A financial crisis can strike in the blink of an eye, most of which are unpredictable. COVID-19 is an excellent example of an unforeseeable event that resulted in significant personal financial problems for millions of Americans who were unexpectedly laid off. With uncertainty still lingering, it’s more crucial than ever to be prepared for a personal financial disaster.
According to data collected before COVID-19, around 40% of US households did not have enough cash on hand to meet a $400 emergency. These people said they’d have to place the expense on a credit card, borrow money from family or friends, or sell something they own to cover the cost. A smaller percentage of this group stated they would need to borrow money from Payday LV or take out a deposit advance. However, 12% of this group stated that they would be unable to cover the cost in any way. Here are some basic financial recommendations to help you prevent a personal financial crisis and increase your financial security:
- Keep track of how much money is coming in and going out
Taking a money inventory is the first step in managing money. Make certain you understand:
- Your money’s whereabouts, including bank details and passwords
- How much money do you spend each month (if you don’t know, keep track)?
- How much money do you owe, and how much are your minimum loan repayments?
- How much money have you saved, and how much of it do you have liquid?
Finally, you should know how to swiftly access your cash or valuables in an emergency. If you’ve forgotten account access credentials, now is the time to call the relevant financial institution to iron out any issues. You’ll be considerably better prepared if an emergency arises due to this.
- Eliminate Unnecessary Spending
Start looking for strategies to save money when you’ve figured out where you’re spending your money. You’ll be able to save that money for emergencies if you do it this way. While giving up your everyday coffee is a popular tip, this won’t significantly increase your savings rate. Instead, start by reducing your spending by doing the following:
- When feasible, buy generic brands (including prescription drugs).
- Sever your cable (After all, we all have Netflix).
- Cancel any subscriptions that you are no longer using.
- Consider whether you need to join a gym or if you can work out for free.
- Put in the effort to pay off your debts
Debt, particularly high-interest debt (https://www.investopedia.com/terms/d/debt.asp) such as credit cards, may quickly accumulate. If you charge $1,500 on a credit card with a 19 percent interest rate and pay the minimum balance each month, you’ll make 106 payments, according to the Federal Trade Commission. Worst of all, you’ll have spent $889 on interest. That’s money that may have served as a safety net in the event of a personal financial emergency.
Make a strategy to pay off credit card balances, college loans, personal loans, and vehicle loans to put that money back in your pocket. Pay off your high-interest debt first (most likely credit card debt). While you’re paying off one loan, remember to make the minimum payments on all of your other debts to keep your credit in good condition.
- Make Savings a Habit
Savings can be difficult to prioritize, but we all know that it is necessary to prepare for a personal financial catastrophe. Automating your savings is the simplest way to ensure you save money every month. If you get paid on the first of every month, you might set up a regular transfer from your deposit account to your savings account on the 4th of every month. Note: To avoid overdrawing your account, ensure this transfer amount is within your budget.
You will be tempted to delve into your funds, but you should avoid doing so unless you’re in a financial emergency. Keep your savings in a different bank or credit union to make withdrawals more difficult. As a haven for your emergency fund, we recommend a high-yield savings account or a money market account (MMA). These accounts pay a greater interest rate than your bank’s ordinary savings accounts. Unless you are in a financial emergency, leave your savings undisturbed wherever you want to keep them.
- Get Rid of Unwanted Items
Money management requires not just saving and spending but also earning. Selling unwanted stuff is one method to make money without exerting too much effort. You certainly have goods in your home that you do not use or even enjoy. Sell them to make money while getting rid of your clutter:
- During a yard sale (after the COVID restrictions are lifted in your state).
- You can sell your stuff on an app like OfferUp, Decluttr, or Letgo.
- Amazon, Craigslist, and Etsy are all good places to start.
- Boost Your Income
Increasing your income is one strategy to grow your savings. Here are a few suggestions:
- If you are a professional CFA or CPA, you can assist people with their taxes.
- Tutor students.
- Cut your lawns or work on your landscaping.
- Dog walking or pet sitting.
Almost everyone has a marketable ability that can be used to supplement their income. All you must do now is figure out yours. You are not required to raise your income outside of your current job. Try to boost your revenue at work by asking for a raise, working overtime, or looking to get up within your company.
- Improve your Credit Score
During a personal financial crisis, your life may be interrupted in numerous ways. You may need to take out a loan (https://www.paydaylv.com/apply-now) or move to another location. Lenders and property owners will want to know your payment history before issuing loans or getting into a leasing agreement. If you can establish a history of paying your obligations on time (and lowering your debt level), you have a greater chance of an accepted loan or lease.