When you find yourself in a negative financial situation, it can be pretty demoralizing and you might not know what you should do next to turn things around. It’s a situation lots of people find themselves in and there are certainly no easy answers.
But if you’re feeling lost and unsure right now, you should remember that money is never the most important thing in life and there are always steps you can take to rectify the situation if you want to. So read on now and learn more about how to recover from the financial situation you find yourself in.
In this day and age, debts are inevitable for most people. Taking out a loan can be of tremendous help, especially when you are in a financial emergency, be it for business or personal reasons. However, there are many mistakes that people make, leading to a stressful life of debt. To help you avoid becoming a victim, here are some common debt mistakes to keep in mind:
Same Old Spending Habits
We are creatures of habit and spending money is no exception to that rule. That’s because driving the same car, eating in the same restaurants, and buying at the same store proves to be comfortable. However, it could be costing you more than you can handle financial wise. It’s pretty simple- if you do not change your spending habits, then you will never get out of debt. Consider beginning with your morning habits and take breakfast at home. Next, carry lunch from home, rather than eating at a restaurant. In the evening, watch movies or games at your house while enjoying a homemade meal. These simple changes will have an immediate significant effect on how much you spend on a daily basis. You do not have to do what you like or prefer, you just have to make better choices when it comes to it.
Attempting to Get Out of Debt Alone
Almost everyone doesn’t like to ask their friends and relatives for support when it comes to handling debt. A wise remedy is to contact a non-profit credit counseling agency and seek help from the experts. These counselors are well-trained and certified by national organizations such as the National Foundation for Credit Counseling and will recommend debt-relief solutions including credit consolidation, debt management programs, debt settlement, and even bankruptcy if things are really bad. They will show you how to create an ideal budget and suggest a solution that will match your needs. The best thing about this is that the advice is free. Ask, am I eligible for a debt management plan?
Failure to Create a Practical Budget
It is virtually impossible to gain control of your money if you do not have a practical budget. Many individuals think it is too much work until they reach into $10K or $20K credit card debt and wonder how they got there.
A great solution is to create a realistic budget that addresses common financial needs such as health care, food, housing, education, and insurance, while also creating room for paying your loans. Do away with the credit cards and only work with cash. Yes, this will mean cutting back on things like dining out, hitting the movies, buying new electronics or clothes, but if you really want to get out of debt, having a practical budget and using cash is a solid start.
Getting into a Debt-Relief Program but Not Understanding What it Entails
There is rarely a quick-fix solution for debt issues. If you come across this claim, then immediately look elsewhere. One of the most important things to bear in mind is that debt-relief programs tend to take three to five years and so, you’ll need to be patient. Next, you need to assess the firm providing these solutions. A great place to start the check is the Better Business Bureau (BBB) or the local state attorney’s office. Military bases, universities, and credit unions should also be reliable sources for suggestions. Just ensure the organization you pick is licensed and does not have a record of client complaints.
Trying to Clear Multiple Debts at Once
Many people in debt usually have multiple sources including student loans, credit cards, car loans, mortgages, etc. Unfortunately, they try to handle them all at once. This is a move that will only see you give up and be unable to make progress in clearing debt. Instead, go back to your budget, trim everything to the essentials and create a surplus that goes to the credit card with the highest interest rate. Once that is cleared, go to the next credit card, and so on, until you clear all the debt.
Failure to Put Aside Savings for Emergencies
According to reports, over 55% of American consumers do not have adequate finances to cover emergency expenses of at least $500. You cannot predict car accidents, plumbing failure, unemployment, etc. That’s why every household requires an emergency fund account. Experts suggest putting three to six months of expenses aside to cover any emergency you might experience. It may take time to get there, but if you are determined to pay off your debt, it needs to be part of your monthly budget. So, consider putting aside at least 5% of your monthly income towards an emergency fund. This way, you won’t have to depend on loans to cover an unexpected expense.
Failure to Contribute to a Retirement Account
Yes, it seems good to devote your money to clear your loans today, but it is a costly mistake in the long haul. There will come a time where you need to retire and so, ensure you devote at least 5% of your monthly income towards a retirement savings account. The earlier you begin contributing to that 401(K), the better off you will be when you retire.
Failure to Prioritize Your Debt
We all have bills and many people want to get out of debt. However, many people fail to be focused, and doing so isn’t a priority. One of the best solutions is to consolidate your debts and only make a single payment per month. Another way to stay focused is by writing down the top 5 debts you want to clear. Put this note in a place you will see every day to remind you of your mission. Whenever you see that note, you will remember that you are getting rid of and not adding to the debt.
Closing Accounts When They’re Paid Off
The remedy for this is straightforward, pay off your account but do not close it. Keep in mind that credit score systems not only depend on how much you owe but how much credit you have available.
Before you get started on planning your financial goals, it is a great idea to check out one of the previous posts on debt if that is a specific area you wish to tackle:
It is just as important to set financial goals for your business as it is to set them for the rest of the areas of your life.
Each person will have some financial goals that are personal to them. They might be because you want to save up for a particular thing, or it could be how you can begging to live a more comfortable life.
No matter what your financial goals are, it is important that you set them with the intention of making them a priority. From Forex trading to automatic saving. Every action you take has an impact on your goals. So make them count.
