We’ve all been there. The air conditioner goes out, and you’re looking at a summer of triple-digit temps with little more than a few box fans. The clutch on your car stops working, and you live in a city with no reliable public transportation (unless you don’t mind taking an extra hour to get to work). The roof springs a leak. The dentist says your kid needs braces. You break your leg and have insurance with a huge deductible.
There are so many things that can happen that can cost you a lot of money, and they can come up with no warning. Unless you’re a great saver, you’ll probably find yourself scrambling to pay for these things, maybe even looking around for items to sell to come up with the money. Or you might be tempted to put the expenses on your credit card and call it a day.
You don’t have to sink yourself into a hole with the excessive interest rates that credit cards charge. Instead, you can look into one of these great ways to pay for life’s unexpected expenses, whatever they may be:
Establish a Line of Credit
This works better if you can do it in advance of an emergency, but it can help in a pinch too. There are a number ways to get a line of credit, but using your home’s equity is the most common.
1. Home Equity Line of Credit
This is a standard loan that allows you to have access to your home’s equity when you need it. It can be used for anything and you only make payments on the amount you actually use. Having one of these in place can make those urgent cash situations much less daunting.
2. Reverse Mortgage
If you’re 62+ years of age (and meet other eligibility guidelines), a reverse mortgage pays you for the equity you have built up in your home. This is different than a traditional home equity loan because there are no required monthly payments. You don’t have to pay back a reverse mortgage until you sell the house, move out of it, or die. So, what can a reverse mortgage do for you? Check out this calculator to learn how much you might be able to get and at what terms.
Start a Health Savings Account
For many, life’s unexpected expenses are medical in nature. You get into a serious car accident, and suddenly, you’re looking at medical bills in the tens of thousands. Your child has a serious allergic reaction and you’re in the ER, followed by bills in the thousands.
A health savings account can help you pay for those expenses and save you a little money along the way. You can contribute to the HSA with pre-tax money, and you can withdraw from it at any time to pay for verified medical expenses. You never pay taxes on the money, so contributing to it is a good way to save. The more you contribute to the account, the more you save. Even if you and your family members do not have any medical conditions that require regular visits, it is a good idea to contribute as much as you are allowed to an HSA since medical emergencies can arise at any time (and can be quite expensive). The older you are, the more prone you are to medical emergencies.
You don’t have to be rich to be able to pay for all of life’s unexpected expenses. You just need to know how to manage your money properly. You also need to know what resources are available when you need more money than you have on hand. These are all great resources for dealing with the unexpected.