7 Steps to take when you’ve fallen financially:
No one is immune to financial problems, as we all experience them at one point or another. The difference lies in how deep we get into those problems.
Some of us run into the usual budgeting problems, which could be manageable if we control our tendency to overspend or splurge on our guilty pleasures. Unfortunately, others could find themselves in very unfortunate situations that are beyond their control, which leads to a heavy blow to their finances.
How do you deal with a financial crisis when it happens? Here are tips to keep in mind to help you manage your financial problems and get you back on track more easily.
- Identify the Source of Your Financial Problem
This first step is important, as you need to see the big picture of your financial status. It’s highly likely that you know what’s causing the slump in your finances, but you also need to identify other underlying problems that might be worsening your situation even more.
Being a first-time parent, for example, could cause a drop in your income, especially if you have to stop working temporarily. The prospect of not earning as much is a problem in itself, but if you fail to adjust your lifestyle based on your current cash flow, your expenses could balloon into something more than you can handle.
- Maximize Your Liquid Assets
Liquid assets are those that can be converted into cash quickly such as your savings or checking account. These let you take out your money without causing more losses to your finances, unlike when you take out your investment from the stock market during unfavorable market conditions, which could reduce the value of what you have invested.
Hopefully, you have saved three to six months’ worth of expenses in your liquid assets which you could use to help tide you over until your finances improve.
- Set a Realistic Budget
Having a budget could be of great help for you at this time, so if you’re not used to following one, this is the perfect chance for you to do it.
A realistic budget is one that accurately reflects your monthly income and expenses. When you have this information in budget form, you could easily see where you need to cut back on.
If there’s a huge disparity between your income and your expenses, it might be a good idea to do the next thing on this list.
- Look for Other Sources of Income
You might feel that despite all your budgeting efforts, your income still does not suffice. The most logical thing to do then is to try to work on the side.
It’s not so hard to look for a second job these days, especially those that you can do right from your own home. Check out online job sites, and chances are there’s something you can do that will let you earn a few extra bucks.
If you’re not so much into freelance work, you could ask your family or friends if they need any help with some tasks that they can no longer fit into their schedule.
You could also set up a garage sale to get rid of your old stuff that others might still find useful. Use social media to let others know about your plan since some may be interested in partner with you on the concession.
See also...8 timeless money tips to put to work in 2018
- Lower Your Monthly Bills
A major financial setback may test your ability to exercise prudence in keeping your expenses to a minimum. You have to be ready to make small sacrifices if your goal is to save every penny possible.
You could start by limiting your phone, cable, or internet bills to a basic plan instead of a premium one.
Encourage everyone in your household to do their part in keeping your electric or water bills down, too.
- Maximize Your Non-Cash Assets
You might have those store discount cards or gift certificates that you haven’t used up. Apply those credits the next time you shop for grocery or gas, so you don’t have to spend your cash.
If you have accumulated a lot of those gift cards through the years, you might want to sell some of them at a slightly lower price and keep the rest for future use.
- Negotiate with Your Credit Card Company
If you have credit card bills that have accumulated into huge debt, you should waste no time in contacting your credit card company. Every time you miss a payment, the finance charges keep piling up too, causing your bills to swell every month.
Check with your bank if they could waive your penalties, work out your terms of payment with them, and request them to suspend your account for the meantime until you pay off the entire balance on your credit card.
Going through a financial crisis is one of the most difficult challenges in life, especially if you have not saved or prepared enough for better days. However, there are corrective measures you could do to get back on your feet after experiencing a financial plunge.
At the end of the day, you may see how developing more awareness, discipline, and self-control in the way you handle your money and other resources could give you financial stability and security that’s for keeps.
Comment below with thoughts or questions.
Carol Soriano is a consultant for PawnHero.ph. A writer at heart and a social media enthusiast, she finds personal finance, investment and money matters interesting topics.