How to Access Hardship Funds When Times Get Tough (4 Video Links)

If you’re like most Americans, at some point, you’ll likely need to address the financial needs of a situation that doesn’t have an obvious solution. Maybe you discovered a surprise medical bill is coming up, or possibly your job unexpectedly closed, and you need to secure another source of income.

 

Whatever the case, if you don’t have a savings account set aside for such situations, it might be time to start thinking about accessing hardship funds when times get tough. Accessing hardship funds can provide peace of mind during uncertain periods. They can also help ease the pain of unexpected financial shocks by reducing the burden on your household budget until things improve again — or at least until they don’t.

 

This article will cover everything you need to know to set up a bank account, access emergency funds from a trust, or even open a separate retirement account for those situations when it makes sense.

 

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What is a Hardship Fund?

A hardship fund is exactly what it sounds like — a fund you set up specifically to cover unplanned financial expenses. That’s a good thing-because unplanned expense can and will happen to everyone, rich or poor. Hardship funds are commonly used by people who are unemployed, between jobs, or who have experienced an unexpected reduction in income. A sudden job loss, a medical bill that is unexpectedly high, or a major reduction in income can put you in a situation where you need to access hardship funds.

Setting Up a Bank Account for Your Hardship Fund

When setting up a bank account for your hardship fund, you’ll need to figure out exactly where you want to keep your money. There are a few good options for this. It can be a savings account, an investment account, or a combination of both types of accounts. The important thing here is that you save the money in a separate account from any other funds you might be holding. Once you’ve figured out where to keep your funds, you can move on to the next step.

Accessing Emergency Funds from a Trust

Emergency funds are often accessed by people who find themselves unemployed or experiencing unexpected medical bills. This can result from an accident, a serious illness, or a surprise bill from an unscrupulous healthcare provider. In these cases, the best way to access emergency funds is to open a trust account. Trust accounts are a great way to store funds without anyone knowing exactly where they are. In other words, any withdrawals from the account will be reported as “other income” on your taxes. You can set up a trust account under the name of your spouse, children, or anyone else who is trusted to access the funds. Once the account is set up, you can transfer the funds into the account and withdraw funds in an emergency.

Accessing Bail Bonds

Bail Bonds are another way to access emergency funds when needed. This is different from accessing a trust account, as it is another type of financial tool used by law enforcement. There are two ways that bail bonds are often used. The first way is when a friend or family member bonds someone out but then can’t make the bail. In these cases, the friend or family member uses the funds to get the friend or relative out of jail. The other way that bail bonds are used is when a person can’t make bail. A person may contact bail bond services to access bail money to ensure release when expenses cannot be covered immediately.

Opening a Separate Retirement Account

You can open a separate retirement account if you have a substantial amount of money that you would like to keep for unplanned expenses. Doing this allows you to keep your regular everyday retirement fund separate from your unplanned funds. This will help ensure that the money is working for you instead of you having to take money away from your retirement account to access a hardship fund. There are a few things to remember when opening a separate retirement account for your hardship fund. First, if you are over 55, you can waive your traditional IRA’s 10% penalty tax and make the funds tax-deductible. If you open a separate retirement account for your hardship fund, the tax will be taken off at a 10% rate.

Wrapping Up

Accessing a hardship fund can provide peace of mind during uncertain periods. They can also help ease the pain of unexpected financial shocks by easing the burden on your household budget until things improve again — or at least until they don’t. There are several ways to access a hardship fund in the event of an unplanned financial expense. The best way to access a fund is to open a trust account, access a bail bond, or access a separate retirement account.

 

Consult with a financial advisor and a licensed attorney regarding these issues.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(amazon author page) amazon.com/author/kenboyd

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/