Twelve Ways to Raise Cash in an Emergency

The world changes, and our personal situations are not exempt from this. Sometimes bad things happen and we need money fast. From losing a job to being hospitalized, there are thousands of reasons why someone may need to free up some money. I’m going to lose my usual jovial sense of humor for this post, as serious topics deserve a serious voice. 2008 was a big year for a lot of people, fortunately in Canada we avoided some of the harsher consequences that were seen (and are still happening) in the U.S and parts of Europe. But that doesn’t mean we shouldn’t prepare for the worst and hope for the best.

#1 Redeem Rewards

This one didn’t automatically spring to mind when first writing the article, but it was a great tip found during my research and it had to be shared. The two biggest reward schemes currently being used in most households are credit card points (like Visa points) and Airmiles points. I recently started looking at my Visa points as I wanted to save every penny and go visit my family for a week this summer, and between my cards I have around $1,000 in redeemable points. To verify how many you have try checking your monthly statement and using your favourite search engine to find out if they have a rewards calculator.

While the points can’t be redeemed for cash, what they can do is help you save money in an emergency. Simply redeem those points for gift cards for stores where you buy your essentials (for example if you do your food shopping at Walmart). And use the cash you save towards going to pay for that emergency.

#2 Withdraw Money from RRSPs & Retirement Plans

This tip only applies to Canadians. U.S. residents have a similar set up called IRA (If you are American, also read Frugal Dad’s take on this). I like what ING have to say about RRSPs if your new to them. With a Registered Retirement Savings Plan (RRSP) and other retirement plans available there may be consequences and penalties for taking money out of the plan. It all depends on how much you have earned this fiscal year and what the money is for.

Many people are not aware that a RRSP can be used for other purposes than just for retirement. Two good examples where it may work in your favour are:

What you can use an RRSP for

To take money out early to buy a first house (stipulations apply). First-time home owners can take money out of their RRSPs to put as a down-payment on their first home (this money must be put back after a given period of time) without penalty.

If you find yourself unemployed (which may be the reason you need the emergency fund in the first place). RRSP penalties, in the form of actually paying tax on this income (which you didn’t do the first time round), are based on your income for the fiscal year. So if you are no longer employed, for whatever reason, your total earnings drop considerably. And can fall so low that you fall under the minimum threshold to pay income tax (even if your income is not zero the tax threshold will be much lower for you). So potentially you can take money out of your RRSP with no tax.

NB: If it is a real emergency, and you need the money quick but to not meet the above criteria, the RRSP can still be used. The only difference being that you will have to pay tax on that amount, equal to your current tax bracket. It’s important to remember that you may not be able to put all of the money back into the account within a time frame that suits you (the government limits contributions every year depending on tax contributions and your situation).

#3 Sell Stocks

In times of recession (or during market blips) selling stocks can mean you absorb huge losses. But it may not be as bad as it seems as:

Advantages: – Some of any potential loss can be written off in your tax filings as a deduction (you’ll need to research this for more information on percentages per province).
– Stocks can be liquidated relatively quickly.

Disadvantages: – Selling stocks because you need the capital, rather than because the profit hits a threshold you were interested in has it drawbacks, especially if the stocks are depreciated.

#4 Sell your Stuff

I’m going to break this section up into parts. because it’s important, and varied. It all depends on how much money you need and what you ‘need’ to get buy (i.e. if you can’t get to work by public transport then you need a car). My recommendation is to create a spreadsheet with items and anticipated resale prices to really see how much stuff you need to sell to make the money you need. Start off with the things you don’t regularly use and especially those which you will likely not purchase again (at a later date) or those you need for you job (like say tools if you are a handyman).

