Ways to Unlock Cash in an Emergency

From tapping government programs to liquidating assets, you have options to unlock income in an emergency.

Written by Elaine King CFP® / August 3, 2022

Linda, a friend from college, was thrilled when she got a new job offer. She had been waiting for months. Due to the nature of her job and contract she signed, she had to take a month break between positions. While talking to her human resources manager about the benefits that would cease, including health insurance, she decided to take the risk of going uninsured for a month. What can happen, right? Unfortunately, a stomach ulcer that cost $12,000 out of pocket is what happened.

Just like Linda, you could face an unexpected emergency like a car repair of $7,500, a leak from a roof at $15,000 or your child going to college when you are about to get laid off. In a perfect world, you will have an emergency fund to avoid tapping your credit card and the never-ending payments. But with all the recent economic and pandemic uncertainties, it is likely your emergency fund is near depleted, so how can you unlock cash in an emergency? There are several sources you can count on. Depending on your emergency you may be eligible for government funding, or you may consider taking some liquidity out of your own assets or finding alternative sources of income.

Inside this article

  1. Government funding
  2. Liquidity from your own assets
  3. Creativity liquidity

Government funding

In an emergency, it is helpful to know which government programs are available. Needy families can get temporary assistance with some states paying up to $650 a month. There's also nutrition assistance, emergency rental assistance if you are in danger of eviction, energy assistance programs for utility bills and down payment assistance programs such as those that help with closing costs, among many others.

If you have a child that is going to college, they should apply for a Pell Grant ,which can get them up to $6,493 for the 2022-2023 school year. In the event your emergency is business-related, you can go to SBA.gov where you can find loans to cover your business emergency, capital from future investors to provide liquidity, disaster assistance, and surety bonds to anticipate future client payments.

Liquidity from your own assets

Some of your assets may be able to provide a temporary bridge loan until you can pay off the total amount of your emergency. The idea here is to find a short term loan that can beat your credit card interest rate, which on average is 19.90%.

You could tap on a home equity line of credit, which currently is at 4%, keeping in mind that it’s a variable rate, which means that as interest rates go up, so will your interest rate and it will be to your benefit to pay it off as quickly as possible. Another option, could be to borrow against your 401(k). That interest rate may range from 1% to 2% higher than the current 4% prime rate. If you choose this option keep in mind that the amount you borrow stops growing and you will pay taxes on the withdrawal.

Finally, if you have assets invested in the stock or bond markets, you can get a margin loan, typically 50% of the account value. Here you will collateralize your assets but, be careful to do so in a negative market outlook since the value of your collateral can go down, which may trigger a margin call, forcing you to deposit additional cash or securities to cover losses.

Liquidity from your own creativity

I am sure there are things in your home that you don’t use and still hold value such as vintage items, collectibles and brand name accessories. There are several apps you can use to list these items:

  • Poshmark for branded fashion

  • Offerup for furniture

  • Craigslist for electronics

In addition, you can always rent out an empty room on Airbnb or sublease your car. Finally, take those talents and put them to work. Try freelancing or side hustling. Places like Upwork and Fiverr are good place to advertise your abilities.

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About the Author

Elaine King

Elaine King CFP®

Elaine has served as the Family’s Financial Planner for over 1,200 families and 100 multigenerational family enterprises crafting actionable family financial plans.

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