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We can’t always tell what the future will bring. It might be our own negligence or factors entirely out of our control. Whatever it is, we should never assume that we’re never going to be in a spot of financial difficulty. Instead, we should prepare for that possibility. We should act not only to protect our finances now. We should also start putting together plans that are going to help us in the case a crisis does hit. Here’s how you should consider preparing to weather those choppy waters.
Know your finances
Too many of us are far too lenient on our finances. We’ll check our bank balance when we feel we need to, but do little else. To know how to properly protect your finances, you need to know what kind of position they’re in. You need to know that your out-going isn’t at risk of growing bigger than your incoming. You need to have a close eye on all your creditors. You need to know your net worth. Not just to feel good or bad about yourself. It helps you know what options might be available to you in future.
Protect your finances
Once you know your financial situation, you should be prepared to protect them from some of the most common risks ahead. A big part of that is finding out what insurance and how much coverage is right for you. For your health, home, car and other important assets. But one that needs to be considered more is protection for your income. A financial airbag that can help you keep afloat when that income suddenly stops coming in. An emergency fund should also be set up to help you deal with other minor crises. For the bigger ones, like an injury, you should consider researching claims lawyers for the off-chance you might ever need them.
Reducing your expenses
Getting a look at your net worth and other financial details should have made a few things clear. In particular, it should help you recognize, in more detail, your expenses. Particularly, how much you’re spending, where it’s being spent and if that might be too much. You should take the time to identify expenses you might already start cutting down on. Know the difference between what you need to spend and what you tend to spend. Start getting rid of the bad habits like buying a coffee instead of filling a thermos. We can all do a little bit more to live more frugally.
There are other expenses that need to have a closer look taken at them. In particular, the bills and the subscriptions we use. Take a month to look at all the money that comes from your bank. Identify bills or subscriptions you might have forgotten about. Then stop paying for them automatically. Automatic payments make it far too easy to stop paying attention to where your money goes. Then look at ways you might be able to reduce your must-have bills. From lowering your usage of electricity in the home to negotiating a better deal with your providers. You should even be looking at your provider’s competitors and whether or not they can offer a better deal.
Determining your assets
Another important part of your net worth you should look at is your assets. Not just because they can help you understand their worth. But because it can help you start to determine ways those assets can help you. With assets, everything, big or small, matters. Any spare possessions you don’t want or need should go up on sale. Then you should look at those bigger ones and how you can use them. Could downsizing your home free up some cash? Do you have a business you could sell? Look at future possibilities using your assets. We know that many wouldn’t like to have to go that far. But having those possibilities prepared in advance can take a lot of the stress out of doing it when in a crisis.
Finding additional income
Looking at your possessions and assets is only one of the ways that you might be able to get something of a cash injection. You should take a closer look at how you can use what you already have to make money. Most people have time and an internet connection. From freelancing your skills to doing surveys for money, there are a lot of ways to make money with just that. Then you can look at your car. Consider working as a courier or using a taxi app to make money just from driving. Finally, how can you home make you more money? Can you rent out a parking space or storage? Perhaps even take a tenant?
Finding the best loans
When financial trouble strikes, you don’t necessarily have to let it hit your finances directly. If you can’t afford to pay all at once, instead look at how you find the best loans. For example, look at banks and mortgage advisors. Don’t leap at the first loan you might see. Especially ensure you avoid those like payday loans that can have ridiculous interest attached to them.
Take care of your credit
Of course, most of the loans you look at are going to rely on your credit. Yet over a third of Americans haven’t looked at their credit rating just once. If you’re in that uninformed category, you might find yourself with a nasty shock the next time you apply to pay for something on credit or get a loan. Your credit rating is based on how reliable past creditors have found you. You can take steps to fix it, easily, but you need to know its situation, first. Even getting a check on it can highlight erroneous entries that could be removed, immediately improving your score. Of course, there are bad credit loans and other options to consider outside of your score.
Dealing with debt
If your credit is bad, there’s a good chance that you’re going to have some debt to deal with. Debt can feel like an immense weight on anyone, but it isn’t weight that can’t be shed. To best deal with debt, you have to be proactive. You have to put plans together. For one, keeping creditors informed to your financial situation. If it goes bad, they are likely to take steps to help you pay back more reliably. Think about consolidating your debt, as well. If you have high-interest debt, consolidating it can help you reduce that interest.
We all know that looking for help when you’re in financial trouble isn’t a situation that anyone wants to find themselves in. However, it’s important to be aware of whether you can get any assistance from the state, first and foremost. If you’re injured and out of work, you might find that you can get significant help, for example. Otherwise, you should talk to your friends and family about your problems. Don’t feel like you have to lie for your pride’s sake. You will find that many of them will be open to helping you out. Make the terms of any loan from loved ones perfectly clear. State how much you need, what you need it for and how you intend to pay it back. Keeping things transparent is an important method of keeping you honest. And keeping them reassured.
Be aware there are always options
Even when the situation might seem right at its darkest, you should know you always have options to help you take the next step forward. One that many people might consider the final solution, the one they’d rather avoid most, is bankruptcy. While it’s a serious step, it shouldn’t necessary be considered as the worst possible outcome. Bankruptcy can help you clean your slate and get rid of all your debt. In the process, you will likely lose your most valuable assets. Your credit score will also take a huge hit that takes years to recover. But it is vital that people recognize that the option is at least there.
Taking care of yourself
When dealing with heavy topics like debt and bankruptcy, it’s easy to be affected. Money is one of the biggest reasons behind stress and anxiety today. So it’s important to take the time to look after yourself. One of the ways that might help you is by distancing yourself from your problems for a moment. Meditating or keeping a ‘stress journal’ can help. It can help you compartmentalize your concerns and help you view them more objectively. You’re not likely to make the best decisions when you’re dealing with stress or other indications of poor emotional health. So you have to do what you can to deal with it. Even if it means seeking help. It’s not a sign of weakness to find yourself in trouble.
We hope the points above help you put together a plan that’s going to help you stay stable in future. Just remember that even in the seemingly darkest moments, you have options. Rely on them.