at the situation, and figure out what options you have, and where you can turn to help.  Consider your obligations and resources, and create a manageable plan based on those items.

2. Prioritize Your Obligations

financial emergency

In a financial emergency you need to prioritize your bills and spending. Every cent counts!

Once you know where you stand, you need to figure out which bills are the most important to pay.

If you need your car to get to work, you’d better make sure that you are up to date on your car loan.  Consider what you need in terms of food, utilities, and your housing payment.  All of these are items that are important if you want to maintain the necessities of life.  Put secured debt (if you want to keep whatever is securing it) ahead of unsecured debt.

Sometimes, you can’t pay every bill.  You have to make hard choices.  Look at your obligations and be practical about it.  You will need to make sure the vital things are taken care of first, and that less important items are paid for if you have the available funds.

3. Contact Your Creditors

Next, you need to contact your creditors.  In many cases, you can work out some sort of alternative payment plan to help you avoid falling completely behind.

Student loans can be deferred.  Some credit card companies are willing to defer payments, or work out another payment plan.  If you still have a job, you might be eligible for a mortgage modification, or some other program.

You can also contact other service providers.  Some utility companies have options for those facing financial hardship.  Call these companies and find out what your options are.  Be on top of the situation so that others are aware of your challenges.  You might be able to work something out while you are recovering from the financial emergency.

4. Cut Some of Your Spending

You are going to have to cut your spending.  Since you have prioritized, you can figures out which items need to be cut from the budget for a while.

Non-necessities like cable TV, eating out once a week, and buying the latest gadget can all be cut from your budget.  Find ways to trim the fat in your budget, cutting back so that you spend less, and more of your resources go toward the necessities, and toward getting you out of debt.

5. Find Ways to Earn More Money

The flip side to cutting expenses is looking for ways to earn more money.  There are a number of home businesses you can start fairly easily, and it’s possible to offer to do odd jobs around your neighborhood and town.

Consider how you can earn money with an additional part-time job, or by starting a side hustle.  In some cases, there is only so much cutting you can do to your expenses.   At some point — especially if you lost your main source of income — you need to earn more money.  Bottom line.

Look for ways to be proactive in your situation and earn extra cash. Combine this with your cost-cutting, and you have a better chance of weathering your financial emergency.

6. Ask for Help if You Need It

If you need help, ask for it.

Your local church congregation, food pantry/food kitchen, family, and other resources are likely available to you.

Whether you need help with your kids while you search for a job, or whether you need a little food to help you get through the week, ask for help.  Friends and relatives are often willing to provide loans at low interest, or money gifts to help you along.

Use the help you receive wisely and gratefully, and don’t forget to be ready to return the favor once you are back on your feet.

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Published or updated July 11, 2012.


  1. Jenna, Adaptu Community Manager says:

    I think number one and number six are the most important steps. Thanks for the reminder to breathe!

  2. Great checklist. I think people often panic first and then things just go downhill from there. While it is hard not to panic in a big emergency you really need to get your mind in a rational spot before you start making decisions.

  3. Timebanking is a great resource in times like these. Find out if your community has one that you can join and if not take the inititive and advantage of your time off to start one in your community – it will double as a great resume booster as well!

  4. Another way is to take out a payday loan but you must be extremely careful if you do decided to go down this route as it is only a short term fix and before taking one out you must make a budget and stick with it. If you can not pay back the loan on your pay day without having to take out another one the following month then this is not for you and it could end up making your situation worse.

  5. For my situation #2 Prioritize Your Obligations has been my financial savior. Before 2009 I would think of ways to spend my federal tax refunds as if it was ‘free money.” For the next 3 years I would save my tax refund and accumulated over $3,500 in my savings account. Having that cushion relieve me from a lot stress. In 2013 I began working on improving my credit score by applying for a Capital One secured credit card and a $500 installment thru my local Credit Union. After using my credit card in a responsible manner (keeping credit utilization between 10% and 20% of credit limit and paying balance in full) and never being late or missing a payment on my installment loan. My credit score increase to 750+ across all three credit bureaus at which time I applied for a unsecured Capital One QuickSilver Visa card with a credit limit over $5,000. Time and responsible money management were two most important factors in improving my personal financial situation.

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