Places to sell your stuff:

  • Craigslist (great for household and novelty items)
  • Kijiji (essentially the same as Craiglist)
  • Yard sales (amazing for random articles, brick-a-brack, toys and clothing)
  • Specialty websites (like Autotrader, which is a free option for people wanting to sell their car)
  • eBay (good for electronics, but usually involves more work due to shipping)
  • Jewelry Stores (shop around, but regardless, a much better option than online cash for gold kind of websites)
  • Pawn Shops*. This is an important one, so pay attention. Until I conducted my research, I didn’t know the knowledge I’m about to impart.
*What you may not know about pawn shops is that they offer a relatively low interest rate (seriously). And, if the conditions fit, can actually be an extremely viable way of raising cash in an emergency. There should not be such a stigma with pawn shops these days (although there still is unfortunately), most are dressed up to be fancier than they once were, and they usually have good relationships with the police (they hand in serial numbers to the police). The interest the average pawn shop charges is actually in the range of under 2%, which if you do your homework, is less than nearly anywhere else on the market.

There is a catch though, and it’s a big one. If you need to loan money then this is a good option. If you think it will take more than 3-6 months to get back on your feet then use the above options to sell your stuff instead.

Let me elaborate, as with any lending institution, pawn shops need collateral. This collateral can come in many forms, mostly items that are considered ‘personal valuables’ (watches, gold, jewelry, electronics and other big-ticket items). And if you default on this load your collateral is lost. For example, you go to a pawn shop and pawn your laptop computer. The computer is worth $1500 second hand on eBay (you did your research). The pawn shop is likely to give you $1000 for it at a rate of around 2% for six months (they usually range from 3-6 months). If you default on the loan you loose out by $500 from what it was worth on eBay. if you manage to repay the loan then you have to repay $1020 for your computer (so it cost you $20). So, as you can see, one of the worlds oldest loan operating agencies can actually be a decent way to raise cash on the fly.

#5 Churches

Churches and charities are there for a reason. To help people in need. If you’re in need and they have the ability to help, you will be surprised how often they will. From my research online, it seems that there were lots of people that the church helped to pay a mortgage payment or two, in order to stop a repossession. It’s important to remember this if you ever fall on your feet again. Churches and charities cannot continue to help others without donations.

Not only may charities be able to help with small financial problems but food banks, as an example, can help reduce your living expenses, therefore saving money, which can be used as part of your raising cash initiative.

#6 Rent Your House Out

This is a clever one, and is probably a safer solution than #7. It’s simple. If you need a lot of money, or if you are in a position that renders it difficult to earn money or to at least not earn the same money you used to, then renting your house out is a good money generating option. If you can stay with family even better, family are more likely and more willing to accommodate you than to lend or give money outright. There is the option to rent somewhere cheaper than your current mortgage but this really eats into the money made from renting your house out. Hopefully, the income generated will sufficient to cover the mortgage and then some.

#7 Ask Family and Friends for Help

It’s not always money you need, in the direct sense, that people can help with. For example, friends and family can help babysit, which gives you more time to work and earn money.

But if it’s cash you need, then from personal experience (and some soft research) it might be better to sit down privately and ask for money rather than to borrow. Borrowing money can add unnecessary complications to a relationship, it might be better from the outset if they knew they were never going to see this money again.

NB: If there is anyone who actually owes you money at this point, now is a good time to try and call this in.

#8 Borrow from Lending Institutions

This is a huge topic. And for every situation there is a different answer. Try pin-pointing your situation and investigate which solution fits your needs only if you have no other means of gaining capital quickly.

Social Lending Clubs
A relatively new phenomenon Person-to-person (P2P) lending are usually facilitated on websites (research to find reputable ones) between someone who has some cash and someone who needs it. The percentage interest varies from person to person and from website to website and from amount to amount, but it is general less than that of an official financial institution (like a bank).

Re-mortgage or Access Home Equity
If you’ve been steadily paying off your mortgage for a few years, you have some equity invested in your home. Accessing this equity or borrowing against it greatly depends on your future prospects to repay the remainder of the loan. For example, and unfortunately, if you are made redundant or have been stricken with a disability that results in working no longer being an option, your ability to pay back a loan greatly diminishes and so does the likelihood that a bank or a lending institution will lend you the money.

