Each of us can minimize the risk of becoming bankrupt. How? Analyze your financial situation and try to get better. You should change not only your lifestyle but also your mind and learn some new things, for example, planings. Check some advice from financial experts and follow them. You will be able to overcome fear, raise your eyes and see not only the destination but also the road that will lead to your goal. Let’s go!
Financial situation definition: your ability to cover financial needs and your current relations with finances, skills to manage money.
#1 Deal With All Your Debts
It is the first step where you should start. If you don’t have debts, skip this step, if yes – read carefully.
Now you should sit down and count how much money you should return to banks, friends, and lending institutions. But it doesn’t mean you need to search for personal loans to cover all debts. Just find the solutions, how to cut spending to cover debts faster. The good advice is to change your annual vacation near the seaside to calm home weekends, walk at the park or make a picnic instead of the restaurant.
But what to do if you don’t have an extra budget? Try to find debt consolidation loans. They have lower interest rates and longer terms of return. In such a way, you will be able to repay all high-interest loans and make a repayment plan to repay debt consolidation loans. Such a lending solution will save you money and let you deal with debt without nervousness.
Why? Because despite payday loans and credit cards, long-term loans have fixed payments every month. And you always know how much you should pay. So, just include this sum in your budget and keep calm.
#2 Take Care of Your Credit Score
According to information at Fit My Money, a lot of Americans spoiled their credit scores with student loans and payday loans when they were young. We can’t change the past but we can change the future. Even if you are not going to use loans in the future at all, take care of your credit score in every possible way.
Unfortunately, you won’t get any financial help with a bad credit history. And while some financial services may still give you a loan no matter what your credit score looks like, you shouldn’t rely on it. We strongly advise you to make your bad financial situation better and fix all the financial indicators related to it.
#3 Make a Separate Account for Savings
Your financial situation is insolvent when your spending is equal to your savings. But a wealth advisor Justin McCarthy says that there are no people who can’t save, but there are a lot of people who tried to do it incorrectly.
Usually, people save all the sum on one account that is why it is so easy for them to spend all the sum till zero. McCarthy advises separating an account with savings and spending. It means you should create an account where you will put a certain sum every month but don’t spend this sum, just accumulate.
The second account will be for spending and you will be able to spend money from there. Seeing the rest of the balance you can evaluate your financial abilities and identify needs that are necessary to be covered and smth that can be delayed or refused.
Do this and you will notice that you spend less on unnecessary things and your approach to finances becomes more serious. If you don’t spend all the sum from the spending account till the end of the month, just transfer it to a savings account. If the sum won’t be enough, step 4 is for you!
#4 Control Your Spendings
Emotions from spontaneous purchases are the most pleasant, but only at the moment. In the nearest future, you will understand with stupid was your spending. How to fix my financial situation with spending planning? The costs should be divided into fixed and optional.
Fixed costs are those that are paid regularly and without significant changes, for example, groceries, payments for mobile communications, utilities, mortgages, etc.
Optional expenses are casual expenses such as buying gifts for birthdays or a new dress to go to the party.
- make a list of urgent purchases, not urgent purchases and your wants;
- make a list of your needs and identify the minimum sum you need to spend every month;
- evaluate all the points in the lists and think what you can refuse from;
- pay attention to sales but only if there is a discount for items you really need and have on your lists;
- check automatic subscriptions and don’t forget to cancel or choose the most favorable tariff.
After you learn how to control your expenses, you should cut them. Take your time to refuse all your wants and stay home every day. Be smart! Regardless of income level, everybody can call different services and ask for discounts.
Or if you are planning a big purchase, don’t make it simultaneously. Check discounts on different websites and check the level of price changes during the year. There are big seasonal discounts on various items.
You can also buy groceries in bulk if you buy the same goods every week and they can’t be spoiled quickly. Even if you can cut your expenses at least $100 per month, just count how much it will be per year. But per 5 years?
Financial situation meaning is not certain. It means your relations with finances at all. No matter what tips and advice you follow. You can choose the most suitable steps for yourself. But start taking care of your financial situation right now and in 5 years you will be thankful to yourself.
Analyzing your budget (income, debts, and spending) is the first step you should do. And if you want to save and earn more but spend less, read financial advice carefully and follow at least half of them. Reduce your debts and try to leave only your personal money but not borrowed ones.