Most of us find ourselves financially struggling at one point or the other. If you are in a situation of the financial crisis, you need to take actionable steps to come out of it.
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What to do when you are financially struggling?
Making a solid plan and sticking to it will help you improve your financial position. Less money as well as mismanagement of money both causes problems. You have to assess your situation, what is your problem. Is it lack of money or you don’t know where your money is going.
There are two types of financial situations,
- You have enough but you don’t know how to manage money properly
- You don’t have enough to pay for basic needs
Both situations can make you struggle financially and you have to make a plan to come out of it.
If you are in a situation where
- Your budget is bigger than your income
- You have to borrow money to stay with the budget
- Your savings are all-time low and you don’t have an emergency fund to cover even smallest emergencies
There are two options, either you can start earning more or you can manage your existing income by squeezing money wherever possible or do both.
How can you manage your existing money?
If you are financially struggling, the first step should be to manage your existing money. Know exactly why you are in financial trouble. Is it due to your low salary or due to your spending habits? If you are spending more than needed, freezing your spending habits can make a difference.
Your problems could be due to other emergencies, medical problems, but in any case, you have to make a plan to come out of these problems.
Here are a few steps that will help you come out of financial struggles.
1. Stop spending on unnecessary items
You may be familiar with the term Retail Therapy, it makes you happy. Money scarcity makes you feel miserable, to counteract the effect you go shopping and spend money. Which means more financial struggles.
The first step to come out of this is to make two separate lists of necessary and unnecessary things. You will find many items which are not required but you just want to have them. Slash those items from your budget and focus only on the items which are basics.
Do a favour, stop going to market and totally forget about online shopping. This will let you have some money to be used on necessary things.
2. Track your spending
Start tracking your spending. This one is a crucial step in tacking your finances. Write down each and every expense. Tally at the end, and try to eliminate all those expenses which are not required in your next budget.
It is easy to create a functional budget when you know where your money is going. Here our goal is to make use of every single dollar.
3. Make a new budget
If you already make a budget but still struggling, make a new one. From the previous step, you have a list of necessary as well as unnecessary items. Also, you are aware of your spending patterns, it is easy to create a functional budget.
Now, add only those items to the budget which are necessary and skip all those which you want but don’t need.
This tight budget will give you some wiggle room and you should have a few dollars left at the end for any emergency expenses
4. Stop incurring more debt
When you are struggling financially, incurring more debt is not the answer. But sometimes, you borrow more to stay with your budget. Instead, start working on your existing debt and try to get rid of it.
The mortgage is the biggest debt most of us have. This one needs some time to get paid. But other smaller loans can be paid easily.
If you have credit card debt and other loans, try to repay them. For this, you can follow a few steps
- Convey the message to your financial institutions that you are having difficulty paying higher interest rates. And that you are their loyal customer so you want a lower interest rate.
- If you have multiple cards, try to consolidate the debt. This will let you make a single payment instead of many different paments
- If consolidation is not possible, try to tackle them one by one.
5. Earn extra income when you are financially struggling
If you feel that you have done all you can do with your existing income, start earning extra income. The internet has made it easy to earn extra income working from home. There are many ways to start working from home.
Your side hustle may be related to the work you are already doing. It may be some skill you have picked up or you can monetize your hobby. If you are looking for some ways to start earning immediately, start doing surveys. Believe me, it is the easiest way and you can start earning right away.
I have created my emergency fund from the money I earned from surveys and a few other online works.
Here are a few survey sites you can start doing right away
Survey Junkie: Survey Junkie is the best place to earn some extra money. There short and high paying surveys will let you make a good amount of money.
There are many side hustles which you can start to make money.
Download a list of side hustles and have a look which one suits you
6. Create an emergency fund
Building an emergency fund sounds counterintuitive when you are already in debt and struggling financially. Having an emergency fund saves you from incurring more debt by having some cushion when you need money.
If you cannot make a huge amount of contributions to your emergency fund, start with $25 a month. It is not a big amount but will create a momentum. When your financial situation improves, you can make bigger contributions to your emergency fund.
7. Review the situation
Once you have a plan in place and you are working on the plan for a few months, you have to review how things are going. If you are making a process and your financial position is improving, reviewing the plan will let you assess the situation.
If you think you are in the same position and have made no progress, change the plan. (If possible, take professional help). Sometimes you need guidance to come out of the crisis.
You can do a few more things to improve your financial situation
This may be a viable option if your house upkeep and vehicle maintenance are drying your finances. If your household is managing more than one vehicle, try to get rid of the others if possible. This can help you in saving money on vehicle upkeep and maintenance.
Think about your house, do you need a big house to live? If you can, downsize your house and live on less mortgage, it will save you a lot of money and stress.
Additionally, you can rent a room in your house. This will save you a lot of money. We have tried this one and it feels amazing when you get the rent as extra income.
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