But if you can prove that you are a good long-term bet for paying back the loan, then accessing this money is an option. The terms can vary and so can the percentage. But broadly speaking, you should receive anywhere from a 5-15% interest rate on a loan of this sort. This rate is much better than an unsecured loan, but again, it should only be used as a last resort.

Line of Credit
This option is popular, but because it’s easy and quick, not because it’s the best. It is wise to find out from your banker what line of credit they are willing to offer and at what percentage before you dismiss it as an option.

NB: The ramifications of these options mean that your monthly expenditures go up. The money you have borrowed must be sufficient to pay whatever needs to be paid, including the budgeted increase in payments because of this loan. Also, investigate any potential tax deductions you can make because of this new interest repayment (please check with your accountant). The above solutions have the added benefit of being long-term solutions, and really should not be used for short-term gain.

#9 Borrow/Get from Insurance Policies

A friend of mine tipped me off to this one. Apparently (and according to the LA Times), you can “borrow against the cash value accumulated in your account” ~ referring to a life insurance policies. It seems a little convoluted, but certainly something that can be investigated with your broker or insurance provider (if you have a policy that is).

Pros: There may be no set repayment schedule, or sometimes the loan may not have to be paid back at all. The loan process is relatively fast. No collateral needed. There is a potential to borrow against multiple policies (i.e. if you are in a relationship, you may both be able to borrow, doubling up on your loan amount).

Cons: The loan will affect the death benefit on the policy. Some loans that do require repayment may have a high interest rate (always do your research). Not all insurance companies offer it. You can only borrow against the cash you have already accrued with them.

#10 Work

That’s a broad title, let’s narrow that down:

Get a Part-Time Job
My mother had 3 jobs on the go when my parents decided that enough was enough and that we had to move out of the rough neighborhood I grew up in (it was going to the dogs). This move was expensive To their detriment, they got a variable mortgage and the repayments drastically went up and my dad worked by contract and at the time had trouble finding work. So my mum had a full-time teaching job, a night-school job and a weekend cinema clerk job (I loved the free movies and popcorn). It was only when I got older and started to work for a living that I truly appreciated her sacrifice, and I’ve learned a lot because of it (like I have an awesome emergency fund).

Getting another job in the short-term (even long-terms in some cases) can be a solution to get money. If you need money fast, then focus on the jobs that pay by the hour, give weekly paychecks and the best are ones that are in the service industry where you have the potential to earn tips. Other good options are seasonally high paid jobs like becoming a mover in July or a Santa in December.

Ask for a Cash-Advance
Depending on the situation, this could be an option. Bear in mind the potential ramifications of this, notably, bosses perceptions of you and your lower earnings down the road (as you are borrowing against future earnings). Certain professions lend themselves to this kind of solutions, like sales positions, contract and manual labour work.

#11 Credit Card

My colleagues didn’t want me to put credit cards as a way to access money quickly. But done right, it can be one of the best resources. Done wrong, it is, short of loan sharks, the worst option. You really need to ask yourself one question.

Q: How long do you think it will take you to repay the debt?

If the answer is more than a couple of months then this option should definitely be skipped. As long-term credit card debt is one of the biggest debt problems in our society. Mostly as credit card debt can reach over the 20% mark, and if you do not have the ability to pay this off quickly the minimum payments and the actual balance of the card can skyrocket.

If the answer to the question is “relatively quickly, definitely within a month or 2”, then this kind of debt is manageable. The interest hasn’t had the time to accrue and you even get points if you are using this money to buy things (and not withdrawing cash from an ATM).

#12 Save Not Raise

Our awesome friend Ariane (you can see her comment in the section below) made some cool suggestions to this list (the original article was 11 ways to raise cash). She is one of the most frugal-minded individuals I have had the pleasure of knowing, so I trust her wisdom.

