7 Ways to Avoid Debt in a Financial Emergency

You got demoted at work, your roommate abruptly moved out and ghosted you, your car broke down, and you’re left wondering how you’re going to deal with all of this. This sounds like the story of a melancholy country song, but these kinds of tragedies eventually hit all of us, sometimes two or three of them at once — after all, it’s said that bad things come in threes.

Making this reality more difficult is the fact that many Americans live paycheck to paycheck, with no resources to draw on if a major emergency strikes. According to a recent survey by the American Payroll Association, 68% of Americans would find it “somewhat” or “very difficult” to meet their current financial obligations if their paycheck were delayed for a single week. Simply put, most Americans aren’t prepared for emergencies.

There are better solutions and strategies for how to avoid debt in an emergency. 

In this article

    Look into programs provided by the government

    There are many emergencies for which the government can provide assistance. For example, if you suddenly become unemployed, you may be able to apply for unemployment benefits and have a plan for when unemployment benefits run out

    The benefits don’t end there. If you’re facing a natural disaster, you may be eligible for individual disaster assistance from FEMA. If you’re struggling to put food on the table for your family, check into the Supplemental Nutrition Assistance Program (SNAP). If you have children, the Office of Family Assistance offers programs in each state that can help with temporary assistance in difficult situations. You may also want to look into Medicaid or the Children’s Health Insurance Program, which can provide medical care in moments of need.

    Adjust your household budget

    This isn’t about having and altering a formal household budget (though making a budget is powerful and useful). Rather, this is all about identifying areas of your life where you can cut back on your spending for a while so that you can handle the emergency. 

    [ More: 10 Tips to Create a Personalized Budget Based on Your Spending ]

    Many of the adjustments you can make are small ones, like switching to buying store brand products. On the other hand, making just a few significant changes can have a profound impact on your finances. Consider making just one big switch, like cancelling your cable or satellite service or stop ordering food on DoorDash and Uber Eats.

    Ask your employer for an advanced paycheck

    If your emergency hasn’t directly affected your employment, contact your employer to see if you can get an advance on your next paycheck. This is a far more financially sensible option than using a payday lender, which will charge enormous fees for this exact service.

    If you work for a small business, go directly to the business owner, as this will come down to the decision of the owner. If you work for a larger business, contact your human resources officer, as your employer may have a program for exactly these situations, wherein an employee is facing a personal emergency. 

    Request a payment deferment 

    Often, the real pain of an emergency isn’t your immediate ability to pay, but how that money was earmarked for other bills, which you are now unable to cover. Thus, one powerful strategy to apply when you’re facing a financial emergency is to simply ask for deferment on your bills.

    Rather than being late on a bill or going into debt to pay a bill, simply contact the company associated with that bill, explain the situation, and ask for a temporary deferment on that bill. Perhaps it could be delayed for a few weeks without accruing a late fee, or the balance could be applied to next month’s bill. Many businesses have programs already in place for people who are struggling to pay bills, as it’s in their best interest to work with customers who are in a temporarily difficult situation.

    Sell personal belongings

    If a quick infusion of cash will solve your emergency, consider selling off some of your personal belongings that you don’t use. There are many ways to sell unwanted items for extra cash: list them on your social media feed, in a community buy/sell/trade group, Craigslist, eBay, Facebook Marketplace, take them to a consignment shop or have a yard sale.

    [ Next: 30 Legitimate Ways to Make Money Fast ]

    What about figuring out which items to sell? The best place to look is where you store items you rarely use: the back of your closets or your garage or any other out-of-the-way places that seem to accumulate things. Also, go through your collections and determine which items you’re unlikely to watch or read or enjoy again.

    Get an extra stream of income

    One great way to get back on your feet after dealing with an emergency is to take on a side gig, supplementing your income for a while so you can recover financially. This can take the form of a part-time job or an independent side hustle.

    There are almost endless opportunities to make a few dollars in your spare time. You might become a driver for Lyft or Uber. You might become a pet sitter via Rover. If you’ve got technical skills, you might pick up a quick freelancing gig at Upwork or Fiverr. You can even get paid a few bucks to do simple tasks from your couch via Mechanical Turk. Be selective and careful at what you get involved with, as some side gig opportunities can be scams.

    Borrow from friends or family members

    A final option to consider is borrowing money from friends or family members. This can definitely be an uncomfortable proposition, both in terms of asking for money and in terms of the ongoing expectation of repayment, but you may have friends or family willing to help.

    [ See: How to Lend to Family and Friends ]

    If you want to borrow money without damaging these relationships, be very open and honest about why you need the money and make repayment a top priority. If you’re struggling to repay, don’t avoid the situation; rather, be open and communicative about your challenges, too. Communication, honesty, and clarity are the key here, not playing cards close to the chest and avoiding the issue.

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to Interest.com, PersonalLoans.org, and elsewhere.