Sometimes, with all the best will in the world, our finances can go awry. Especially in the wake of the covid-19 pandemic, many people live just one paycheck away from financial disaster when the economy has been ravaged.
But if you are struggling to get your finances under control, can you change your fortunes without having to destroy your credit rating permanently? The truth is, it is never too late to start changing your financial outlook. If anything, when you have less money to live on, now is the time to really take stock of your financial health.
What Are Your Financial Goals?
Do you know what your goals are? It is to reduce their debt; for others, it is starting with $401K. If you have a goal in mind, then taking stock of your financial goals can help you to have a place in mind to reach and an end goal, so to speak. Write it down and really commit to making this a reality.
What Are Your Expenses?
Next, you need to assess exactly what you are paying for and what you can remove from your expenses. If it isn’t vital, it needs to go. In the long run, the sacrifice will be worth it. Remove non-essential slowly to avoid building them back up again, and with the money you save, have it directed towards your goal.
Can You Save Money?
Most financial experts suggest that your savings need to be classed as a vital expense. This means, when your paycheck hits your checking account, you need to move money instantly, even just a nominal amount, to a savings account regardless of what else you need to pay out for.
If you cannot save, you can use automatic savings plans with your bank to help you save or invest. For many people, this hasn’t been an option, and consulting with a financial adviser can give them a clear idea of how best to save, invest and improve their financial health without struggling alone.
Do You Have Credit Card Debt?
Some levels of debt are completely healthy to have and can help you improve your credit score. Credit cards are somewhat of a grey area. When used responsibly, for example, for living expenses and are paid off in full each month, they can be a valuable asset to improving building your credit score. But when you are paying off the minimum payment each month and keep accruing that interest, it isn’t going to do you any favors. Instead, look at paying off your credit cards, starting with the smallest balance first.
The trick is to maintain your minimum payments on all your credit cards and put any extra money towards clearing the smallest balance first. Next, you move onto the next smallest balance and so on. This method can be applied to any debt you may have.
Can You Splurge Without Wasting Money?
Many people think that to save, they need to deny themselves. This actually won’t work. Much like when you are on a diet, you will start to rave them if you cut out certain foods. This happens with spending too. When you try to change too drastically, you will end up splashing out on frivolous items. Instead, assess your needs. Like your morning coffee on the way to work? Instead, f hitting the coffee shop, invest in a good quality coffee machine and make your own. It isn’t about restricting. It is about compromising.