Staying On Track When Money is Short



Guest article, from a friend of Barbara Friedberg Personal Finance

As you know, it makes sense to develop a savings-investment strategy that involves regular, even if modest, contributions to Roth IRAs and 401(k)s. Building up those savings over time, with consistency, can make the difference between a comfortable retirement and one that is quite different from that.

But life is not always a smooth road. There are times when surprise expenses will occur, and those are the kinds of expenses that can disrupt a savings plan. Maybe it’s a surprise tax bill. Perhaps you have had car repairs, or medical expense co-pays. Perhaps it was a last-minute cross-country trip to visit a seriously ill relative. However necessary these may be, you do not want to allow such occasions to stop you from saving and investing.

You have several options for managing those kinds of unplanned expenses:

• Put it on a credit card – If you are disciplined about paying it off very quickly, this is not necessarily a bad choice.

• • Borrow from family or friends – Tread carefully on this option. If you are getting a personal loan from someone you know, be sure to put all terms in writing: How much was borrowed from whom on what date, and how you will pay back on the loan. Both lender and borrower should sign this as a “letter of agreement.” Understand it will affect the relationship for years to come if the borrower fails to pay back the lender as promised.

• Get a pay loan (paycheck loans) – The employed person always has the option of pay loans. Because these are now found online, it is an easy cash advance method of managing personal finances.
• Endure the penalties of late payments – You can look at the bills that are due and determine which can be paid late with the least degree of ill consequence (e.g., Bill A carries a $75 late fee, while Bill B carries a $45 penalty, therefore pay Bill A and allow Bill B to go late).

No one enjoys dealing with unplanned expenses and making difficult choices, but life is imperfect. In such times you still come out ahead when you make your best choice, given the set of circumstances you are faced with.

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