How to Survive a Financial Crisis Without an Emergency Fund

Emergency Fund Series
Photo illustration to accompany article on how to get by in tough times if you have no emergency saving Getty Images
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Your emergency fund can be a fantastic resource to help keep your finances afloat no matter what obstacles life throws your way — an unexpected medical diagnosis, an economic recession, or even a global pandemic.

But the reality is many Americans don’t have a well-stocked emergency fund to guarantee security through tough times. 

While experts generally recommend keeping three to six months’ worth of expenses in an emergency fund, data from the Federal Reserve indicates nearly 40% of Americans already didn’t have enough cash saved to cover a $400 emergency before the devastation of the current economic crisis.

Even a small amount of savings can make all the difference when facing financial hardship, so it’s important to establish a plan and look for ways you can begin saving even a few dollars each month for the future. 

Still, by nature, emergencies won’t always fall in line with your plans, and when hardship strikes, you still must find a way through even without a financial safety net. Luckily, there are alternative resources you can turn to. 

Here are a few solutions to consider if you’re forced to face an emergency without an emergency fund: 

Getting Through an Emergency Without an Emergency Fund

If you’re weathering financial hardship due to the COVID-19 pandemic, whether you’ve been furloughed, taken on medical debts, or have been otherwise impacted, there are resources to help you get through the emergency, even if your emergency fund is lacking. 

Because of the unique nature of the current crisis, there are even more options and assistance programs you can utilize than there were a few months ago. 

While taking on debts or dipping into long-term investments may become necessary as a last resort, consider these assistance programs first.

File for unemployment

After losing your primary source of income, says Greg McBride, CFA, chief financial analyst at, “start by filing for unemployment and looking into other federal or state programs you may be eligible for, such as food stamps or Medicaid.” 

Even if you think you may not qualify, double check your eligibility. Furloughed workers, workers whose hours have been reduced significantly, and even freelancers and gig economy workers, among others, are now eligible for unemployment benefits under the CARES Act.

According to recent data from the U.S. Department of Labor, the unemployment rate was 13.3% in May. More than 43 million Americans have applied for unemployment benefits in the weeks since the coronavirus hit the United States.

Given this influx of filers, the process may be delayed more than usual, so it’s important to file as soon as possible. 

As you receive them, you can also put your smaller windfalls, such as a tax refund or stimulus check, toward your expenses and begin building a small savings cushion. Then start reaching out for assistance and make reductions in your budget to further stretch what cash flow you’ll have.

Ask for assistance

Reach out to your creditors, lenders, and other financial institutions to ask about your eligibility for financial hardship assistance plans. 

“You can get payment relief on your mortgage, your car loan, credit cards, and student loans if you encounter financial difficulty,” McBride says. “That can really lighten the burden of monthly expenses and allow you to focus what limited dollars you have on the real essentials like food and medicine.”

Look into pro bono services offered by financial planners and counselors for those affected, too. 

“I would encourage someone to sit down with their financial advisor or financial planner and they can help talk you through it,” says Liz Plot, CFP, associate financial planner at Ballast Point Financial Planning in Columbia, Maryland. 

Working on your budget with an expert can help you tailor your plan and minimize the long-term impact of any hardship you’re facing.

Streamline your budget

There’s no time more necessary to trim your budget down to the essentials than during an emergency for which you’re underprepared.

Since many businesses and retailers remain closed due to the pandemic, your discretionary spending has probably already been significantly reduced. Common spending categories such as eating out, shopping, going to bars, and attending concerts or other events will be easy to cut. If you had any upcoming events or vacation plans you have been forced to cancel, talk to a representative and get your refund in cash rather than credit or vouchers.

But looking at expenses that may not be so clear as places to cut — recurring subscriptions and fees, types of foods you’re buying at the grocery store, and gym memberships, for example — can make a big difference. 

Use a credit card

Taking on debt to cover expenses is never ideal, but if it’s the best option you have, there are ways to use credit cards or other loans wisely and reduce your future debt burden.

“Nobody wants to go into credit card debt, but if that’s your only option, make a plan to pay it off as soon as you can,” Plot says. 

If you have a healthy credit score, consider opening a credit card with a 0% introductory offer on purchases. A card with a 0% introductory APR for several months (these cards typically range between 12, 15, or 18 months) on new purchases can help you make ends meet now without the interest obligations later.

Still, adding to your debt balances shouldn’t be your go-to emergency plan.

“You want to hold off on that as much as possible because you’re going to have to pay that back later with interest,” McBride says. “Before you start resorting to debt, deplete your entire emergency fund.” 

Refinance your home

For many people, housing makes up the largest monthly budget line item, which means reducing housing costs by any amount when money is tight can be a great help.

Interest rates are low, so if you have good enough credit to qualify for the best terms, refinancing your home at a lower interest rate could save you a lot of money over time. Just make sure the costs and fees of refinancing don’t outweigh your savings, especially if you’re already struggling with payments. 

Like other creditors, many mortgage lenders are offering assistance programs for borrowers eligible for up to 12 months of suspended or reduced mortgage payments, which may be a better short-term solution to reduce their housing costs. Renters, too, should reach out to your landlord or property manager to ask for assistance or forbearance for a few months.

Just remember forbearance does not mean forgiveness. You will eventually have to make up the payments you miss, so make sure you work out a plan up front.

Borrow from your investments

Even in an emergency, dipping into your long-term investments, such as a retirement fund should be your last resort. 

According to Jill Schlesinger, CFP, host of the “Jill On Money” podcast, it’s a break-the-glass scenario. “I would really, really emphasize that pulling money out of that retirement account is a tough decision to make,” Schlesinger says. “There has to be a compelling reason to do it.”

Unless your situation becomes dire, don’t risk your long-term financial health and the work you’ve put into growing your retirement fund for short-term assistance, forfeiting your investments’ exponential growth potential. 

McBride agrees. “The tap into the retirement account should be your absolute last resort,” he says. “Look to borrow from family and friends before you touch the retirement account.” 

However, if you have investments in other accounts not tax-advantaged, such as an online brokerage account, it may be beneficial to cash out. You’ll lose out on earnings, but you’ll still come out on top if you’re able to avoid high-interest debt or other financial downfalls.

Coming face-to-face with an emergency before you’ve had the time and resources to prepare is scary — especially when the crisis is as uncertain and wide-reaching as a global pandemic.

Pro Tip

Instead of resorting to short-term fixes putting you in a worse position over time, a bit of planning and communication will allow you to reach the other side of any emergency more securely.

In Conclusion

Do what you can to get some cash coming in, whether finding a new job or applying for unemployment benefits. Then work on reducing your costs, saving what you can, and planning for the more distant future. 

The crisis may not end quickly, but remember eventually your circumstances will improve.

“Once you’re in a better position, write down a plan,” Plot says. “Sit down with your family and make a plan for what to expect while not working for a month or two, at least, depending on your area.” 

Not only will planning help keep everyone on the same page going forward, she says, but it can also be a tremendous emotional and mental relief amidst the uncertainty.

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