Emergency Money Ideas

Uh-oh.  You’ve been scraping by financially, and along comes something unexpected for which you need money fast!

You consider charging it, but smartly want to avoid adding more to your debt.  (Or, maybe charging to your credit card is no longer an option if you are already over the limit or if your account has been closed.)

But, how to make the money fast?

Some people turn to the Internet.  You could offer services online, such as writing or design, or put some stuff on an auction site.  If you already have a website with products you sell, you could post a special sale or send a sales message to your list.

But, how quickly will you get the money?  You could use PayPal, but, if you don’t have a PayPal debit card, it could take a couple days for the money to transfer from your PayPal account to your bank, and you may not have enough time!

Look for “real world” opportunities instead.  Rather than trying to auction stuff online, look into the possibility of doing a garage sale (if time permits) or selling it at a pawn shop.  If you have collectibles to sell, you might take them to a memorabilia dealer.  Or, maybe, again if time allows, you could rent a spot at a flea market to sell items.

If you have nothing of significant value to sell, look into offering services.  Can you mow lawns or shovel snow?  How about raking leaves?  Collecting aluminum cans?  Painting?

Perhaps offer cleaning services.  You could see if anyone will pay you to haul junk away—and then sort through the junk for anything you might be able to refurbish and sell or sell as-is.

Think of anything you could do or offer for money.  Look for things for which there is a pressing need, as those would be the easiest to sell people on.  You will do yourself a big favor if you can raise the money to pay for the emergency than to add it to your debt.

The Bottom Line

When faced with a need to come up with money fast, resist the urge to charge it and instead look for ways to earn the cash.  If you can pull it off, you’ll be better off in the long run than adding more debt to your credit card.

Avoidance is Not a Solution

When you’re burdened under a pile of bills, struggling to keep up with payments, the last thing you want to do is think about how much you owe.

You may try to make excuses that you need to focus on making more money, that you need to be doing real, productive work, rather than sitting at the kitchen table, adding up your debt.

But, if you ever want to dig your way out of debt, that’s exactly what you need to do.

Set aside an evening or a weekend, gather all your bills together and do it.  Turn off the TV, skip mowing the lawn, certainly don’t go shopping and stay home, grab a pen, some paper, a calculator and all your bills.  Then, sit down and work at it until you are finished.

In order to create a budget, in order to develop a debt reduction plan, you need to know the total of what you owe.  You need to know your minimum payments each month, your interest charges and your regular expenditures.  You need a full overview of your financial situation.

Avoiding this step will likely keep you in debt for many years to come, perhaps even lead to increasing your debt if you aren’t aware of your total costs of living and the total costs of your debt.

You can’t pin your hopes on winning the lottery or a sweepstakes to pay off your debt.  You need to make a plan and a budget and, in order to do that, you need to sit down and total up your debts.

The Bottom Line

A budget and debt payment plan is essential to reducing and paying off your debt.  Figuring out your total debt is a necessary step to do that.  Don’t put it off!  If you want to get serious about paying off your debt, do this as soon as possible!

Ways to Invest Your Money

You’ve been keeping up with your credit card payments and bringing that debt down.  Along with that, you’ve also managed to set aside some money for emergencies and more.

At this point, you might be wondering if you should begin investing that money so that you can start getting a return on your extra money.

Invest vs. Paying Off Debt

First, you need to figure out whether that is a good idea.  Take a look at how much you are able to invest.  Don’t include your emergency fund in that, because you want to make sure that money is easily accessible for emergencies.  When considering different investment options, figure out how much you will likely earn on each.

In a lot of cases, you may end up earning less on your investment than what you are incurring in interest charges on your credit card debt.  In that case, you may be further ahead to use that money towards paying off your debt so you can get that reduced, thus being able to pay off the full debt sooner.

You only want to invest that extra money if it will earn you more money than you will lose with interest charges on your debt.  In a way, you can look at paying down your debt as an investment, because it may help you reach financial freedom sooner.

If it makes sense to invest while still in debt or if you’ve paid that debt off, then you can examine some of your options.

