22% of the UK population said they would need to borrow money to meet a £200 unexpected expense due to the lack of an emergency fund.
Until the start of this year I had absolutely no money saved in an emergency fund.
I had no debt, but I lived month-to-month, spending frivolously without too much thought to an emergency.
I was an idiot with my money, but for many people living on the breadline saving for an emergency or rainy day isn’t so easy.
When we were growing up as kids, every spare penny my mum had went into feeding, housing and clothing my two brothers and I.
I’m still not quite sure how she did it.
Although, I have learned since becoming an adult that she regularly went hungry to make sure there was enough for us – something that still chokes me to think about to this day.
Four in ten adults in the UK do not have more than £500 in savings, with that in mind I thought about what I would do if disaster struck and I had no emergency fund.
It’s not that difficult, it’s happened a few times over the last few years as you’ll see!
Speak to my employer
Around three years ago the tenancy on my house was up and I hadn’t found anywhere to move with two weeks left to spare.
It wasn’t that I wasn’t looking, I was just struggling to find anything affordable in a location closer to work.
The biggest problem here was I hadn’t saved enough for the deposit.
I went in to speak with my boss, came clean and admitted I was up Shizzle Creek without a paddle.
I explained I could get a loan if need be, but I’d pay back a lot in interest charges and inquired about the chances of a wage advancement.
Amazingly he said yes (diamond bloke) and allowed me to pay it back over six months interest free.
Not everyone will be as lucky as me in that situation, but if you don’t ask you don’t get!
My fist point of call would always be my employer.
Let me set the scene.
I had booked an unexpected birthday trip to Lanzarote for my partner’s birthday.
I then proceeded to swipe my card all over the island like a crazy man, spending money as if I earned the wages of a Premier League footballer – I don’t!
I’d checked my bank several times and there was plenty of money in there.
It didn’t strike me as odd that it didn’t seem to be going down very quickly – why to this day I’ll never know.
We got to the penultimate day of the holiday, when the lady who owned the apartments we were staying at knocked on the door to inform me my card had just declined.
Nonsense! I had checked my bank, how could this be?
Well, turns out that the businesses in Lanzarote all tend to bank on the same day, therefore a weeks worth of spending had come out of my bank all at once and in a matter of hours I was majorly over budget.
I had to use my rent money for my house back home to pay the room and then borrow it off a friend when I got back until I got paid again – cheers Rachael!
Again, as above, not everyone will be as lucky as me in that situation.
But if are able to get a short term loan off your friends, at least it is interest free.
Just make sure you can absolutely pay it back on time so you don’t risk your friendship or their financial well-being.
My friends would be next on the SOS list.
Back in the day I was a self employed barber.
Unfortunately I hadn’t used my – fairly decent – wages to create an emergency fund.
Especially unfortunate when the owner threw an absolute wobbler at me one day for nothing and I walked out without any equipment and around £2 to my name.
It was the Tuesday after the August bank holiday and I was broke!
Not only broke, but also without the tools I needed to earn.
I sent an SOS to my mum.
I’ll always try everyone else first before asking my mum, she struggled for years bringing us up and now it’s her time to chill out and not worry.
I was left with no choice, I had to borrow the money off her to get back to work – as much as it killed me to ask.
My mum would be number three on my hit-list.
Apply for an interest free credit card
Had the other options above not been available to me my next point of call would be to look for a credit card with an interest free period.
I could have used it to pay my way through the emergencies and still had time to pay it back without any added interest.
If you use a credit card with an interest free period wisely, you can get away with only paying back what you owe.
They can be a great short term solution in an emergency.
Speak to the bank
If I was unable to go down the interest free credit card route I’d speak to my bank.
They already have a relationship with me, can see I’m never overdraw and that I have genuinely just had an emergency.
Of course, they may still decline me, but it’s worth a shot talking to them.
You could look at a loan or an overdraft with an interest free period.
Payday loans are only meant to be used for an extreme emergency in my humble opinion.
And when I say extreme, I mean extreme.
A day out or some new wallpaper is not an emergency.
Your car breaking down or your boiler packing up is – you see where I’m going here!
The problem is people take them out thinking they are able to pay them back, and when extortionate interest charges kick in it makes it impossible to pay back what they owe.
There is only one I would consider and that’s Street UK who are a ‘not for profit’ organisation run by a charity.
They take a much more ethical approach when it comes to payday lending with much lower interest rates than companies such as Wonga, Quick Quid and Provident.
What I especially like about them is the personal touch they show with their branch customers, getting to know why they have fallen on hard times and giving appropriate advice to their clients.
In fact, 79% of their customers went on to say that a loan from Street UK had more than a financial impact, including improvements to their stress levels, overall health, self-esteem and relationships with family and friends.
It’s not very often anybody has good things to say about payday loan providers, but these guys have mightily impressed their customers.
Street UK seem to understand what other payday loan companies don’t – a customer who is coming in monthly is in financial difficulty, not having an emergency.
They show genuine concern and investigate why this particular person is coming back so often, you’re a person not a pound sign!
Street UK also recognise that not everyone who has a default registered against them years ago, is necessarily a risk now.
You can see their full Social Impact Report here.
If it was the last resort, the only company I would use is Street UK.
It’s extremely important to remember, if you are regularly using credit to pay your bills you have a problem, it’s not a short term problem and it will get worse if you don’t tackle it.
Using credit to get yourself out of a hole is fine, providing you have worked out the cheapest and quickest route to pay it back.
However, if you have found yourself using payday loans regularly, you need to address the issue by speaking to a trained debt adviser.
Clear Debt are the founders of the Debt Resolution Forum so you can be safe in the knowledge you’ll be in safe hands.
Once you have managed to get your finances under control, get working on that emergency fund.
It’s always better to be able to fall back on your own money if you have an emergency out of the blue.
Do you have an emergency fund? Have you ever used your emergency fund to get you pout of a hole?
The companies mention above are trusted companies I would recommend and I have received absolutely no payment for this article.
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