Personal finances today are a lot more complicated than they once were. We also increasingly live lives that are at the mercy of seismic events that lie beyond our control. These can potentially turn our lives upside down virtually overnight and when they strike, it is often one’s financial matters that we worry about the most, and with good reason!
For individuals, unexpected changes in our personal circumstances can necessitate a dramatic rethink in the way we manage our own finances. It is often the worry of paying bills that is most keenly felt by those thrown into unexpected financial turmoil. For those who are self-employed, the calculations involved can be very different, as problems with personal finances can lead to problems with one’s business.
Fortunately, managing finances in preparation for a crisis is quite easy and this will help to insulate you from the effects of all eventualities, which harm one’s financial interests.
Below are some top words of advice from entrepreneurs and personal finance agents on the best, most effective steps that one can take in order ensure that your finances remain strong and resilient during any crisis.
Maintain an Emergency Fund
It is never too early to start a rainy day or emergency fund to see you through any unexpected hard times. There is also no amount of money too small to be worth saving, as it is these smaller savings and contributions that will ultimately accumulate and lead to much bigger savings as time goes on. You should aim to keep your emergency money separate from your main bank account to reduce the temptation and likelihood of you inadvertently spending your savings.
The best first step in putting together an emergency fund, as with most financial endeavors, is to put together a budget of your regular income and expenses. This will give you a good idea of how much money you have available and what the discrepancy is, if one exists, between your income and expenditures. Once you have established how much money you have to work with, it is now time to put together a spending plan, one that you think you will be able to stick to.
The effectiveness of your efforts will depend on how well you can stick to the spending limit that you have set yourself. It is important, therefore, that you are realistic in your expectations of yourself, as if you set yourself an unattainable goal you will find that your inability to live up to it will damage your confidence and chances of success in the long term. The hardest part of any attempts at saving, or rather not spending, money lies in finding the necessary willpower. It is, therefore, a good idea to set up some kind of reward system so that you can treat yourself for successfully sticking to your spending plan.
Loans
Loans can be an effective way of bridging your finances during a crisis. It is important that you choose the right loan for you and your circumstances. To this end, a loan calculator is an important tool. Essentially the loan calculator takes your income and expenses and, on this basis, helps you establish how much money you can afford to repay each month. This will ultimately set the limit on any loan you might seek. You should aim to take out small, short term loans that you are confident you can repay. Otherwise, you are setting yourself up for more trouble down the line.
Save Money to Make Money
When we think of saving money we think of reducing our spending. Usually, however, we focus on purchasing frivolous goods and this is where we focus our money saving efforts. Consequently, we often overlook some of the more fundamental things we can do to save money. We usually do this because, unlike retaining money in our wallets, many of the other ways in which we can save the most money don’t offer us any kind of visual representation of the money saved and the amounts we retain after our monthly bills often appear as they did before.
Despite this, we can make some very significant savings by being more conservative with our energy use. First and foremost, you should try and remember to always turn off electronic devices when they are not being used as this represents a near constant source of wasted energy and money. It is over the long term that the real benefits of saving energy are felt. In the short term, however, you might be able to make some significant savings by switching provider. Alternatively, you can call your current provider and tell them that you are thinking of switching and see if they’d be willing to negotiate a new deal.
Plan ahead to ensure that your finances can withstand the shock of an unexpected crisis. Consult with professionals and use tools such as the loan calculator to ensure that you don’t escape one debt by taking on more debt.
Views: 2
Be the first to comment