Savings Accounts, CDs and Term Deposits

Most banks offer these.  The return may be low, but the risk is low as well.  You could even stick your emergency fund into a savings account, because, in most cases, the money will be easily accessible.  (But, it still may be a wise choice to keep some cash on-hand for emergencies, just in case you have a situation where you need money and the bank is closed.)

Stocks, Bonds and Mutual Funds

A bond is kind of like a loan, where you are loaning money to a company in exchange for interest on the investment.  Governments can also issue bonds.  A mutual fund is a pool of investments from various issuers.  And, stocks are part ownership in a company, which is referred to as a “share”.  Shares are usually, but not always, traded on one of the major stock markets.

Typically, bonds, especially government bonds, are considered the lowest risk and stocks a higher risk.  The risks of mutual funds will vary depending upon the types of securities involved.  Risks can be mitigated by diversifying.  Before making investments of this nature, you should discuss it with a financial advisor or other financial professional.

Precious Metals

Precious metals, such as gold and silver, can also be investments. Most people think of investing in precious metals as buying a bunch of bars (or coins) of the metal and keeping them locked in a safe somewhere.  The physical metal in such forms is called bullion.  However, you can also invest in precious metals by buying shares or certificates.  The metal is stored elsewhere and you have a certificate of ownership.

Real Estate

If you have a lot of money to invest, you could look at investing in residential or commercial properties, and then leasing them to individuals or companies.

The Bottom Line

Any investment carries some risk.  Before investing, you should research to make sure that you are better served by investing money than using that money to pay down your credit card debt.  If your debt is paid off or investing makes financial sense, do your due diligence in finding an investment that is right for you and your situation.  For anything riskier than a savings account, you would be well advised to seek assistance from your accountant, financial planner or other finance professional.

Planning Tools for Debt Reduction

Even if you have been making your credit card payments on schedule and paying more than the minimum, you may still want to know how long it is going to take you to pay it off.

This is where a debt calculator can come in handy.  There are a number available online.  Some can be used on the web, while others can be downloaded for use on your own computer.

In either case, you want to plug in accurate information.  The calculations will only be as good as the accuracy of the information you provide.  So, make sure you get all your bills and expenses added together, which you should have if you’ve previously worked out a budget.  You can give the debt calculator your current debt totals, the amount you currently pay, and it can tell you how long it will be before you have your debt paid off.

Be careful, the number may be a bit depressing!

However, you can use the debt calculator to fine tune your budget.  The more you can increase your payment, the faster you can get it paid off.  Of course, the debt calculator will not factor in any additional debt you take on.  So, if you want to stay on track with your budget and get the debt paid off by whatever date you’ve determined, you will need to not charge more purchases to your credit cards.

You can also call your credit card companies to see if you can negotiate lower rates.  This may also help you pay off your debt sooner.  If they refuse, or even if they accept, once you’ve established a track record of paying on time, making the minimum payment or more and getting the debt under control, you could try calling them again to negotiate better rates.  They may decline, but it doesn’t hurt to try.

The Bottom Line

A debt calculator isn’t going to magically solve your credit card debt problems.  But it can help you in figuring out what it will take to pay off that debt and what you can do to pay it off quicker.  The most important thing is to develop a plan and stick with it.  If you’ve not started, you should begin right away.  The sooner you get started, the sooner you can reach debt freedom.

Resisting the Urge to Use Your Credit Card

It’s something that probably happens to everyone.  You’re walking through the store or browsing the web, and you come across something you absolutely must have and, despite your debt, you’re ready to grab your credit card and charge it!

Of course, you do not want to do that.  So, how do you resist that urge?

Some preparation is in order before you get to that point.

Visualize where you want to be in two years, five years or whenever you anticipate your debt being paid off.  You will have no debt hanging over your head.  You will not have the stress of struggling to pay your credit card bills.  When you see something you want to buy, you pay cash for it and you don’t need to worry about how long it will take you to pay off and how much it will actually end up costing you.

Think about how much less stress you will have.  Consider how happy you will be.  Form a strong mental image of yourself in this debt-free future.

Now, whenever you see something you really, really want, and are tempted to charge it on your debt-ridden credit card, think about that future you.  What will get you there?  Will buying this item get you there?  Likely not.  Will not buying this item and using that money to pay down your credit card get you there?  Yes, it will.

