7 Steps You Should 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. There are those with relatively manageable debts, but there are those unfortunate souls who find themselves in serious financial trouble. In case you fall into either situation, it’s how you get out of the hole that counts.
We all have our ways of dealing with financial problems, but how do you deal with yours when it happens?
Steps to help you manage your financial problems and get you back on track:
Identify the source of your financial problem
Awareness is always key before tackling any kind of problem. This first step is quite crucial, 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.
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.
The same goes when picking up a new hobby or purchasing an asset such as a car. Any kind of hobby incurs costs, and getting into an expensive one will surely give you a headache if you’re spending more than what you can afford. The same goes for maintaining a car. The bottom line is, you have to find out what’s chipping away at your finances so you can address them immediately.
Take time to evaluate your financial situation. List down your sources of income such as your salary or other side businesses. The, enumerate all your expenses including your rent or mortgage, utilities, food and groceries, monthly subscriptions or recurring membership fees, leisure activities, and other miscellaneous expenses. Do you have money left over for your savings, or are you spending more than you’re earning?
Maximize your liquid assets
These, let you withdraw 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’ve saved three to six months’ worth of your monthly income. Dipping into your savings will help tide you over until you’ve found other ways to improve your financial situation.
Set a realistic budget
Having a budget that you follow to the letter could be of great help to you at this time. But if you’re not used to following one, this is the perfect time to do it since a budget is one of the most effective tools that could help you climb out of that deep financial hole you’ve fallen into.
A realistic budget is one that accurately reflects your monthly income and expenses. When you’ve acquired this information, you could easily see where you need to cut back on. You will have to make sacrifices to make sure you stick to a budget that would help you get out of debt. You might want to skip eating out at expensive restaurants or switch to less expensive brands when grocery shopping.
If there’s a huge disparity between your income and your expenses, it might be a good idea to find other sources of income.
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 augment your earnings by freelancing or starting a small business on the side.
It’s not so hard to look for a second job these days, especially those that you can do right in the comforts of your own home. You can spend time on the internet to check out online job sites. Chances are, you’ll find work that fits your skill set and help you earn a few extra bucks.
If you’re not so much into freelance work, you can ask your family or friends if they need any help with some tasks that they can no longer fit into their schedule. They could teach you how they’re done, which could help you learn new skills while helping them unload some of the work that may stress them out. It’s a win-win situation.
If you have a lot of personal effects and household items that you’re not using anymore, 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 partnering up with you on the concession.
Another way to boost your income is by monetizing your hobbies. For instance, if you’re a talented baker, then maybe you can sell pastries, cookies, and cakes on the side. Or perhaps you’re into arts and crafts, then you can sell some of your finished projects.
Lower your monthly bills
A major financial setback may test your ability to exercise prudence in keeping your expenses to a minimum. You must 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. Or perhaps you can let go of your gym membership and work out at home instead. Keep an eye out for promo plans, too. Remember, any opportunity that lets you lower your costs of living should always be taken into consideration.
Encourage everyone in your household to do their part in keeping your electric or water bills down, too. This kind of attitude not only helps you in keeping your expenses low, but it also helps save the environment.
Maximize your non-cash assets
You might have those store discount cards or gift certificates that you haven’t used yet. Many stores also offer membership cards that accumulate points that you can exchange for items. Make sure to take advantage of those credits or points the next time you shop for grocery items or gas, so you don’t have to spend your cash.
If you’ve collected 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 been left unpaid resulting in huge debt, you should waste no time in contacting your credit card company. Every time you miss a payment, the penalty fees 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 to suspend your account for the meantime until you pay off the entire balance on your credit card. Getting into a huge credit card debt not only puts you in a financial crisis but if left unpaid, gives you a bad credit reputation. Being in that kind of financial situation will potentially hurt you more.
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 such as making a VUL investment. However, there are corrective measures you can do to get back on your feet after experiencing a financial nosedive.
At the end of the day, you may see how developing more awareness, discipline, and self-control can help you handle your finances and other resources. You will realize that it’s all about financial planning. Ultimately, your efforts will give you the stability and security needed to free you from the chains of debt and financial ruin.