A sudden illness, retrenchment, your employer going bankrupt – it doesn’t necessarily take a global pandemic to hit you with a sudden cash crunch. Whatever the cause, it’s how quickly you react to an unexpected financial emergency that can make a difference.

Ideally, you should have a rainy-day fund: money saved that you can use to tide you over during a cashflow shortage. If you aren’t in a cash crisis at the moment, now is the time to start a savings account – and we have several tools and products to help you set savings goals and invest money for your future.

If you don’t have a savings buffer when a cash crunch hits, you really only have 2 possible solutions: either increase your income or reduce your expenses. Cutting expenses is the solution you have immediate control over, but you need a detailed plan to turn the situation around. Here are 3 steps to consider.

1. Know the numbers

It’s a good idea to have a monthly budget anyway, even when you’re not facing a crisis. It helps to track your spending patterns.

When a cash crunch hits, you can revisit your budget to see what you might be able to cut out. This is where a budget becomes essential, because you divide your spending between necessities like rent, food and electricity, and treats or luxuries that you can do without when necessary.

Once you subtract your essential costs from your reduced monthly income, you’ll know at a glance how much you have left to spend on non-essentials – then stick to that budget with an iron will.

2. Banking tools to turn to

Sometimes you need money immediately. If you know you’ll be able to afford the repayments in the future, you can dip into your credit card or the overdraft on your bank account to tide you over a lean patch.

A personal loan from a bank might be another option. Be sure to apply only at a registered lender, though. We wouldn’t grant you a loan if we didn’t think you could afford the repayments, so a loan can be a useful tool to get your financial life back on track.

Are you perhaps qualified for a better job, and is anyone hiring? How about taking on a side hustle?

But it could be that you already have a personal loan to pay off, and perhaps a credit card and overdraft stretched to their limits. If you are going to be without an income for a long time and can't afford your debt repayments, it’s time to speak to your financial services provider about your options.

The worst thing you can do is ignore this and hope it will go away. Your first step should be to contact the services provider and agree on a plan – you may be able to restructure the loan to pay a smaller amount over a longer term.

As a last resort, you may need to consider selling your car or home to buy something more affordable. But making these choices to deal with your debt yourself puts you in the driver’s seat, rather than having the decision made for you.

3. Stay disciplined

As we’ve said already, sticking to your new budget is the key to being able to weather a cash crunch – you have to pay for all the essentials, including debt repayments, before you even think of spending on luxuries. If your reduced cashflow is permanent, that budget could become your new reality. Or you could start thinking about finding increased sources of income.

Are you perhaps qualified for a better job and is anyone hiring? How about taking on a side hustle? This could be in a different field to your day job – do you have a hobby that produces goods you can sell? Do you have a skill you can teach, or is there freelance work available in the same field as your day job?

Whether it’s related to your main job or not, it’s important to make sure that your side hustle doesn’t interfere – be careful of conflicting interests if you’re freelancing in the same field.

Remember, though, that if you’re in a cash crunch and you’re having trouble making debt repayments, it’s best to talk to your bank before you miss one. We should be able to work out a plan that allows you to keep paying your debts on time, without creating negative reports on your credit record.  

Contact us on 0860 110 702 for more information or help.