If you want to seize that future for yourself, you will have to resist buying (and charging!) things now that will not help you reach that goal.  Having this strong mental image of your future debt-free self will help you overcome that urge to spend now.

The Bottom Line

You have a choice: you can buy something now and end up paying for it over a long period of time, and put off having a debt-free future that much longer, or you can resist the temptation and pay down your credit card debt instead to stay on track with reaching your future with no credit card debt.  It’s easier to do this if you can visualize that future for yourself and bring that image into mind whenever you’re met with a desire to buy something now, for instant gratification.

The Stress of Credit Card Debt

There is little doubt that credit card debt is stressful.  You wonder when, or even if, you will ever be able to pay it off.  You struggle to make payments and it doesn’t seem to lower your debt enough.  You worry that one little emergency will undo every little bit of progress you’ve made so far.

Even with a budget and payment plan in place, the debt can still hang over you like a dark cloud.  You cannot feel relaxed until it is cleared away, which may be a long time yet.

At times, it can feel overwhelming, and you may even be tempted to go buy something just to feel a little better.  Stress can lead you to make mistakes and give into temptations.  You might think you’ll feel so much better if you get a new pair of shoes or if you buy the latest gadget.  You may even make excuses to justify the expense.

Of course, that’s something you do not want to do!

However, you should take the time to do something for yourself every once in a while.  That doesn’t mean going on a shopping spree or anything that’s going to increase your debt.  Take time for yourself in ways that won’t cost you money.

Read a book for recreation.  Maybe have a nice bubble bath and read while you relax in the tub.  If you don’t live alone, hang a “Do Not Disturb” sign on the bathroom door so no one will bother you.

If it’s pleasant outside, sit out on your backporch or in the backyard and have a glass of iced tea.  Or, maybe a soda.  If it’s too cool for a cold drink, maybe have a cup of coffee or hot tea.

If it’s cold outside, perhaps you might want to build a fire in the fireplace and spend some time in front of the crackling wood with a nice cup of hot cocoa.

Or, set aside a day each week to play board or card games with friends and family.

If you’re married or otherwise share in the credit card debt, be sure that both of you do something to relax so that both of you can get your mind off of the debt for a while.

The key is to do something fun, something relaxing, something that will take your mind off of your debt for a while.  Just make sure it’s something that won’t cost you money!

The Bottom Line

Credit card debt can really put you under a lot of stress.  While you may not be able to get rid of the debt as quickly as you would like, you can take steps to reduce the stress it creates.  Remember to take a “timeout” from your credit card debt and do things to take your mind off of it.

Put Down that Credit Card!

Even though it’s been tight, you’ve been managing your budget and getting your debt until control.  But, money is scarce and your bank account is limping along.

And then you run into a situation where you need something, but don’t have the cash.  Maybe it’s an unexpected bill.  Maybe it’s gas money.  Or maybe it’s groceries.

You don’t have a choice.  You have to do what you have to do to make it through.  Your only option is to put it on your credit card.

Stop!

You may feel you have no other choice, but that may not be the case.

At some point, you’re going to hit the same brick wall, except your credit card will be maxed out and you won’t be able to charge it.

What will you do then?

Whatever it is, do it now, rather than add more debt when you’re already struggling.  Remember that debt costs you more money.  So, “temporarily” using your card again “just for this emergency” is going to end up costing you a lot more.

Consider Alternatives

Have you exhausted all of your money reserves?  (If you don’t have an emergency fund, you should start one as soon as possible.)  Do you have any cash you’ve hidden away under the mattress, in the fridge or in an old purse or wallet you haven’t used in years?  Do you have any old savings bonds gathering dust in an old drawer that you could redeem?

Do you have anything you can sell?  Do you have any old, unused or broken jewelry you can sell for the gold or diamonds?  Do you have any items you really don’t use anymore that you sell online or maybe to a pawn shop?

Does anyone owe you money that you might be able to collect on, even if only a partial payment?  Or, can you borrow money from a family member or a friend?  While this may not be the optimal choice—especially if you may already owe them—it may be better than putting more debt on your credit card.

