Unwanted and out of control debt can challenge and make your financial life a struggle. Are you ready to take back control?
The recent and on-going pandemic was the ultimate financial stress test for a lot of people. Even leading world economies were not spared. Most countries felt the sting of the health crisis. What started as a seemingly insurmountable challenge for the healthcare industries soon rippled out and started to wreak havoc on the economy.
In a bid to lower down the transmission rate, stay-at-home orders were handed down forcing people to stay indoors. This had a wide-reaching impact that impacted the economy. With consumer purchase as a main driver for the US economy, the pandemic dealt a big blow to several businesses and industries across the country and the world.
This is one of the biggest reasons why a lot of people saw a decrease in their take-home pay. CNBC even shares that about 77% of Americans feel anxious when it comes to their finances. Your financial life is starting to stress you out especially when you start to think about all the payments you need to meet every month.
If you were already having a difficult time getting your debt under control before the pandemic, there is a big chance that you are already deep in the red with an ongoing health crisis. This is because you could be using a credit card or taking out loans just to make ends meet. As a result, you could be juggling several debt payments every single month.
How to protect your financial life
It is important to figure out a way how you can protect your finances from slipping further into debt. If you are already deep in the red, the goal is to climb out of your debt problems. Here are a few tips to help you do just that.
Keep track of your financials
There are several financial tools you can use to help you manage your finances better. But one of the most commonly overlooked tools at your disposal is your household budget. One reason for this is the fact that it has been around for such a long time. People might even forget that it is there and not realize the sheer value it brings in managing and organizing your finances.
Putting together your budget should not be complicated. In fact, the easier and simpler it is, the higher the chance that you will get to stick to it. Of course, you have to keep in mind that creating a budget and following one are two completely different aspects of discipline. You could have a great budget that will be useless if you do not use it to keep track of your financials.
One thing that can help you keep track of your budget and keep your financial life away from debt is making sure you have access to it whenever you need it. You can have a copy on your phone or identify a budgeting app you can link up between several devices. This way, you can edit and make adjustments on your laptop at home and the same will reflect when you go out to buy the groceries. The information in your budget is important to help you make informed money decisions.
Avoid using your credit card for wants
There are a lot of people who still believe that they are in serious debt because of their credit card debt. It could have some truth to it but you have to remember that you are still the one using your card. And you have control over how you pay it back. It basically means that your credit card is simply a financial tool at your disposal.
Before you go on to say that credit cards are bad for your finances, there are people who actively use their credit cards to improve their finances. They incorporate it into their budget and even assign a credit card for each type of expense. Some have a specific card for car expenses and have another card for their food and home expenses.
Using credit cards can help you stay on top of your expenses. The statement you get at the end of your billing cycle also gives you the chance to double-check all your expenses. The idea of using credit is to pay for everything at the end of the month. This keeps interest payment, fees, and other penalties from being charged on your account bringing your total payment higher than it should be.
Don’t purchase unless it’s a necessity
USA Today shares that on average, Americans spend $1,497 on non-essential items every month. If you want to keep your financial life on the right track and away from unnecessary debt, you need to lower your non-essential expenses. This is not to say that you should never buy anything you want. But you need planning and moderation when you do decide to buy your wants.
If there is something you want to buy, try postponing the purchase for a week. If it is not that important, there is a big chance you will forget about it. You can also try and save for your wants. It can take some time but you get to pay for it in full. You do not get into debt or use credit just for your wants.
Build an emergency fund
When you set out to strengthen your financial life, your emergency fund should be a big part of your strategy. This was very evident as the health crisis made it very challenging for a lot of people to get on with their daily lives. With a lot of businesses and companies still trying to adjust to the effects of the pandemic, it forced their hand and had to let people go.
Having an emergency fund keeps you afloat and able to pay for your most basic expenses without going into debt. You can use credit cards but if you have no way of paying it back, you could be putting yourself in more trouble. It is also possible that without an emergency fund, you could end up taking out high-interest loans just to get by.
This is the reason why you need an emergency fund. It keeps you away from debt at a time where you are going through a crisis. It helps give you that peace of mind as well knowing you have the funds to get you through a difficult time.
Unwanted Debt can cause the following
There are a few things you need to know if you are given into unwanted and unnecessary debt. These challenges can make your situation a lot more challenging.
Debt can help you improve your finances. Your student loans give you the chance to take up higher education and land better career opportunities after. Taking out a mortgage loan can give you the chance to buy the house you need and pay installments for it. The problem starts when you start missing payments. You begin to struggle and try to catch up with your payments. The longer you put off your payments, the more charges, fees, and fees will be added to your monthly payments.
Unwanted debt can also cause mental and even emotional stress. When you start to feel that you do not have a way out, you begin to feel depressed and anxious about your current situation. This can also ripple out and affect your relationship with the people around you. It only goes to show that money problems can affect not only your finances but other areas of your life as well.
Your financial life is easily impacted by unwanted debt that is why you need to get ahead of the problem. It does not only help you get to your goals faster allows you to manage other areas of your life better.