Even if you are at the start of your business journey, you will need to have a plan to grow forward. You can use your mission statement and vision as a guide for the steps you will need to take.
Here are some examples of small business goals that you might consider:
Decreasing overheads and general costs
You might be using multiple online tools and platforms – but do you need them all? Make a note of all of your overheads and look to see where you can cut back. Decreasing your general costs will aid in the next steps.
Increase revenue
A decrease in your overheads will automatically see more money put back in the kitty. However, to truly increase your revenue you might want to consider how you can see a bigger profit.
It is key that you set solid numbered goals here.
Vague = to increase my revenue this year.
Solid = to increase my revenue by in the first two quarters and then even more for the last two quarters.
Ideal = to increase my revenue by $250 dollars a week for the next 6 months, and then by $500 for the following 6 months.
It is important to remember that your financial goals can be much more or much less than this. Be specific.
Cashflow planning
If you are still guessing your income and outgoing, and then checking your bank at the end of the month you are doing yourself a disservice. You should be the king, queen, and master of your cash flow.
Make it a priority to sit down and look at your income and outgoings correctly.
If a cashflow just makes you shudder at the thought, then check out the following:
And you can even get some great templates on Microsoft Office (for free) too: Check out these cashflow templates.
Running a business isn’t just about doing what you love, although that should be the biggest part. It is also having firm goals that can help your business grow, and you to prosper too.
Whether you’ve suddenly had to deal with a major expense out of the blue or you’ve found yourself saddled with new debt due to poor planning, time is often of the essence when a financial emergency arises. Fail to deal with it soon enough and you can start spiralling into unmanageable debt. However, while acting quick, you want to make sure you’re not making any rash decisions. Here are a few tips to ensure that.
Having some financial flexibility so you can cut your costs as needed and when needed is important. As such, it’s a good idea to look at some basic money-saving tips and, most importantly, to put together a budget. You need to get a good idea of what you’re making and how much you’re spending and where to find the wiggle room you need to pay money aside to deal with debt and other financial emergencies. You can’t afford to ignore bad financial habits, so be sure to track absolutely everything.
Get your creditors in the loop
If you have any debts or credit arrangements, make sure you address those first of all. The sooner you inform creditors of your situation and the difficulty you might have in paying them back, the easier it could be to negotiate them into something like an IVA. What is an IVA? These individual voluntary agreements allow you to freeze the interest on debts and pay them off with assurances, helping you avoid bankruptcy in the long run while making sure creditors have a formal agreement that they will get their money.
If it sounds too good to be true, it is
There are some unsavoury financial services that specifically target people who are in need of help but can lead to even further debt and trouble. As of late, the payday loan has come under a lot of fire. It can see you get money quickly, but with super high-interest rates that can get you in a lot more trouble in the long-run. Don’t look for any short-term solutions and know what you have to pay on any loans you might take out.
Have emergency savings ready for the next time
One thing you should always expect is the unexpected. You might not know what form it will take, but you should anticipate that a financial emergency will, at some point, be part of your future. As such, some people might recommend keeping an overdraft open that you only tap into for emergencies. However, to help you save money, it might be a better idea to start putting together an emergency fund, as well as to make sure that you are appropriately insured to limit the kinds of costs that can rock your finances.
Whatever choices you take, ensure that you understand what, if any, costs come with them. There’s no point taking on new loans, for instance, if you will be no more able to pay them off in future than you are now.
If you are working freelance and don’t have a regular set amount of income, balancing the books might be challenging for you. There are some things that you can’t control each month, such as your income, but you can always shop around and wait for larger purchases to make sure that you can afford them without getting into debt. Below you will find a few tips on managing your freelance budget better with a family.
Most people working as a freelancer tend to live from one month to the next. You will need to focus on your long term financial plans and change your attitude towards money. Whether you would like to save up for a family holiday, save up enough for a deposit or moving house, you have to create a bucket list of things to do with clear deadlines, so you can do things in your business that will help you achieve them.
Stay Flexible
One of the things you need when trying to manage your freelance family finances is flexibility. Not all the bills will be paid on time, and you might have to face delays when dealing with project work. This means that you need to have a flexible budget and allocate money for paying your bills first. If you have funds left over for a weekend away or a day out, you should plan this at the end of the month, but if there isn’t enough, save it up and add it to next month’s budget and plan something bigger,
As a freelancer, you will need to make sure that you are not stretching too far, as your income for next month is not guaranteed. This means that you have to allocate excess money for larger purchases every month. Have a minimum saving plan to stick to, but if you have a particularly good month, put more toward the savings to have a rainy day fund.
Protect Your Finances
One of the things people forget when starting to work freelance is protecting their finances. It is crucial that you have an income protection for falling ill, as you are likely to lose your source of salary for a while. At the same time, you should ensure that the future of your family is safe, and get in touch with estate planning companies like Fielding Triggs to save money on wills and asset protection.
Ensure You Get Paid
One of the uncertainties of working as a freelancer is when and whether or not you will get paid. You can eliminate the risks by consulting with a legal company and making your contracts legally unquestionable. Even if you are a freelancer, you will need to get paid for the work you do.
Managing your finances as a freelancer might be challenging. Make sure that you have a detailed financial plan and a rainy day fund, so you can look after your family and your financial future.
