Financial hardships can happen to anyone without warning. It’s safe to say millions of people all around the world have learned this simple but harsh lesson, especially after COVID-19 tested the global economy over the last two years.
Some of the most common signs of financial hardship include accruing debt, not being able to afford what one was able to before, falling behind in rent, to name a few. If you find yourself facing a financial crisis in life, here are a couple of things to consider to alleviate the situation and recover from it.
Budget
When hit with a financial crisis, the first thing you need to sort out is your budget. The easiest way to control your spending is to have a budget and follow it. Everyone has an estimated monthly budget planned out, even if most people don’t put it down in pen and paper. If you’re the sort who doesn’t, it’s high time you start doing sp for your own good.
When allocating your monthly budget, try to stick to the 50/30/20 rule, which is considered the most optimal way to plan your budget no matter what your financial condition is. The numbers in the ratio represent the percentage of your monthly income you should spend on food, rent, and other expenses, respectively.
Emergency Funds
The advice to save money is something society and families try to drill into individuals from a very young age but very few end up forming this financially sound and safe habit. No matter how well off or worse off you are, you should always set apart an amount as emergency funds.
That way if you find yourself in a pickle, you always have something to fall back to. It’s important to keep in mind that your regular savings and emergency funds have to be treated separately. The purpose of savings is to buy something in the future or be used as an investment, while emergency funds are only used during emergencies like accidents or sudden financial pressure.
Change How You Spend
You can make all the changes in your monthly budget you want, but unless you change how you spend money, you won’t see any difference in your financial circumstances. You need to be aware if you overspend your money- if you do, you need to track your expenses and change how you spend. This is very crucial in determining whether you’ll find success in handling your financial difficulties.
One easy way to keep track of your expenses is by keeping your receipts for every expense you make and comparing them over extended periods of time. If you purchase things online, you should automatically get a bank statement showcasing the charges on your card to your bank account, so keeping track of things shouldn’t be too difficult.
When making cash purchases, you really need to be careful as this is the one part of managing finances where most people lose track of their money. Make a habit of jotting down cash purchases on your smartphone’s sticky pad and jot them down later when you get back home. Once you start noting purchases, you’re more likely to notice hidden expenses you didn’t take into account for.
Personal Loans
If you’re absolutely unable to cope with your current financial situation with your current income, then taking a personal loan is a very viable option. Aside from banks and major federal financial institutions, there are many private organizations out there that provide online installment loans that are easily available.
While taking a loan is something that is neither advisable nor desirable, there are times when there are no other options than taking a personal loan. But the good news is as long as you’re smart about managing your finances, paying back your loan won’t take a toll on your finances. Just focus on paying back your loan on time and cutting down on unnecessary expenses.
If you decide to take a personal loan, make sure to thoroughly go through the terms and conditions of the loan contract no matter how recommended the bank or financial organization is. Always keep a lookout for specific deadlines and other restrictions.
Play It Smart
Financial hardships can be difficult to face if you’re not used to them, but they become less daunting through proper planning and acknowledging the options available to you.
Take comfort in the fact that everyone has to address problems related to their finances. It’s how you respond and hopefully anticipate those challenges that make them much easier or harder to resolve.