Home > Personal Finance > 8 Soul-Crushing Situations When a Pile of Cash Comes in Handy

Comments 0 Comments

When is having a pile of cash on hand not a good thing? Pretty much never, unless you’re in a dark alley surrounded by armed robbers. But even in that circumstance, the pile of cash could help you get away with your life.

While you probably already know that you need that pile of cash in the form of a rainy day fund, a contingency fund, walking-out-the-door money — whatever you want to call it — there’s a good chance you don’t have it. A recent survey showed that nearly 40% of Americans don’t have enough money saved to carry them through an emergency, even something as small as an unexpected auto repair.

It’s when the big things happen — the catastrophes and near-catastrophes that occur in life — when having enough savings can keep your world from crashing down around you, or at least feeling like it is.

If you don’t already have an emergency fund, the most important thing is to make it happen and make it happen as soon as possible so you can at least have some financial control over your situation and don’t have to resort to desperate measures.

“Having a contingency fund gives us options,” Amanda Clayman, a financial therapist, said. “Money in a big sense gives us options, and there are a lot of pieces of our lives and our financial lives that are not going to be predictable, so we need to have as many options as possible in those circumstances so we can make choices about how we’re going to respond.”

Here’s a look at eight scenarios where a pile of cash can really save the day.

1. You’re in an Abusive Relationship

The important aspect of having a contingency fund in this situation is that you have money that’s under your control, Clayman said. Physical, verbal and financial abuse can often go hand in hand, so keeping your finances as your own can be important.

“A key red flag for financially abusive situations is that the abuser tries to control all sources of your money — your income, your assets, your credit — they may even try to trash your credit,” Clayman said. “So you need to make sure you remain in control of all of those resources at all times.”

If you’re worried about your significant other negatively affecting your credit, you can check your credit scores for free every month on Credit.com to keep a constant eye on what’s happening to your scores.

2. You’re a Victim of Identity Theft

Identity theft can totally screw up your financial life. For years, potentially. While you can freeze your credit reports, change credit card numbers and report it to the authorities, you still could be working from a cash-only basis for a while. Unless you’re good and liquid, that can be a huge financial burden.

“We take for granted how credit makes our lives easy, like when renting a car,” Clayman said. “If all of a sudden you need to put that type of expense on your debit card, they’re going to place a hold on your account — it’s usually three or four times whatever the anticipated cost of that expense is, so that’s an amount you’d need to have liquid in your bank account.”

3. You or a Loved One Has a Major Health Crisis

If you or a loved one gets a major medical diagnosis, it can be life altering and highly stressful. There is the adjustment to your “new normal,” trying to understand what medical treatments will be needed, assessing the possibility of lost wages, healthcare assistance costs, etc.

“Having money in the bank allows you the mental and emotional space to simply adjust to what the primary health concern is going to be,” Clayman said. “It’s much harder to do that when you’re also adding financial stress and vulnerability to the picture. There’s lots of evidence that suggests financial stress can exacerbate any type of health concern.”

4. You Have the Boss From Hell

“Having the freedom to leave a toxic situation is just something that is fundamentally good for all people,” Clayman said.

While most financial experts suggest having at least three to six months of living expenses available in an emergency fund to provide just that kind of freedom, Clayman said that number can be daunting if you’re starting from zero.

“Instead of focusing on time, start with incrementally smaller goals,” she said. “Make your first goal $1,000 … and build up, absolutely, to three to six months.”

5. You Lose Your Job

Unemployment is a financial setback, but it doesn’t have to be disastrous, especially if you have an emergency fund. While there are safety nets like unemployment, and options like part-time jobs, and living off your credit cards (which should be avoided, when possible), having enough money on hand to pay the bills while you look for new work can have a huge impact on your day-to-day outlook and ability to focus on finding your next job opportunity.

6. You’re a Victim of a Natural Disaster

“When we have a shock, when something just comes out of the blue, it takes some mental and emotional catchup work to really take it in and deal with it,” Clayman said. “Our brains and bodies are mostly setup to deal within a particular status quo.”

It’s this kind of situation where lack of financial preparation can lead to serious life setbacks, including long-term homelessness.

Clayman, who has worked with trauma victims, including some who were displaced by Hurricane Katrina, said a lack of money in these circumstances “adds a sort of traumatic multiplier, if you will. It can affect how you’re practically able to deal with the situation.”

Living below your means is key, Clayman said. “In order to do that, we have to be aware of two things: how much money we have coming in … and how much it costs to be us,” she said.

7. Your Spouse Dies

Having insurance, making sure you have access to your spouse’s accounts, including passwords, PINs and other pertinent information is key beyond having an emergency fund, Clayman said.

“Making sure you have access to enough money to cover the day-to-day expenses for say, six months — you just want to be able to not have this awful loss and trauma exacerbated by any disruption in your general financial life.

It can take a long time to set up things like survivor benefits through Social Security, she said. “So the more you can do to keep your financial wheels turning, the better.”

8. The Unknown

The bottom line is, life is full of surprises and the only thing you can really control are your personal choices. Choosing to create a savings account for those surprises by making changes in your spending or even taking a second job can put you in a position of power when it comes to dealing with them.

“It’s valuable in all these underestimated ways, big and small,” Clayman said. “Even if you’re a shift worker, having a contingency fund can mean even if you get the flu, you’re still able to pay your rent that month. So much of life is outside of our control … setting aside this money allows us to deal with the curveballs life throws at us … and take care of ourselves.”

More Money-Saving Reads:

Image: Bananastock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team