Are there any services you can offer?  Can you babysit a neighbor’s children?  Can you paint their house?  Can you mow their lawn?  Can you write articles for people online?  Design websites?  Create graphics?

What about collecting aluminum cans from around town and turning them in for cash?  Or, in areas with bottle deposits, collecting bottles to turn in?

Consider every alternative before using your credit card.

The Bottom Line

While you sometimes may feel you have no choice but to use your credit card, you should think about what you would do if that were not an option.  The last thing you want to do, especially if you’ve been making good progress on reducing your debt, is to start increasing it again.  Try to find some alternative to adding to your credit card debt.

Prioritizing Payments on Your Credit Card Debt

So, you’re carrying credit card debt across multiple credit cards and you’re wondering how to manage that.  In addition to making the minimum payments on each, how do you spread the extra money to get your credit card debt paid off sooner?  Do you spread the money evenly across all your accounts or do you use some other method?

There are a couple schools of thought on this.  Let’s take a look at them.

Pay Off the Credit Card that’s Increasing Your Debt the Most

This is actually the best choice.  Usually it means paying off the credit card with the highest interest first, as that will save you in the long run because it is the one that is typically growing your debt the fastest.

Unless, of course, you only have a small amount of debt on it.

Don’t look at the interest rate alone.  Look at both the amount of debt and the interest rate.  A low interest rate on a high debt may be increasing your debt faster than a high interest rate on a low amount of debt.

Take a look at your credit card bills and see which one has the highest interest fees each month.  Which ever one is growing your debt the most each month is the one you want to prioritize.

Now, as you make your payments, keep paying attention to your bills.  As you get one debt paid down, you may find that another credit card becomes the leader in increasing your debt.  At that point, you may wish to switch your focus to that card in order to maximize the use of your money in paying down your debt.

Pay Off the Credit Card with the Smallest Balance

Some prefer to focus on paying off the credit card with the smallest balance first.  That provides a psychological victory in having paid off a debt, which will result in one less payment per month.  That will also allow you to take the payment you were making on that card and then apply it to another card to help snowball your debt reduction.

While this may provide a psychological victory, it may be more expensive in the long run,   if it slows down the rate at which you are paying off other cards which may be increasing your debt by more than paying off the smallest balance reduces it.

If you need a psychological victory, instead of celebrating paying off a particular credit card, you could celebrate reaching milestones in your debt reduction.  For example, you might make note of when your debt falls under $10,000.  Or when it falls under $5,000.  Or whatever intervals are meaningful to you, depending on your amount of debt and preferences.

On the other hand, it allows you to close that credit card account (or stick the card in a drawer somewhere where you will not use it) so you don’t continue to increase your debt on that card.

Again, you should do the math to see which most benefits you and also decide based on your determination to not add new charges to open accounts and, thus, increase your debt in spite of your payment plan.

The Bottom Line

While there are several methods of paying off your credit card debt, you shouldn’t base your choice on what someone else says worked for them.  Take a good look at your bills, check your interest rates, do the math, and select a method that will work best for you.

The High Cost of Debt

People often don’t take into consideration interest charges when figuring in the cost of something they purchase with a credit card.  Of course, if it’s paid off by the due date, there may be no interest charges and they only end up paying the actual price of the item.

However, if not paid off right away, interest will be added on top of that purchase.

For example, let’s imagine you purchase something for $100 on a credit card with a 12% APR.  If you don’t pay that off by the due date, it will cost you $101.  The next month, if not paid off, you will owe $102.01.  And so on.

Of course, that may not seem like much, but most people don’t stop at just one $100 purchase, do they?  And, even if they figure it will cost them a couple bucks in interest, they don’t think of all the other items they’ve purchased that will also cost them a couple bucks in interest.

Imagine that’s $1000 (either 10 $100 purchases or one $1,000 purchase).  Now, instead of $2.01 after a couple months, it is $20.10.  And it keeps going up and up.

Think Paying Cash Will Help?

Some people do realize this, and so they stop putting new purchases on their credit card.  They will only purchase new things if they have the cash to pay for them.

Of course, this is good, as it helps you build the habit of not making purchases you cannot really afford.  It’s too easy to just say “charge it!”  But, by forcing yourself (or being forced) to pay cash, you learn to manage your money better.  You learn to prioritize.  You don’t buy stuff unless you really need it or can afford it.

