Life happens and although no one plans for disaster, it happens all too often. This is mainly because we are not solely in control of our finances. Whether we like it or not, there are factors out of our control and these factors can plunge you into financial ruin if you do not have an alternative strategy or plan.
The question is not if a financial emergency will occur, but rather when it will occur. The trick is not be caught unprepared for it. You should always have a plan for quick access to money if the need should arise. Here are the best ways for you to make ends meet when the going gets tough.
Short term-loan
A financial emergency does not always mean a massive amount of money, but when you need a couple of extra bucks at a moment’s notice, applying for a short-term loan is one of the best ways to get through a month.
The great thing about short-term loans is that you pay them off in a very short space of time. Sure, they have relatively high interest rates, but when you do not take one out every other month, it is not that big of a sacrifice. By taking out a short-term loan, you could alleviate the cash flow problem of your business or get that dental work done that has been causing you serious discomfort.
The trick with short-term loans is that you should have a payback strategy in place before you take out the loan. This will keep you accountable to yourself to return your monthly budget back to normal.
Refinancing your home
When you need a slightly larger amount of money, and you have a house as an asset, then you potentially have a very large sum of money at your disposal. The reasons why you need the extra money is irrelevant. What is relevant is that you can procure a large sum of money at a very low interest rate.
In essence, when you borrow money against your house bond, you actually just take out a bigger loan and the bank refinances your home loan. Your monthly premium will go up slightly and you can pay the money over a longer period. If you want to save on the interest, paying a little bit of capital above your normal bond will save you a massive amount of money in interest.
Cut the budget
You get financial emergencies and then you get financial mismanagement. When you start to see a pattern of not meeting your monthly financial obligations, then you need to evaluate your budget and see where you can cut it. There are other times where you come under a prolonged period of financial stress a restructure is also needed. In either case, sitting down and doing the math is the only way forward.
When you start to look at your expenses and your income, it will be easy to determine where your money is leaking. The very first thing to do is to pay any debt you might have as quickly as possible. This will require some lifestyle changes, but these changes beat the alternative of losing your house going even further into debt.
Plan ahead
Prevention is better than cure and when it comes to surviving a financial emergency, it also rings true. Having a budget to balance your income and expenses is good, but it also needs to be supplemented with an emergency fund.
You should never have all your eggs in one basket and this is why you should look at investment opportunities. These expenses should be constant and is the last thing you should cut from your budget when things get tough.
People always fall into the trap of thinking that the little they have to invest is not going to make a difference, but it makes a massive difference. The sooner you get into the habit of putting some cash away, the easier it will be for you to make do with what you have left.
Track your progress to keep motivated
When people face financial emergencies, they often get discouraged by the mountain of debt that is looking back at them. The best way to beat the slump is if you keep track of your progress and watch the mountain become a hill and eventually a smooth and flat plain.
As you see, the numbers dropping it also eases the stress you feel about your situation even more. It helps you to focus on the positive aspects of your situation and not just on the negative. When you do not live in an anxious state of mind and continual worry, you start to see solutions to your problems and outcomes that were hidden by your clouded thinking.
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