Her tips were not necessarily to raise money, but to save money on the usual most common unnecessary expenditures to achieve the same goal. For example:

  • Making your own lunch for work instead of buying one
  • Trading stuff with friends and family (swapping items you need for items you have that are superfluous)
  • If possible make things yourself that you would ordinarily buy (from coffee to clothing)

If Possible, be Prepared

I conducted a survey with my friends, and I would say that roughly 50% actually have an emergency fund. The percentage shocked me a little at first, I didn’t think I had such responsible friends for one thing. Do you? If the answer to this is “no” then listen up, if the answer to this is “yes”, my next question would be – “how long could you afford to be off work [at your current salary] in case something bad happened (like a lay off or hospitalization)?

From my research, as a rule of thumb, it is broadly agreed that a readily accessible emergency fund should be able to last 6 months. One of my friends goes as far as having a standing order from her bank account that goes into another account (from a different financial institution, so she doesn’t actually see the money, and is less likely to use it outside of an emergency) to save for that ‘rainy-day’. Thanks Ariane

This topic is so important that I will follow it up with a more in-depth article on how to create an emergency fun, with some best practices as well as tips and encouraging a discussion. But even if you don’t have an emergency fun the worst thing you can do when you need cash quickly is to not think it through, which brings me to…

Consequences of Not Thinking it Through

So you need money and fast. That doesn’t mean you can’t think it through. Stop to think and analyse your situation, then research the best way to raise money for your particular needs. Otherwise you could be left with unnecessary:

  • Tax consequences (for example taking money out of an RRSP if the conditions don’t fit)
  • Bad choices and regret (let’s say you sell something that you actually need end up buying it back at a higher cost)
  • High interest rates (for example you choose credit card debt as a long term solution)

The Do’s

Do think about reducing your living expenses, no matter what you need the money for, reducing your outgoings will leave you with more disposable funds. Try reading and educating yourself on financial blogs, frugal living websites and coupon sites (like this one). And most importantly, try to only buy the necessities. Reduce you outgoings by getting rid of the non-essentials like:

– Cell phone contract
– The internet (potentially, as for some like me this is an actual necessity now)
– Stop using gas by going on non-essential trips in the car
– Personal luxury items

Do your research and ask for advice from friends, family and from trusted sources like an investment broker.

If you become unemployed there is no shame in going on unemployment benefit if you genuinely need it. Social welfare is designed to help, use it if you need it.

Try to stay positive.

The Don’ts

Don’t Gamble: Some people, in times of a crisis, try a quick fix approach. Remember the expression ‘the house always wins’? It’s for a good reason, don’t risk your future on the roll of a dice, no matter how tempted or how desperate.

Stay away from unsecured loans (if possible) and certainly loan sharks.

I want to discuss this. I have been there and while I may not be qualified to give individual financial advice I can talk with you about my experiences and I have a knack for research so I welcome questions. Have you ever been in this situation? Are you going through it right now?

I am open to editing this article. If, at any point you feel like you have a good addition to this article please make a comment below, and if appropriate, I will add it to the list. To share with people looking for help and advice on how to raise money fast and the best ways to do it in the short and long term.

2 Comments

  1. Ariane says:

    This is a very interesting post! At first I thought, wow, I’m doing number 1 and 2 so I guess I must be doing ok at raising cash when I need it… but it turns out I still have alot to learn. No 6 is very clever, although I doubt I’d have the guts to try :) I’ll keep all of this in mind for future reference. Thanks!

    I would suggest adding DIY and trading in the do’s. Sometimes we want/need things that we could make/repair ourselves after viewing a quick tutorial, and for very low costs (lamps, artwork, even furniture). Also, trading with friends might be fun and useful. I’ve mostly traded art for art, but I’ve seen people exchange furniture for art, etc. People move all the time and have stuff to sell, and sometimes it’s just what you need.

    Finally, my number one tip for reducing my living expenses is, as simple as it sounds, making my own lunch to avoid spending about $10 a day on bad food-court meals. It’s also way healthier. It does require a bit of time and planing, but I usually do it on Sunday and then I don’t have to bother for the week.

    • Stephen says:

      Thanks so much Ariane, I’ve added a new section (number 12) based on your advice. We would love to hear more of your tips you use to save money or to live a more frugal life. Drop me an email with some ideas and I’m pretty sure we’ll feature them!

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