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Last Updated on July 30, 2020
During difficult economic times, your finances can take a back seat, resulting in a wave of financial instability. Unfortunately, it only takes a few months to undo all your hard work. Your credit score begins to take a nosedive, putting you at a disadvantage when it comes to securing a loan to pull you out which in the end can create debt hurdles on their own. Thankfully, there are several ways to turn your financial situation around and become financially sound.
Your Debt Overload
Once you miss a payment or two on your credit cards, it becomes difficult to bring your debt current. Unfortunately, interest and late fees only further compound the problem. You have a few options available to reduce your debt. A refinance of an existing mortgage can give you cash to pay off the bad debt making you solvent. Or, if this is not something available to you, taking on a second job will give you extra money. Then you can contact the creditors with a plan in hand and comply by making arrangements for future payments. If your debt is too much to handle on your own, you can reach out to a company such as Braidwood Capital who specializes in debt consolidation.
Establishing a Savings Account
Hiccups will happen throughout life that can put a strain on your income and cause you to fall behind. To avoid this scenario from recurring in the future, you need to have money in reserves. One way to achieve this is to set up an emergency fund for the sole purpose of those types of emergencies. Start with a small amount each pay period and increase it as your income rises and your debt reduces.
Budgeting Is an Essential Tool for Financial Wealth
People who use a budget for their household have a home, go on vacation and have money set aside for their children’s college and their retirement. It isn’t a miracle that they have it all, it’s discipline with their money. Many people who live paycheck to paycheck earn six figures annually. What a budget does, is open your eyes to where your money goes. Many people don’t realize that their morning latte on the fly costs them upwards of a thousand dollars each year. Add in a night or two of ordering take-out and impulse purchases, and you’re now up to five thousand or more for the year.
Living Within Your Means
There are many people who get caught up in keeping up with family members, neighbors and co-workers. In the end, this created competition costs you dearly. Everyone has their own time frame for things like purchasing a home or buying a new car. That time is when you can comfortably afford it. It doesn’t do you any good to do everything within your means to get into a home, only to discover that you can’t afford it. After all, in addition to the monthly mortgage payment, you also have property taxes, homeowner’s insurance, regular maintenance and monthly household bills. Learning to live within your means is a step in the right direction to a bright financial future and fruitful retirement.
Monitor Your Credit Score
Your credit score is a three-digit number that creditors use as the primary instrument in their loan decision process. If your score falls below what they consider good (660 and above), you may need up with a higher interest rate or a denial. Monitoring your credit score is something you should do every 6 months to ensure that there aren’t any discrepancies. Today, your credit score is also reviewed when you apply for utilities, any type of insurance and in some cases, employment.
Earn More Through Higher Education
The amount of money you can earn will also affect the stability of your financial future. If you currently have a dead-end job with foreseeable advancement opportunities, go back to school. There’s no age limit requirement to earning a degree. Many people well into their forties have decided to take classes to improve their income.
Life is unpredictable. You will have times that require additional finances to remain solvent. By creating a household budget, establishing savings, reducing your debt and improving your bottom line, you’ll remain financially sound.