Good financial planning and building financial security is rarely a smooth journey. Layoffs, economic recessions, illness, divorce and natural disasters can deplete savings and cause an avalanche of debt that threatens to cause a significant financial setback. However, making a clear-eyed assessment of your current position, and taking steps to resolve issues with your personal finances, can help you get back into a more stable position.
Here are 5 steps you can take to rebuild your personal finances after a financial setback.
1 - Look Carefully At Your Personal Expenses
Do a thorough and honest assessment of your current expenses and budget. This action can often reveal a number of costs that can be changed or eliminated, in order to rebuild your wealth effectively. Maybe your situation requires a change of residence to a smaller, less expensive place. Maybe your car payment is too high, and you need to change it for a more affordable vehicle. You may need to get a few new insurance quotes to reduce your premiums. You may have to eliminate pricey services and do some of the work yourself.
2 - Get a Side Job
Additional income is often necessary to eliminate debt or restore your personal finances to a good position. A second job will help you get your finances back on track more quickly. You can take skills you already have to find additional work, but don’t be afraid to learn new skills, which may be useful in your career in some way. If you’re IT savvy, offer your services to your community to help those who aren’t as technology oriented. Become a handyman in your neighbourhood or offer to cook or clean for busy families. Almost everyone has a skill that can be used in some way to increase income.
3 - Concentrate on Paying Off Debts
After a financial setback, you may have a number of debt payments to make each month. Focus on paying off your car loan or student debt as quickly as possible. Credit cards can be a useful tool for getting through a difficult financial period, but the reckoning always comes with a certain amount of pain. Financial experts recommend paying off high-interest credit cards first, then working on lower interest rate cards.
Make a commitment to using your credit cards as little as possible to keep your debt levels manageable. Rely on your debit card, which only allows you to spend the money you have available. Ideally, look into getting a new credit card with an introductory offer. These are often in the form of a 0% interest on balance transfers or money transfers for a 12 or 15 month period. If you have an existing credit card then transfer the balance to this, or use the money transfer to pay off another high interest debt.
4 - Always Look For New Ways to Be Frugal
In good times, individuals often fall into spending habits that cause a significant dent in their disposable income. However, when bad times occur, these same habits are no longer sustainable, and can even hold you back from getting control over your personal finances. Look at your daily habits to see how you can live more frugally. That expensive cup of coffee can be replaced with a travel cup of coffee from home. Instead of going out for lunch every day, plan an interesting packed lunch. It will probably be better for your health and may help you maintain a healthy weight. Find the best price for petrol in your neighbourhood. Cut the cord on your cable TV viewing. Sign up for a deal offered by an internet provider. Eliminate unused subscriptions. These small changes can help you spend less every month.
5 - Make a Habit of Saving
Developing a habit of saving isn’t as hard as it sounds. Even small amounts add up over time and begin to make a significant difference in your financial security. You may be more concerned about getting rid of debt or acquiring enough income to be comfortable, but you can also save while you accomplish these goals. If necessary, scale down your saving efforts to simply collecting extra change or rounding off purchases. As you make inroads in your financial gains, you can then sign up for “automatic savings” accounts. As your personal finances become more stable, you can then look for accounts that offer higher interest rates and better returns on your savings investment. The primary idea is to work savings into your daily life. You will find that even a small amount of savings can motivate you to accomplish more of your financial goals.
More Favourable Personal Finances
Financial setbacks happen routinely in life, sometimes through no fault of the individual. If you have gotten into a tight spot, whether through your own decisions or because of outside events, taking effective actions can allow you to return to a more favourable financial position. These 5 actions will help you to get back into the black as quickly as possible.