As the health crisis is starting to let up, the big financial question now is if you are in debt again.
There is no question that the economy is slowly picking itself back up from the effects of the pandemic. Businesses are starting to open up again and companies are slowly getting people back into the office. Though the whole work-from-home set-up proved to be successful for some, there are those that struggled and welcomed the chance to report back to the office.
But in all these, many people are starting to get back into financial troubles. CNBC shares that many Americans are starting to rely heavily on their credit cards again. And this is going to be a problem mainly due to inflation and skyrocketing interest rates. The increase in interest rates is one way for policymakers to try and curb inflation. This is bad news for consumers who have no choice but to rely on credit to make ends meet.
This is a big reason why a lot of consumers are starting to get in debt again. With their savings low, relying on credit means paying high fees and rates. It also does not help that after the health crisis, the economic recovery is not as swift as many want it to be. As a result, people are still struggling in their journey to financial recovery.
But even if you are struggling financially and find yourself deep in debt, there are strategies you can use to help you manage your situation.
Redo your household budget
If you are in debt again, it would be a good idea to try and re-assess your household budget again. What used to work prior to going back to the office might not be applicable anymore with the change in your routine. You might need to start accounting for additional expenses and taking out items you can do away with in your new setup.
Remember that at the very core, your household budget revolves around three main pillars – income, expenses, and savings. But remember that this is a fluid tool that changes as your situation and needs change. Just as when the pandemic started and you had to adapt and redo your budget, you might need to do the same now that the health crisis is slowly waning off.
This is true especially when your routine has changed. You might be working from home for the most part of the pandemic but recently recalled back to work. The household budget you had then might not necessarily work for you now. Take time to look at your current routine and needs and adjust your budget accordingly. This could help you manage your expenses better.
Focus on your priorities
If there was one particular lesson that the health crisis was able to highlight, it was the need to have clear priorities. Much like how you would separate your needs from your wants, your priorities should always be clearly defined. For some, this is an easy exercise but for others, they struggle to outline these areas in their finances. But this is important to help you manage your finances especially if you are in debt again.
Identifying priorities differs from one person to the other. There is no single formula to help you determine these things. It’s because you need to consider a number of factors to help you determine your priorities. This includes your long and short-term goals, your current financial situation, and even your family status.
Your priorities will be different from when you were still single to when you have a family of your own. If you start to have children of your own, your priorities will again shift. If your income changes, your priorities will also change. Determining your priorities will help you redirect your focus on what matters most. In turn, you get to allocate your income towards important expenses.
Explore other income-generating ventures
It is difficult to be in debt again especially when you are just on your way to getting a grip on your finances. One of the biggest contributing factors to this is simply the inequality in your take-home pay and expense. If your income cannot fully cover all your expenses, you end up in debt. Just as if your income is greater than your expenses, you have a good chance of staying out of debt.
If your current income level is not enough to pay for all your expenses, you can either lower your expenses or augment your income. You can also choose to do both at the same time. Though cutting down your expenses is much faster and easier, looking for additional income tends to have more impact over time.
It helps if you try to look at your hobbies first and identify ways to earn from them. Just like if you love baking cookies, you can offer your products to businesses in your city. Just be sure to stick to what you can do. If you start feeling burned out, you might start to lose your passion. Once this happens, you might find it difficult to allot time even for your hobbies.
Understand where the problem is
There are a lot of reasons why you would find yourself in debt again. Your income might be affected, your credit use is out of control, or you simply do not have a firm grasp of basic financial management. All these and more could contribute to your current financial situation. And it makes sense to determine which one is giving you a challenging time.
Once you identify the problem, you will have a better chance of looking for a solution. It’s because you know which problem areas to address. If your income is not enough, then lower your expenses or increase your income. If you rely on credit cards too much, then make it a habit to save up for your wants and focus only on your needs.
There are also times when you just don’t know how to manage your money. In these instances, it might be a good idea to try and reach out to a finance professional to help you iron things out. It could even make sense to go into debt consolidation so you can focus on a single monthly payment. The important thing is that you identify the problem and work on a specific solution to help you overcome those challenges.
Do not be afraid to ask for help
As mentioned earlier, you can reach out to finance professional if you want to get a better handle on managing your finances. You can also reach out to family and friends who have a background in financial management. They might be able to give you pieces of financial advice you can use to help you get your finances in order.
People who know you are also in a good position to help you. They already have an idea about your personality and your goals as well. This gives them a unique insight into what you can do to help you get out of debt again.
If you are in debt again, there are a number of strategies you can look into to help you get out of your current financial situation. Just remember that you do not have to follow all the pieces of advice or tips that you get. Just choose the ones that would work to your advantage. You can even tweak these strategies to help you match them with your current situation.