Can you handle an unexpected bill? How to manage your finances in a crisis

How would you feel if a big bill landed through your letter box (or, more likely these days, popped into your email inbox)? About half of people in the lowest three socio-economic groups – known as C2DE in marketing circles – would simply be unable to pay a £500 bill from out of the blue.

These were the findings from a new survey by YouGov for The Times, which tellingly also found that a third of middle class people would also be left struggling in the same circumstances. One in ten of this group – the ABC1s – would have to borrow money even to pay off a shock £100 bill.

It’s clear, then, that a significant number of people are precariously poised when it comes to their finances. If you’re in that number, what should you do?

Budget

What do you have to spend each month? It’s vital that you know your exact outgoings or your chances of navigating a crisis will be scuppered before they start. Budget planning tools – such as this from the Money Advice Service – will help you to do this pretty simply in about ten minutes. Make sure saving counts as one of your essential outgoings. Even £20 a month put into an emergency fund could prove vital in the long term.

Access

Got a little bit of money in savings that you can’t get at? This can be particularly frustrating in a time of crisis. Make sure you can get access to your money if the worse comes to the worst, that way the money you do put aside really can be used in a ‘rainy day’.

Cut your bills

During this process you might be surprised to see just how much your bills are costing you. Use this as an inspiration to cut the cost of these. Head to price comparison sites and see if you can switch energy providers or maybe reduce expensive mobile phone and television packages. The money you save here can go directly into paying for your bill.

Manage debts

Why is it that you’re so unprepared for an unexpected bill? Is it that you’re in debt? If so it’s time you got in control of this. You need to know what you owe, who to and on what terms. If this is too hard to keep track of, consider consolidating your debts so that you know exactly what you need to pay in the months ahead and you’re less likely to be completely knocked off course.

Plan to pay it off over time

If it’s a big bill, then you might well need to borrow to get it paid off. Don’t panic, but make sure you are able to keep up with the repayments and are aware of the full cost involved before you sign up to anything. Avant Credit and Onstride are examples of online lenders that offers loans for such unexpected costs, with quick access to cash that can be paid off over a 12 to 60-month period. Structure your debt sensibly – paying off as much a month as you can without stretching your freshly-sorted budget – and this can be much less of a crisis as it might first appear.