When you’re struggling with your personal finances, it’s easy to become overwhelmed. You’re not sure if you can keep up with your financial obligations, and you’re worried about providing for your family. To address this crisis, take some deep breaths and then take these steps.
Take Care of Pressing Financial Obligations
Do you have outstanding bills or loans that carry serious financial repercussions if you’re late? Common penalties include:
- Damage to your credit score
- Contract termination
- Denial of future applications
To avoid these drastic consequences, prioritize paying off these bills. If you don’t have enough cash, use a long-term loan to cover your expenses. If you’re looking for a private loan, Axo Finans, has several programs that you may qualify for. No matter what program you apply for, make sure that you can keep up with the interest rate and repayment schedule before you sign the contract. As soon as you receive the money, use it to pay off your most pressing bills.
Analyze Your Debt
Now that you’ve taken care of the most important issues, it’s time to get your long-term finances back on track. Start by analyzing your current level of debt. You’ve taken out a private loan, personal loan, or alternative financing loan for a variety of reasons:
- Attending college
- Purchasing a house
- Buying a car
- Handling medical bills
It’s critical that you understand each debt’s purpose so that you can identify patterns in your spending. Does your debt come from impulse purchases that you don’t have room for, or is it the result of necessary spending that your paycheck can’t cover? In both scenarios, you need to change your budget, but your strategy for restoring your financial health is different. If impulse buying is a big part of your problem, talk to an accountant or financial coach about setting limits for yourself.
After figuring out where your debt comes from, you need to make a repayment schedule. Most lenders want part of the principal and interest back every month, but some are more flexible. Look through your contracts and plans and make a list of when each payment is due. Give each payment a priority based on its due date, interest rate, and possible fees. For example, if you have to choose between paying two loans on the same day and one has a fee attached to late repayments, pay that one first.
Identify Your Other Financial Concerns
While debt is usually the most stressful part of people’s budgets, it’s not the only item that you’re worried about. Identify your other major financial burdens:
- Utility costs
- Gas bills
- Grocery costs
- Clothing purchases
- Medical copays
- Entertainment expenses
Some of these expenses are necessary; others are not. It’s not realistic to completely cut entertainment out of your budget if you’re used to going out to eat a few times a week, but you do need to rearrange your spending priorities. Your biggest expenses should be for necessities such as grocery trips and utility bills. If you’re spending much more on movies or bars than on your essentials every month, you need to cut back.
Rather than quitting discretionary spending cold turkey, set realistic limits for yourself. For example, if you currently pay for Netflix, Amazon Prime, Peacock, Apple Music, Spotify, and Hulu, limit yourself to one streaming service each for music and movies. If you go out with your friends three times a week, cut down to twice a week for a month, and then reduce your trips to once a week. Keep track of your progress in a notebook or app and note how much you save every time you give up an unnecessary purchase.
Look to the Future
What’s on your financial horizon? One of the keys to staying in good financial health is to avoid getting caught in your current financial state. Thinking ahead means remembering that you need to keep up with your rent and utility bills as well as your debt repayments next month, too. It also means thinking about changes to your finances:
- Major surgery
- Job changes
- Location changes
- Economic recessions or depressions
- Additions to your family
You should always plan several years ahead because you don’t know what will happen to the economy or your personal life. This is especially important if you’re getting married or starting a family soon. You want to have plenty of money saved up to cover your family’s increased expenses, and it’s hard to start family life with financial difficulties.
One part of looking at your financial future is deciding if you’re in the right job. Whether you love your job or hate it, does it give you enough income to provide for your needs? If you had to take out a loan to cover your debt or keep up with other monthly expenses, your current job probably isn’t enough. You can either look for a new career or find a part-time job to add to your income. Both strategies have benefits and drawbacks. Higher-paying jobs are difficult to find, but that way you don’t lose your free time. It’s not hard to find a part-time job, but you have to carefully balance your two careers and your personal life.
Working through a personal financial crisis takes a long time and requires an in-depth and honest look at your spending. While these steps are challenging, they’re crucial to setting yourself up for a healthy financial future.