The prospect of having to deal with a significantly negative event that can have an adverse effect on your finances, like losing a job, getting into an accident or getting sick, can keep a lot of people awake at night. Any form of financial crisis, however, is only as scary as you let it. If you’ve made the proper steps to secure your finances long before the bad things happen, then you have less to worry about.
If you’re not entirely sure where to start, then we’ve compiled a list for you to do for some peace of mind. Here are steps you can take to help mitigate a financial crisis when it happens.
1. Focus on your Liquid Savings
What will help you the most when the crisis happens are generally your liquid savings, such as your cash accounts, both checking and savings, certificates of deposit and short-term government investment. The reason why it’s important to go to them first is that their value doesn’t change with the market conditions, unlike stocks. Focusing on your liquid savings allows you to take money out any time without having to worry about financial losses.
2. Pay Your Credit Card Debt
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If you have incurred credit card debt over the past few years, it’s very likely that the interest you’re paying every month takes a huge chunk out of your monthly budget. Try to make it a point to pay your credit card debt so you can lower your monthly financial obligations and put yourself in a better position to expand your assets.
This is also true when it comes to paying any form of debt, including loans. Paying your loans on time will improve your credit score and having a good credit score will improve your chances of securing payday loans whenever the need arises.
3. Manage your Bills Properly
It’s very important for you to pay your bills on time. Many people incur penalties when paying their bills late, even though it would be cheaper to pay your bills as early as possible. If you’ve recently lost your job, being organized with your payments becomes even more important. One late payment, for example, has the potential to set you back hundreds of dollars, which is money you could’ve used for necessities like food. Make it a point to review all your bills and debt, preferably once a week to keep yourself updated.
4. Maintain a Budget
While this may seem like common sense to some, not many people bother with budgeting their expenses. This usually leads them to spend money as soon as they get it, lessening their chances of saving anything. Maintaining a budget gives you an overview of how much you’re spending. Doing so will let you know if you’re currently living below your means or are overexerting your finances.
5. Look for Extra Ways to Earn Money
Everyone has something that they do that other people are willing to pay for, whether it’s freelancing online, babysitting, or even cleaning the pool or yard. You can even sell your old stuff online or in a garage sale. The amount you’ll earn may seem insignificant compared to what you earn in your day job, but the extra money you earn will act as a safety net in the cast an emergency would require you to spend money.
While life can indeed be unpredictable, and there are certain things outside of your control, that doesn’t mean that you are completely powerless. Making the right decisions and preparing yourself for the worst can turn any potential crisis into a minor setback. Simply spend smart, live within your means, and the rest will take care o