How to Get Money If You Don’t Have a Reserve Fund
Financial emergencies come to all of us, and when they arise, you need a cache from which you can get at least some of the costs you incur.
But if, like many Americans, you don’t have a reserve fund and need money quickly, there are several other sources you can turn to as a last resort. These buckets usually come with a commission or interest, so again, they should be used with caution. But these are options if you need quick financial help.
401 (k) loan
If your 401 (k) plan allows loans, you can usually borrow more than $ 10,000, or 50 percent of your guaranteed balance, up to a maximum of $ 50,000 (although your plan may have its own limits). No credit check is required, so your credit rating will not be affected.
However, with a 401 (k) loan, keep in mind that you usually have five years to pay back what you borrowed (unless you quit your job) . When you do pay it, “the good news is that you are managing your money and paying interest back to your account,” notes Kiplinger , because technically you are doing your own business.
Assuming you can repay it within five years, this is a potentially interest-free way to access the funds you need. “As long as the plan allows it, members can usually borrow from their 401 (k) for any reason,” notes Credit Karma . “Some plans may only allow loans for certain reasons, so be sure to read your plan’s rules before attempting a loan.”
And remember that you are missing out on potential retirement savings / total income when you withdraw money from your account.
Roth contributions
Likewise, if you have contributed to Roth, you can withdraw those contributions at any time without paying taxes and penalties. However, you cannot withdraw profits unless you meet certain requirements .
Equity line of credit
A Home Equity Line of Credit (HELOC) is a secured loan that is secured by your home. However, you were not lent a specific dollar amount; rather, you are given a line of credit and can borrow up to that amount, like a credit card, over a period of time. The interest rate applied is usually variable (as opposed to a home equity loan ). Bankrate writes:
The borrower accesses the line of credit using specially issued checks or a card that looks like a credit card. Lenders often require you to take an initial down payment when you apply for a loan, withdraw the minimum amount each time you dip into it, and keep a minimum amount outstanding.
Obviously, this option is not available to everyone (you must be the home owner), and if so, your home will be on the line if you don’t pay back the loan. But it can also be a way to make some money.
Waiver of HSA
Kiplinger notes that another potential source of emergency money is your HSA. Here’s how it might work:
If you have used other funds to cover recurrent medical expenses, you can save the money you contribute to the HSA and use it as an emergency fund if you match the withdrawal with the related medical expenses that you have incurred since account opening. even if it was years ago. Keep a cache of receipts for the expenses you paid for eligible medical expenses in your records.
In other words, if you have HSA and can pay with cash now, you may be able to get your money back later to cover the emergency, provided you keep your receipts (otherwise it is prudent to keep your HSA funds to cover medical costs). pension costs, if you can download).
If none of these options work for you, work towards creating this emergency fund.