Yesterday I asked the question when do you use the EF? A commentor asked the question what happens if you have no Emergency Fund? Good question. If you are blindsided or perhaps you are following Dave Ramsey’s philosophy and only have a baby emergency fund of $1k? What do you do? What can you do?
Well typically you can apply for unemployment. This might be able to cover your rent and utilities. Secondly, you might be able to land a minimum wage job waiting tables, retail, delivering newspapers, meter reader, or even cleaning homes. This might seem like minimal pay but it could mean the difference between being homeless and affording shelter.
Would I tell the person to move in with family? Absolutely. However, I hadn’t consider the ramifications of a lease. Depending on where you live, it’s possible (it’s happened to me) that you are responsible for the rent for the rest of the lease. Your landlord can sue you in small claims court. Granted, there may be nothing for them to take, so moving out, they may not be able to really get anything from you. You’ll be sending out bad karma to your landlord, and it could affect future rentals, but if you are without a job/income and renting, it’s possible the landlord would be evicting you anyway. Plus it does cost money to move, but not as much as renting typically. I think the bigger worry is being on the hook for the lease.
But what bills should you pay first? Obviously rent and utilities. Surprised I don’t say food? Well if you are unemployed, you can charge what you need to eat. Sounds crazy right? Well people do usually have a small stockpile of food that can last them a week or two, plus grocery stores take credit cards. It might be nuts to charge knowing you can’t pay, but what little cash you have left needs to be conserved for water, electric, heat, and rent/mortgage. Those you can’t charge.
People say they would cut cable, eating out, etc. In all likelyhood it’s already gone, but without an EF, there are very few options left on the table. You have to conserve cash for rent and utilities, while still eating, filling gas in the car or paying for public transit, and medical bills.
I’d also call all credit card companies and tell them the situation. Find out if they will allow you to miss a few payments or put your student loans in hardship deferral. Also it might be time to consider selling any cars that you owe money on. Granted if it’s so underwater, perhaps it’s worth considering taking the car back to the dealership and telling them you’re broke and can’t afford it.
I know in today’s economy it’s easier said than done finding a minimum wage job. But I’d like to hope that something could be found.
What would you do if you had no EF?
10 responses so far ↓
1 JoeP // Jul 29, 2009 at 9:52 am
If I had no EF, I first would not enter into the contractual agreements that come with cell phones, cable, satellite radio, broadband, etc. In other words, I’d put the establishment of the EF before all of those things.
If after all of that I still had no EF, then I would carefully consider more drastic measures: selling stuff on craigslist and ebay, getting a part time job, trimming expenses in other areas.
2 Meg from FruWiki // Jul 29, 2009 at 1:33 pm
If I had no EF… wow, that is a scary thought. Unemployment isn’t all that much, and it could take months to even get if we got it at all. Many companies are finding convenient excuses to “fire” people so they don’t pay unemployment and frankly, you’re not in much of a position to fight them when you’re worried about your next meal.
Anyhow, first off I would see if we could rent out our house ASAP if possible. Depending on what we could get, we might be forced to live with parents, but we might be able to stay, even if it meant giving up our master bed & bath as well as the office & taking the smallest bedroom.
I’d also see what we could sell — which isn’t much since we’re kind of minimalist, but at least that’s less stuff to move.
Hubby and I would both be job hunting and doing as many odd jobs as we could.
We would definitely eat what we had. It might not seem like a lot, but the rices and beans we have would go far and we’d still have at least an egg a day from the chickies as well as herbal tea that’s practically free and even some wild foods from the neighborhood (been meaning to try some spiderwort recipes, anyhow, and I hear they’re good with eggs). Heck, when my mom was going through a rough patch with my older siblings they ate a lot of fish (which she caught) and rabbits (which she raised & butchered herself). I’d like to think it wouldn’t come to that, but who knows. But before that — and before I’d put food on credit cards — I’d definitely look into local programs that give food or sell it at reduced rates (things like Angel Food Ministries).
We don’t have a lot of bills anymore, so no cable or gym memberships to cut. But we’d stop paying for anything we didn’t have to. No professional pest control at all and we’d at least drop the internet speed a bit — even drop it totally if things got REALLY tight (I don’t see that happening, though, since my husband and I both use it for work, and not just for full-time jobs). And we’d watch our utilities even more — and make sure that roommates paid part of the utilities this time around.
I think we’d survive, though. We did before when my hubby got out of college and couldn’t find a full-time job right away (and neither could I). That was the winter of 2001 — a very bad time for tech people especially. We weren’t so smart about it, though. We put a lot of things on credit cards and kept spending money on non-necessities thinking that our break would be right around the corner. Then when he did find a job he was very underpaid, at least compared to what had been expected. And that’s a lot of what we’re still paying off today — but again, we survived just fine
3 LAL // Jul 29, 2009 at 1:34 pm
Sounds good, but often starting out you have to put down deposits even on cable, internet, heat, electric if you have no credit. And so you might be using up a good chunk of your EF to put down 1st, last, and a month extra rent for DEPOSIT!
At least that’s what my roommate just did, you put down a minimum 3 month deposit and still pay rent. It really wipes out an EF fast.
I would definitely consider selling things. Part time jobs can take awhile to get.
4 Meg // Jul 29, 2009 at 2:43 pm
Assuming I had no investments you could liquidate and no emergency fund I would:
1. Charge whatever I could to my credit card.
2. Get a second (or third) job if possible.
3. Sell whatever I can – (jewelry, clothes, books)
4. Borrow from family.
5. Move home with family.
5 fengshui // Jul 29, 2009 at 10:19 pm
I’m down to my last $2k in my EF. I own my home. I will NOT sell. I will not move in w/ my parents. What I’m going to do now is work 2 jobs. I start my 2nd job next month. Between my 2 jobs I will work “about” 50-55 hours a week and I’ll be bringing in about $80k a year. I will be able to build my EF back up. I’m taking a HUGE gamble that my good health will continue and I will have no accidents or injuries so I can continue to work this much.
I don’t like being in this position, but I’m trying to make all of the right decisions from this point on. I’ve made a lot of changes because of this recession. One thing that is a permanent change for me is that I am no longer using credit cards.
6 Diasdiem // Jul 30, 2009 at 11:05 am
Ramen. Eat lots and lots of Ramen.
7 JoeP // Jul 30, 2009 at 2:22 pm
“Ramen. Eat lots and lots of Ramen.”
I OD’d on that stuff in college, so badly that the mere thought of the smell makes me literally gag! Plus the sodium and fat in that stuff is borderline criminal.
8 LAL // Jul 30, 2009 at 2:34 pm
Meg, I would do the same thing.
Fengshui, glad to hear you got some work finally! Congrats! Good job on not using the credit cards.
Diasdiem, eating ramen noodles for 1 month can lead to um, not using the restroom, trust me I know.
That worked when I was younger and healthier and could torture my body. Now I am not sure what would happen to my body.
9 Fred // Aug 2, 2009 at 7:16 am
I did away with credit cards in the 90’s. We are doing okay but I am considering taking a second job because our EF is non-existent. That scares me.
10 LAL // Aug 3, 2009 at 11:37 am
Fred, have you considered just cutting expenses for a few months?
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