Where to Find Emergency Funds When You Don't Have an Emergency Fund

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Establishing an emergency fund is the first and most important step in taking control of your finances. This fund makes it possible for you to weather a financial crisis — anything from a big car repair or medical bill to losing your job. (See also: A Step-by-Step Guide to Creating Your Emergency Fund)

But what if you don't have an emergency fund? Or you have only just started building it when an emergency strikes? Or you have been hit with back-to-back hardships that your emergency fund can't handle? How do you find money in an emergency when there's nothing but cobwebs in your "emergency fund?"

Before you assume that dealing with such a situation is basically a hopeless case, remember that your ability to handle an emergency is not limited to the size your emergency fund. Here are several places you can find emergency funds when you don't have an emergency fund. (See also: 10 Ways to Prevent an Emergency From Driving You Into Debt)

1. Your own budget

One of the fastest ways to find some emergency cash in your budget is to cut your costs to the bone. Take a look at what you normally spend on groceries, entertainment, gas, and utilities. You may be surprised to find that there is enough money in your monthly budget to cover your emergency if you are willing to eat nothing but peanut butter and jelly, say no to happy hour with your friends, turn off the A/C, take the bus, and switch off your cellphone data plan for a month. This might not sound like much fun, but it will be well worth the short-term discomfort if you can use the savings to solve your emergency. (See also: Are You Spending Too Much on "Normal" Expenses?)

As a bonus, you could extend your cost-cutting to last a few weeks after you've taken care of your emergency, and use the freed-up cash to refill (or start) your emergency fund. That will make it much less likely you'll have to deal with this kind of deprivation the next time an emergency crops up.

2. Your stuff

It's very easy for us to forget just how much money is sitting in our homes in the form of all of our stuff. When you are facing an emergency, it can become clear that a lot of the stuff you own doesn't actually add anything to your life.

A financial emergency is a good time to sell some of the things you have kept but don't actually need. Craiglist, eBay, and Facebook groups are all excellent options for maximizing your profit if you have some time available before you need the cash. If your emergency has a quick deadline, however, you can take your valuables to a consignment or pawnshop.

3. Your monthly due dates

If your emergency is one you could financially handle if you just had a little more time, it may be worth your while to call your landlord, utility companies, and creditors to see if they would be willing to push back your due date for this month's bills. You may or may not be able to convince them all to accept a delayed payment this month, but it doesn't hurt to ask.

4. Your withholdings

If you regularly get a large tax refund every spring, you could potentially get hold of that money before April 15 by adjusting your withholdings on your W-4 form at work. Doing this, you may see more money in your very next paycheck.

Use the IRS online withholding calculator to figure out exactly what your withholding should be. Once you've adjusted your withholding, you can keep it at the adjusted amount for the rest of the year and save the difference in your emergency fund.

5. Your employer

Depending on your workplace, you may be able to take an advance on your future salary to help you cover a financial emergency. If you work for a small company where your boss is the final authority, you will need to appeal directly to him or her for your advance. If you work in a larger or corporate environment, you will need to discuss the possibility of an advance with your human resources department.

Be prepared to explain why you need the money, which may feel awkward. But your boss will want to know that the advance isn't enabling a problem behavior, such as gambling or substance abuse, and you do need to give some background so they will understand that this is a one-time emergency.

You can also expect to fill out some paperwork, which will specify the payback schedule and what will happen in the event you leave the job before the advance has been paid off. In most cases, the payback schedule will mean that you receive a reduced paycheck for a few pay periods until you have paid back the advance, although you may be able to negotiate for future overtime in exchange for the advance.

6. Borrowing money

There are several ways to borrow money that can help get you through a financial emergency, although they all have different costs that you need to consider before signing on the dotted line:

A loan from a friend or family member

Borrowing money from someone you know can be a relationship land mine, which is why so many people are leery of asking for that kind of help.

It is possible to borrow money from a loved one, but you must be prepared to handle it like a business transaction and actually use a promissory note. This legal agreement will spell out the specifics of payment dates, interest, and other loan details.

Peer-to-peer lending

The modern world has made it possible to borrow small amounts of money through peer-to-peer lending platforms like Lending Club and Prosper. To successfully borrow money from a peer-to-peer platform, you will generally need a credit score of about 660 or above, and you will need a checking account, since your loan will be deposited to it, and your payments will be automatically debited from it.

Generally, these loans have a maximum lending period of 36 months. There is no penalty for paying off your loan early, however, so a peer-to-peer loan may be an excellent choice for someone who needs money quickly but whose situation will stabilize soon afterward. (See also: 5 Times Personal Loans May Be Better Than Credit Cards)

An emergency overdraft from your bank

Your bank may be able to extend you an emergency overdraft if your emergency occurs within a few days of payday and the amount you need does not exceed your usual payday deposit. Explain the situation to your bank and request an overdraft for the amount you will need to cover your emergency — but don't forget to ask what overdraft fees you can expect to pay. If your bank approves this course of action and their overdraft fees are reasonable, this could be a relatively inexpensive way to get the money you need.

Take a loan from your 401(k)

Though it's generally not a great idea to borrow from your 401(k) for a financial emergency, it is a good idea for you to know what your rights are in regards to such a loan. (See also: 5 Questions to Ask Before You Borrow From Your Retirement Account)

The IRS allows you to access a portion (generally the lesser of 50 percent or $50,000) of your retirement plan money tax-free for an emergency. If you do take such a loan, the law requires you to repay the amount you accessed, plus interest — which you are paying to yourself, meaning you are helping to restore at least some of the growth you lost by taking the loan.

Loan rules specify a five-year amortization repayment schedule, but there are no prepayment penalties if you would like to rebuild your account quicker. In addition, many plans will allow you to make repayments through payroll deduction, in the same way you make normal contributions.

One caveat: If you leave (or lose) your job before paying back the loan, it will be considered an early distribution, which will mean that you owe the 10 percent early withdrawal penalty and tax on your loan.

Take a tax-free rollover from your IRA

While the IRS does not allow investors to take loans from their IRA accounts, a 60-day tax-free rollover allows you to access the money you have in your IRA in case of an emergency. Such a rollover lets you take money out of your IRA with no taxes or penalties, provided you put the money back in that or another IRA within 60 calendar days. If you fail to replace the money within that time frame, it will be considered an early withdrawal and you will have to pay income taxes on the money and a 10 percent penalty.

In addition, it's important to note that there is what's known as the one-year rule. You can only do such a tax-free rollover once within any 12-month period.

Emergencies are never convenient

Like death, taxes, and childbirth, financial emergencies don't like to arrive when it's convenient. The key to being able to handle financial emergencies is flexibility. If you are willing and able to make changes to your habits, respectfully ask for help, borrow mindfully, or reduce your spending, you can get to the other side of any emergency with your finances intact. (See also: 8 Ways to Decide if It's a "Fund-Worthy" Emergency)

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