For the most part.

This habit will also help you to keep your credit card debt from increasing and getting worse, so long as you are still making payments and not using the money that should be used for your credit card payment to buy more stuff.

Debt Costs You Money!

As long as you are in debt, it is still costing you.

Let’s say you have no credit card debt and you buy something for $100.  How much does that cost you?  Well, it costs you $100.

But, let’s say you have credit card debt and you buy something for $100.  How much does that cost you?  Well, that’s going to vary depending on your amount of debt, but it will cost you more than $100.

How so?

If you spend $100 to buy something, that’s $100 you did not use to pay down your credit card debt.  So, while you didn’t add a new charge to your credit card (which is good), you didn’t lower your credit card debt at all, so, effectively, that $100 spent is still going to cost you another $1 the first month (assuming a 12% APR), then another $1.01 on top of that the following month, and so on.

That doesn’t mean you should go ahead and put it on your credit card, though.  It just means you shouldn’t spend money on things you don’t absolutely have to.  While you are under the burden of credit card debt, you should buy only the things you need, and not the things you want.

The Bottom Line

Debt makes everything more expensive for you.  Even if you pay cash for new purchases, that’s cash that’s not paying down your debt, so your debt continues to grow due to interest charges.  That’s why it is important to reduce your spending as much as possible, focus on buying only the things you need, and using your extra “spending cash” to pay down your debt.

Once you have your debt paid off, then you can begin to buy things you want—just don’t charge them!

Does DIY Debt Reduction Work?

We’ve previously covered DIY Debt Reduction.  Many people worry about the efficacy of a do-it-yourself debt reduction plan and are hesitant to give it a try out of worry it may not help them at all.

But, what is important to remember is that the purpose of a DIY debt reduction plan is to provide you with a path to follow in order to obtain the fiscal discipline you will need to both payoff your debt and also stay out of debt once it is paid off.

Let’s briefly review the steps of a DIY Debt Reduction plan:

Step One: Write Down All of Your Expenses

As has been previously mentioned, write everything down.  Include all expenses, even those that are less frequent, such as quarterly or annual payments.  Spread the costs of those non-monthly payments over the 12-month period so you can be setting aside that amount of money each month until the bill comes.

Step Two: Write Down All of Your Income

Record all of your income, which, for most people, will be a weekly paycheck.  Then, calculate your monthly income.

Step Three: Do the Math

Subtract the amount of your monthly expenses from the amount of your monthly income.

From here, you will be able to adjust as needed.  If your expenses are more than your income, you will either need to cut expenses or increase income or a combination of the two.

Develop the Budget and Payment Plan

Once you have done the steps, you need to develop a budget and a plan.  Keep track of where every dollar you spend goes.  You want to be sure to set aside enough money each pay period to be able to pay your expenses that month.

Once you have developed your plan, you need to stick to that plan.  The benefit of sticking to your budget and payment plan is that you will be gaining the discipline to pay down debt and not incur new debt.  So, once your debt is paid off, you will have an easier time staying out of debt.

Note that, once you are out of debt, you shouldn’t scrap your budget and plan.  You can adjust it as needed, but stick with it.  So long as you stick within your budget, you can continue to stay out of debt.

After all, once you’re out of debt, you don’t want to find yourself back in that position again!

Get Your Priorities Straight

Prioritizing will be an important skill throughout the period you are paying down debt—and even afterward.

For example, if you see a new pair of shoes you like, do you really need them?  Or, do you really need the latest cool gadget that just came out?  Probably not.  So, is it better to spend $100 on new shoes or a neat gadget or to spend that $100 paying down debt?  After all, if you spend $100 now, how much additional will that cost you in interest fees (even late fees if you don’t have the money on time) on your debt?

Spending that $100 while you are in debt will end up costing you more than $100.  But, spending that $100 after you are debt free will mean it only costs you $100.  Which is the better bargain?

The Bottom Line

Can a do-it-yourself debt reduction plan really work?  Yes, it can.  But, it won’t work on its own.  You have to have the commitment and the determination to stick with it.  No plan will be of any value if you do not implement it and follow it.