What To Do When A Financial Emergency Happens

Updated: September 4, 2023

Unexpected circumstances is life’s reality and sometimes, it hits us hard when we least expect it.

Financial emergencies come in many forms – it can be as minor as our mobile phone getting lost, or our car needing immediate repairs.

Or it can be as major as our home being devastated by a natural disaster, running into a huge accident, or losing your job.

Whether small or big – these incidents impact our life and if we’re not prepared on how to properly handle these situations, then we could end up in a financial mess.

When faced with a financial emergency, it helps to keep these tips in mind.

Step Back and Assess The Situation

Calm down, breathe deeply, and clear your head. Sit down and assess the situation as objectively as you can. Start by asking yourself the question:

Is the financial impact of the situation short-term, medium or long-term?:

  • Short-term: losing your mobile phone, car breaks down, etc.
  • Medium-term: loss of work, medical emergencies, home repairs, etc.
  • Long-term: illnesses, breadwinner’s loss of capacity to earn, etc.

By knowing how the crisis will affect you and your family, you’re already one step ahead in coping with the situation.


Evaluate Your Available Funds

This is now the part when you’ll breathe a sigh of relief and smile because you have an emergency fund.

Usually, situations with short-term impact can easily be covered by three months worth of your “SWAN fund”. (SWAN means Sleep Well At Night)

Meanwhile, medium-term financial emergencies will probably deplete more than half, if not all, of your “rainy-day savings” – so you should still be okay, theoretically.

However, your emergency fund will probably be not enough for financial emergencies with long-term impacts. Nevertheless, you should still be okay for a few months, but be prepared to make some lifestyle changes.

Make A Financial Plan

For situations with short and medium-term impact – the only plan you need to make is how to rebuild your emergency fund. And since you’ve done it before, I assume it won’t be a problem anymore.

But for the third situation, or in cases when your emergency fund won’t be able to cover the costs you’ll incur, then here are some things you should do:

Restructure your monthly budget
Revisit your spending allocation and make sure there’s room for the new expenses that are coming. This is especially true for health issues that require maintenance medicines.

Cut unnecessary expenses
Go back to basics. Realize that you only need shelter and food on the table to actually live. So have your cable TV subscription, gym membership, and other “luxuries” cut.

Call your creditors
If you have loans or credit card debts, tell your creditors about your situation as soon as possible. Try to work out an alternative payment plan, get modified terms, or even payment deferral. You’ll be surprised how most of them will appreciate the gesture and allow your request.

Find ways to make money
Sell your stuff to acquire some funds immediately, then look for new income sources. Open your eyes to opportunities as there are many of them around. Borrow money from family and friends only as a last resort, again… only as a last resort.

Nobody wants to be in a financial emergency, but it does happen no matter how much you try to avoid them.

Know that the best thing you can do for yourself and your family when such circumstances strike is to be smart and proactive about it.

And always remember that just like bad, stormy weather – it too, shall pass.

Suggested Reading:

What to do next: Click here to start your financial journey with IMG Wealth Academy

Photo credit: kayaker1204


  1. Prayer is also good. Relying onto God’s plan is the best way on what to do when you’re in a financial emergency. Not only do you surrender to his great plan but also acknowledge him as our lord and savior.

  2. Such a timely article. This is what is happening on me, as in right at this moment. To cope up for company’s financial loss, they need to do this so-called “retrenchment”. I did the above mentioned even before this article came out. Prayer does help as well. I realized having an emergency fund is really important.

  3. Keeping expenses under control is very important. And to do that it is mandatory to maintain a monthly budget. I am doing this for a few years already and I say that it pays off. I started first with an excel sheet, later I realize there are free online tools which helps you to do that.

  4. SWAN, (Sleep Well At Night) ,, I really like that one. In the stock market, we are always looking for ways to offset risk and the dreaded ” black swan” event. Personally, I also like to have some cash ready to deploy post-black swan. You certainly do sleep much better at night when you have a good hedge on your positions. It stands to reason that if you have a great financial plan, insurance where needed and emergency funds, you will surely sleep with much less worry than those with no protection against life’s many challenges.

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