By Katie Tejada
If there is a lesson Covid-19 taught us, then unexpected disasters can and must happen. And for the 63% of Americans currently living from paycheck to paycheck, an unexpected job loss, drop in income, or a hefty medical bill can be enough to blow your finances and put a huge financial strain on you and your family.
Fortunately, there are several ways you can take back control of your finances and ease the stress of falling bank accounts. Find your way back to financial freedom with these trusted tips on how to manage financial disasters.
Accept your new reality and lower your costs
The first and most important place to start if your finances have suffered from the pandemic is to take stock of your current location and immediately adjust to your new reality. Waiting for things to return to normal is the worst mistake you can make and it will only put you further into debt.
For some people, this could mean moving into a smaller house. for others it could mean swapping the Mercedes-Benz for something cheaper. Whatever your new reality, you must first assess the situation.
Take stock of the situation
With your partner or a trusted financial advisor, take the time to sit down and take stock of your assets and debts, including:
- Positive bank balances and cash on hand
- Negative bank balances
- Time deposits
- Credit card debt
- Investment accounts
- Personal debt
- Retirement accounts
- Bank loan
- Home equity
- Home loan
- vehicles
- Student Loans
- electronics
- Other debts
- Jewellery
When reviewing your overall financial health, consider all of your bankrolls, as well as your remaining income level (if any), layoffs, social security payments, other government payments, and early release of pension funds. These are resources that you can fall back on now or in the future.
Create a financial plan
A financial plan is not only intended for the rich, but for everyone who wants to achieve a goal. Put simply, your financial plan is a document that describes your short, medium, and long-term goals, including your savings goals and debt payments.
If you’re feeling stressed about finances right now, create a financial plan that includes the following immediate financial goals:
- Save a $ 1,000 emergency fund
- Withdraw and cancel your credit cards
Proposed medium-term goals:
- Save a three to six month emergency fund
- Pay off all vehicle and product debts
- Choose an insurance plan to protect your family
- Contribute to a retirement account regularly
Long term goals:
- Pay off your home loan
- Increase your retirement contributions
Once you have decided on your goals, start planning how you will achieve them. In general, this means creating a budget that will keep the spending portion to a minimum for a while to allow for savings and debt repayments.
Make a budget
When you create a budget, you reduce the financial burden by getting back in the driver’s seat. No matter how tight things are right now, when you find out how to live within your means, you will be able to take a tremendous weight off your shoulders and move in a better direction.
When creating a budget, first write down your expected monthly income on one side and expected monthly costs on the other. After the essentials like groceries, lodging, and bills have been considered, you’ll see how much is left for savings, debt payments, donations, and discretionary spending. The goal of a budget is to keep $ 0 on the spending side of the page so that you can put every dollar to good use.
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Find out how to prune back
What most people find when creating a budget is that they are spending a lot more of their income than they’d like. Consider the following ideas to save more money:
- Eliminate unplanned or “reflex” issues
- Relax by spending time outdoors instead of going to the mall
- Cook your own meals at home
- Make your own coffee
- Drink filtered water from the tap
- Walk or ride a bike instead of riding
- Buy used goods instead of new ones
If you really think about it, you can cut your spending drastically and leave more money in your pocket at the end of the day. Like me, you are probably spending a lot more time at home right now. This is a great opportunity to save big bucks on groceries by eating out instead of eating out. Take a day in the week that you usually order take away or delivery and cook instead and see how much money you save!
Find out what resources are available
Times may be difficult, but that doesn’t mean you have to go it alone. During times of financial stress and difficulty, there are a variety of resources you can access, including senior loans and early release of retirement funds. Refer to the following actions to see what help you might be eligible for:
Once you have received funding or relief from the government, it is a good idea to consult a seasoned financial advisor to help develop a long-term plan for those funds. Once the money is gone, it’s gone, and it is far better to spend a little extra cash honing your new economy skills than indulging in a luxury and going into debt.
Consider the benefits of filing for bankruptcy
It might seem counterintuitive, but filing for bankruptcy could be the difference that turns things around. Find out about your bank’s economic disaster relief policy and negotiate with your lenders and creditors before dealing with any debt or bankruptcy. The benefits of a bankruptcy declaration are a clean slate and the end of debt collection. The downsides are that you may lose your home and / or valuables and the bankruptcy status will remain on your file for the next 10 years.
Often times, a skilled attorney can help you file for bankruptcy without losing your home or vehicle to repay the portion of your debt that you can. Again, this option should be viewed as a last resort if your situation brings you to the verge of desperation.
Take a step now to reduce financial burdens
Whether you’re setting a new budget or requesting relief, take a small step today to get on your way to financial recovery. Achieving your goals may seem impossible right now, but breaking the process down into smaller steps will make the task less overwhelming and make you feel more hopeful and optimistic.
If you have complex financial needs or make decisions related to your business during the crisis, you should seek help from a fiduciary financial advisor. An escrow advisor has an obligation to provide you with comprehensive information and always put your interests first – and in a crisis this is exactly what you need.
About the author
Contribution by: Katie Tejada
Katie Tejada is a writer, editor, and former human resources specialist. She often reports on developments in human resources, business communications, recruitment, real estate and finance, but also enjoys writing about travel, interiors and events.
Company: ML&R Wealth Management
Website: www.mlrpc.com
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