It’s time to put some money away into an emergency fund.
The thing that debtors neglect to understand is that if you’re short on money and need a loan, particularly a short term cash loan, then something is very wrong about the way that you’re managing your money.
You should, regardless of how much you earn, be able to cover an entire month’s worth of expenses (including your home and/or car loans) and then have some left over to add to a savings or retirement account.
This may be hard for people who live pay check to pay check however, it’s one of the most crucial steps to becoming free of all the modern financial burdens that plague so many.
If you simply don’t make enough money to cover all of your expenses then you should certainly not have been provided with a loan in the first place – so it follows that your monthly income must have dropped for some reason. If this is the case then the only way to resolve the issue is to regain that level of income; if you’ve lost your job - you’ll have to find another and if you’ve suffered from a pay cut or have a business that isn’t doing so well, the only reasonable solution is to work on solving that issue first and foremost.
Once you’ve managed to raise your level of income to adequately cover your living expenses and debts then it’s time to put some money away into an emergency fund.
It's like a savings account
An emergency fund can be equated to a savings account except that it doesn’t generate any return and is there merely to provide you with sufficient money to get through an emergency.
You should have an emergency fund that covers you for a period of no less than 6 months – which would be able to cover most cash emergencies and ensure that you never have to take out a high-interest loan.