Getting into debt has been a natural occurrence for most consumers but there are those that are able to get out looking for a way to jumpstart finances to get ahead. It is a very nice goal and actually a great place to be at but the work is not yet done. It looks easy to rebuild your finances but you need to take delicate steps to make sure that you do not end up from where you started.
Getting out of debt is already a big feat considering that NewYorkFed.org points out that the total consumer debt at the end of 2013 was already at $11.52 trillion. This includes mortgage loans, student loans, auto loans and credit card debt. All of which can be found in a consumer’s household budget. Managing and dealing with debt payment is one thing but paying them off is another.
This is similar to people who has already finished a diet program they have been on for the past few weeks and have actually seen results. Now that they have completed the program and lost a lot of weight, they are now trying to get back to their regular food consumption. But they need to make sure that they do not pile up the pounds again because they will just put all their hard work to waste.
This is similar to people looking for a way to jumpstart finances because starting over is almost always a delicate situation. Small mistakes might quickly snowball to multiple problems that can instantly ripple out to a lof of financial areas in your budget. You need to be careful and have a definite plan on how to get back on track.
Starting over with your finances
It is great to be able to look for a way to get a good start over with your finances because you paid off your debts. But there are instances where you are looking to start over and jumpstart your finances because you are coming out of bankruptcy or debt settlement. Here are few tips to consider when you are looking for a fresh start.
- Sit down and evaluate your budget. This should be the first thing you need to consider because your budget is a great indication of how you are handling your finances. If you are overextending your income because of unplanned expenses, learn to cut down and live a frugal lifestyle. For some, it can simply mean cutting down fine dining costs and learning to cook at home. For some, it can be as drastic as cutting down on several expenses just to make ends meet. The idea is to adjust the budget according to your income and needs.
- Start saving. This can cover as simple as a savings account or on to more useful and complex savings instruments like your reserve funds and retirement funds. Do not get intimidated because you can start small with whatever amount you can put in. The important thing is t get started and increase the amount you put over time. Your reserve funds will help you cope with financial emergencies in the future while your retirement fund will be your go-to fund when you decide it is time to leave work.
- Build up your credit score. MyFico.com explains that your credit score is a vital component of your credit health and helps lender measure credit risk. It is one of their ways to estimate the risk they are getting into when they extend you credit or approve your loan. You can slowly build up your credit by making on time payments starting with your utilities and moving on to credit card purchases.
- Ease into debt. As you try to jumpstart finances in your household, you need to slowly ease into debt and learn from your past mistakes. If you will be using your credit card again, be sure that you already have the money set aside to pay for the purchase at the end of the month. If you will be taking out a car loan, understand the repayment mechanics and prioritize payments every month.
- Learn from past mistakes.You need to remember what happened in the past to help you make informed financial decisions. This is especially true when you are coming out of bankruptcy or debt settlement. Try to remember what got you into a deep trouble before and try to stay away from making the same decisions. If you cannot afford the mortgage payments, look at renting for a little while longer while you save up for a big downpayment.
- Consider talking to a finance expert. There are technological hacks to help you with finances and you might want to use them to make budgeting a lot easier. But do not disregard the pieces of advice that you can get from financial experts. It is better if you can hire one to look over your finances and plot out a plan for you. If you cannot hire one, read through and gather tips from these experts to help guide your actions. But you need to remember that there are no two situations that are alike which means that what might work for one household could also work for you. You need to tailor fit every solution based on your unique problem and resources.
- Consolidate loans to manage payment schedules. When you are starting to deal with more and more debt accounts, it would be best to combine and consolidate those loans to have an easier time managing the payments.
Getting your income up
There is nothing better when you are trying to jumpstart finances than a surge in income. It can help you prepare for unexpected expenses and at the same time get you to your financial goals. Here are some things you might want to look at when looking to improve your income.
- Invest in yourself. It might look counterproductive to spend money when you need to save but you need to understand that this will help you earn more in the long run. If you can enroll in a course that can help you get better at your job, the better the chances that your salary will increase over time.
- Look at passive income. Investopedia.com explainspassive income as money coming from areas where you do not need much involvement like rental or interest from investments. Look at increasing your funds by dabbling in investments that can work hard for you. You then free up time to look for other things to do.
- Take your hobby to the next level. If you love photography then it might be a good idea to start taking classes and even investing in decent cameras. Same with cooking and baking or other hobbies- see how you can improve so you can earn off of it and in the process do what you love to do. You just need to remember that you should always have a back-up plan just in case things go south. It can be a business investment with friends or even keeping lines of communication open with potential employers.
It is not that hard to jumpstart finances after paying off all debts or it you are coming from bankruptcy. You just need to be aware of the actions you need to take to prevent getting into debt and repeating the process all over again.