Having a major hit on your finances by any event such as unemployment, pandemic, disease etc., can be traumatizing. It can make you go sleepless for nights.
This mere thought of going bankrupt can take a toll on your peace. Being prepared for the situation may not change the situation but will help you cope with the situation effectively. Here are few tips for dealing with your personal finances efficiently:
1. Focus on Liquid Savings
To be financially stable, you should focus on the resources that can be easily liquidated. Resources such as certificates of deposit, short-term government investments, savings, etc., can help difficult times.
The main benefit of these resources is that the value doesn’t fluctuate with the market and will give a decent return when you need it, unlike stocks and exchange-traded funds.
Having such resources may save you from any financial loss. Also, there will be no early penalties.
Stocks are considered a risky venture as they are dependent on the stock market and may fluctuate often. It is advisable to invest in the stock market only when you have several months of liquid cash.
The golden rule of staying financially stable is to budget your finances. Budgeting will help you get a clear picture of the incoming and outgoing of your money in an organized way.
Budgeting your finances will also help you to keep some money aside for the emergency fund. It will also give you an idea of how much means you have to incur your expenses and put them in your savings account.
A budget may open your eyes and help you stabilize your finances by giving an actual picture.
3. Minimization of monthly bills
The only way to save money is to cut down on your expenses. In case of financial constraint, it becomes necessary to minimize your monthly bills and expenses. Keeping your monthly payments on the lower side will help you make regular payments even when there is a money shortage.
As mentioned below, focus on budgeting and keep a check on your spending. Check on payments that are less required and if they are really important to be continued. You have to do a self-analysis to know your finances well.
Ask questions such as “Can I switch to a lower internet plan”? Once you ask these questions, you can find answers and cut out on your expenses.
Once you can minimize your expenses, you can mould your habits as per your financial situation. To save you from any emergency, you can buy any lower amount of insurance and be prepared.
4. Bills management
There may be instances when you have to pay late fees or a penalty. But making it a routine is not good for your financial health. By just being organized in your payments, you can save a lot of money and stay on top of your bills.
You can set monthly reminders to make things easy for you. You can set reminders on your phone or any application of your choice. These reminders will remind you of the payment date and 3-4 days before the payment date.
This way, even if you forget, the reminders will help you make your payments on time. Along with the reminders, you can also schedule electronic payments to make payments on your behalf automatically.
Along with these reminders, you can also compile a list of all the payments and bills.
5. Evaluate your Non-Cash Assets
To be financially prepared, you have to include all your assets, i.e. liquid asset and non-cash assets. In case of frequent flying, you can use your miles to save money and still enjoy the benefits of travelling.
You can collect all your gift cards, grocery cards and any other reward cards to get them redeemed. These non-cash assets will help you bring down your monthly expenditure and prevent you from buying any unnecessary stuff.
6. Credit Card Debt payments
One way to reduce your monthly payments is by paying your credit card debt. Your credit card may incur high-interest rates payments every month, but you can cut down on your high monthly expenditure if you ensure to pay your credit card debt.
Clearing out with your interest rates can help you build some funds for an emergency. Besides, it will divert you from these petty issues and keep your focus on more important matters in life.
You may fulfil your expenses by using your credit cards, such as buying a new car or a new house. But paying back on time is important. In case of bankruptcy, you can also take out bad credit car finance from direct lenders available in the market.
These funding sources are helpful in availing necessary funds and also to allow smooth purchase of a car. Here direct lenders because they seem more flexible than the mainstream lenders, especially in interest rates and repayment plans.
The interest rates may be higher but the approval can be there despite low credit score.
7. Good Credit Card Deal
You can ask your bank for a good credit card deal. You can try for a deal that offers a lower interest rate and allows you to breathe.
Paying a lower interest rate will help you to spend on other important things and save money. It is advisable to ensure that your balance transfer fee is more than the interest rate if you want to go for a new card.
8. Find alternate ways of earning cash
With one source of income, it may be a possibility that you may not be able to cater to your expenses efficiently. You can look out for alternative ways to earn extra cash, such as selling your possessions that are no longer in use.
There may be no comparison between the money earned from these activities and your primary job. This money would be too less, but adding the amount over time will lead to a significant amount and facilitate your expenses eventually.
The Bottom Line
Life is uncertain; hence live your life to the fullest and save money for the rainy days.
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