No one wants financial calamity, but at one point, many folks have suddenly reached a point of being unable to pay their bills or afford basic commodities. You could be earning a decent living, but then the expensive treatment of a loved one’s medical condition wreaks havoc on your budget.
You could have pulled out of employment and invested all your savings in a venture that failed to yield the expected returns. Or, like many people around the world, you could have lost your livelihood in the wake of the COVID-19 pandemic. Numerous scenarios can put you in an unforeseen position of extreme financial strain.
How do you fend for yourself and your family as you try and wrestle back a source of income? Here are some practical measures you can take to begin getting your finances back in order one step at a time.
Evaluate the Situation
As tempting as it may be to jump into the fastest course of action at your disposal, it is smart to take a moment to think. Before you sign up for that payday loan or begin selling off items, pause and take stock of your situation. What options are available to you? Get some expert advice on the steps you can take.
As you assess your situation you will be able to decide what steps to take and prioritize them accordingly. To help you begin the recovery process earlier, it’s wise to have a plan for a financial emergency even when there are no signs of one on the horizon. While you’re still gainfully employed or enjoying good business revenue, begin making a strategy of how you would make up for the lost income.
Negotiate with Lenders
One of your key concerns in the face of a financial emergency will be how to keep up repayments in the event you take out a loan or mortgage. Your first step in addressing this challenge should be reaching out to the lender. If you took your loan from your local bank, you likely have an account manager who helped you with your application process.
Contact your account manager to figure out what options you have in terms of easing your monthly payments. A number of lenders offered borrowers a grace period of non-repayment at the height of the pandemic. In the interest of keeping you as a customer, most lenders will be willing to offer you this, among other ways of helping you service your loan.
Reaching out in good time will help you avoid getting slapped with late payment penalties, which can easily accrue to hefty amounts. It could also keep you from damaging your credit score.
Make Extra Money
If your financial emergency has to do with heightened expenditure rather than a loss of income, you can try and address it by getting an extra source of income. If your time is not too stretched, you can apply for a part-time job. Or you could turn that hobby you’re passionate about into a thriving side-hustle.
If you don’t quite have the time to dedicate to another gig, you could simply set up an eBay account and put up the stuff you don’t need for sale. A couple with two cars can sell one and make use of a single car.
Reducing your living expenses can help you increase your disposable income significantly. Selling off the second car will see you make huge savings from what you would have spent on gas, auto insurance premiums and service. If you’re renting a place that is huge and expensive to run, think about renting a cheaper, smaller space. Canceling on-demand entertainment, magazine, or club subscriptions can see you save hundreds of dollars every year.
As you look for ways to increase your income while tightening your belt, it is helpful to prioritize your expenses. Without a means of tracking your expenditure, you run the risk of misusing whatever little income you’re getting.
The last thing you want is not having enough money to settle your bills and pay for necessities because you’ve diverted the funds elsewhere. As you identify and eliminate frivolous expenses, you may end up being able to save in the midst of a crisis.
Look Into Insurance Coverage
Depending on the insurance policy you choose, you could get a one-off lump sum or monthly repayments to help you meet your living expenses if you lose your job or suffer an accident that renders you unable to work. All policies are different, so it’s important you read the policy’s fine print before signing the dotted line.
Consider a Loan
Why would I want to take a loan in a financial emergency, you may ask yourself? The last thing you need is the extra burden of interest-infused repayments. However, there are payday loan alternatives you should consider that will give you a bit more breathing space with repayments. In addition to helping you relieve urgent financial responsibilities, such loans can help you build your credit score.
The pandemic is the latest event to prove how topsy-turvy today’s economic climate can be. Don’t let the worst catch you unprepared. Begin taking whatever small steps you can today to safeguard your financial security tomorrow.