If you are financially strapped for cash from a medical issue, losing a job, losing benefits, taking a pay cut, etc., then there are many ways that you can get cash fast that will leave you worse off in the future than you are today. Payday loans typically charge $15 per $100 borrowed, or upwards of 390% APR. Taking cash from a traditional IRA plan you have diligently stashed money into for years can deplete your earnings quickly because of a 10% penalty most will incur to do so, as well as having to claim that money as income for the upcoming tax season. Borrowing from friends and family seems like a good idea because it keeps you out of the hands of strangers who will usually charge more interest, and be less lenient in repayment; however, you risk damaging your relationship with that person. And charging everything to a credit card with average rates of 15.94% is a costly option.
So if you are in a financial pinch, what are some healthier ways to drum up a wad of cash? Please note that the following are truly meant to be used in as last resorts.
Request a Balance Transfer from your Credit Card
This option is typically only available to people with good to excellent credit scores. Request a balance transfer from your credit card (not a cash advance), to capitalize on your credit limit by moving part of your credit card charge limit to another card. The amount of balance transfer that you move to another card will be written out as a check to you. In other words, you get a check for the amount of the balance transfer, and the debt is now incurred on another credit card that you own. If you transfer this new debt to another card with a promotional 0% interest for 6-12 months, and pay off the amount of the balance transfer within that time period, then you have gotten yourself a free loan to get you through a rough patch. Here is a list of credit cards with this sort of special promotion to get you started.
Assess your situation, and make sure that you can pay all, or a substantial amount, of this money down within the 6-12 month period. Otherwise, you may be looking at upwards of 20% interest on your balance transfer.
Carpool Using Your Car
Establish what your carpool buddy will pay (presumably half of the gas bill, and possibly a little extra for wear and tear on your vehicle), and start collecting a week later. This is great for a short-term, small infusion of cash, or for spikes in gas prices. If you do not know of a co-worker that lives near you, you can go here to find other people who live near you and are looking to carpool, or put an ad in craigslist/ local paper. For those living in the following areas: Houston TX, Washington D.C. metro area, Connecticut, Hampton Roads VA, New York metro, New York/Connecticut metro, Richmond VA, or San Antonio TX, sign onto NuRide to log carpooling miles and receive gift cards from earned points, as well as to find carpooling buddies.
Get Out of your Cell Phone Contract
Most cell phone providers have us all fooled with a two-year contract. You get a shiny, new phone that is generally free or nearly free for a two-year commitment (and if you do not sign onto the two years, that same cell phone all of the sudden costs a whopping $250-300!). Then there is an early termination fee of between $100-$200. All of these extra costs makes paying the $50-$150 per month (a $50 per month bill and contract of two years will cost you $1200 over the course of the contract) seem like a necessity given the alternative of coming up with $100-$200 to get you out of a contract.
I am here to tell you that there are ways to get out of your contract, and to not pay the early termination fee. One of the easiest ways is to find a person who will assume the rest of your contract for you (and your cell phone number). If you find a willing person, you both can call up the cell phone provider and get the contract transferred. There may be a small nominal fee to do this, but it pales in comparison to continuing to make the monthly payments over a two-year contract. Check out online sites that pair together people who want a cell phone contract to people who want to get rid of theirs, such as CellPhoneDepot.com and Cell Swapper. Another way to get out of contract for free is if your service provider changes its terms of services in anyway, you can void the contract (this happens frequently so take a look at your last month’s bill for any indication that this has occurred). Typically you are given 30 days from the change notification to cancel the contract with no charge.
Cash in Your Unused Gift Cards
A great service that allows you to sell your gift cards for cash is Plastic Jungle. You sell the gift card directly to the website—you do not need to wait until a buyer is interested—which means you will get your money more quickly.
Take Money Out of your Roth IRA
Unlike a traditional IRA, you can withdrawal the money out of your Roth IRA that you have contributed (not the earnings) at no penalty to you. It would be best for you to pay this back to your future self.
Take a Loan from your 401(K)
This is a loan; however, the interest rate that you will be paying back is going directly into your 401(K) plan. So you are paying interest to yourself, and not to a lender. Check out this article for the pros and cons of a 401(K) loan.
Go on a Spending Lockdown
Our hiatus on spending money began Friday night. The reasons are twofold.
- Number 1: our mortgage broker sent us an email that said we basically have to report to them anytime between now and closing when we move money around between our accounts, charge more than $500 on our credit card, or breathe.
- And Number 2: we need all the money we can get for appliances and such after the actual purchase of our home, and know that more unexpected costs are sure to pop up.
Going on lockdown is not a far stretch for us. Because I deal in ExtraCare Bucks and the grocery store game, we have quite the stockpile built up (see upcoming article: Plague of Overconsumption). I have enough toothpaste, shampoo and other toiletries, trash bags, plastic bags for lunches, etc. to last several months. If you look in our hall closet, we are flooded with spaghetti sauce, sugar, flour, coffee, bread crumbs, croutons, noodles, pasta, tea, etc. Thanks to some great deals, our cat Lyla is stocked up with a year supply of litter, and probably six months worth of food and treats. Plus, we’ve each got at least a dozen books and movies in our collection that we have yet to enjoy.
Granted, we cannot be on complete lockdown. We will need some food to complement the reserves we have in our freezer and supply closet (like veggies/fruits, cheese/dairy). Kroger’s is having a one-day sale where they will double coupons from $0.40 to $1.00 in value on Saturday August 15th, (and ofcourse continue to triple coupons below $0.39) and I will be taking advantage of this. I just filled up my tank with gas from a free gift card, so I should be set for the month in gas, but I am sure Paul will need to fill up once or twice. All of our bills will still be paid. But “no” will become a much more used word in our vocabulary over the next month. The trick is, we are going to substitute something for everything that we say no to in order that we don’t feel like we are denying ourselves. Feeling like you are denying yourself can lead to a nasty spending binge at the end of the month.
Here is what we will be saying no to, and what the substitute will be:
- Eating Out = cooking at home, freezing a few meals or leftovers for nights when we will be too tired/busy to cook, and an occasional barbecue at family and friends
- Tickets for Concerts and Such = Miller Outdoor Theater free concerts/plays
- Buying Cute New Things for the House (oh the urge…) = perhaps picking out what we would like to go in our gift registry for the wedding
- New Clothes = I have a free $10 off $10 gift card to VS
- New Books/Dvds = a fully stocked book shelf at home with many books we have yet to read
- Going Out to the Movies = an occasional free premiere invite to Studio Movie Grill Theater makes its way into my inbox, as well as just getting movies on our Netflix subscription and watching those
Is it worth the sacrifice? I will admit that the list of things we are denying ourselves will basically be cutting us off from society. But by saying no to these things, we will be saying yes to a beautiful new home. In my book, that’s worth a few movies and a night out on the town.
What about for you? Having a no-spend month can help to jump-start many things in your life: an emergency fund, saving for a vacation, a down payment, paying down debt, etc. Perhaps you want to start easy, and go with a no-spend weekend, or week. While you almost certainly cannot get away with spending $0 for the month, you can set yourself a very low ball budget and then bank the rest for whatever is important in your life.
Leave a comment with ideas, or just to let me know how it goes!