What is the most effective way to cope with financial stress? People’s circumstances and priorities differ, so we pay off debt and fix financial woes in different ways.
If you feel overwhelmed with your finances right now, you’re not alone. The current situation has caused many of us to lose our jobs, be put on furlough, and take on any available job, even with a huge pay cut. It’s been two years since the pandemic hit, and at this point, we are all doing our best to keep our finances in the best state possible.
But like any overwhelming problem, we can solve our financial problems by creating a realistic plan and remaining committed to it. Here are four things that you can do right now to start recovering financially.
Examine Your Current Money Solutions
At this point, you might be dealing with loans with high-interest rates. Typically, payments for these loans go towards paying the interest without covering any position of the principal amount. If you absolutely need a financial boost to help tide you through a rough patch, you might want to go for a short-term loan. However, there is an alternative to salary loans: a faster, more cost-effective way to get a loan without the additional stress and pressure to pay everything off in two weeks. You can instead go for installment loans that allow you to make affordable monthly payments and one that is structured in a way that lets you pay off principal and interest at the same time.
This type of loan is also ideal to pay off consolidated debts or if you need to make a necessary purchase but do not have the available funds to cover the cost at the moment. Installment loans that let you pay principal and interest at the same time will come out more cost-effective as your interest rate shrinks along with your principal rate.
This way, you can get financial assistance without getting trapped into the vicious cycle of paying the default interest when you have no available money to pay off the loan in full.
Plan for Expenses
Spending is unavoidable, but it is controllable and can be planned for. When expenses and purchases are scheduled, tracking expenses is easier to do. Tracking your expenses will keep you aware of how much money you’ve already put out and help keep your expenses below your limit.
When you use a tracker for your expenses, you can get an overview of your daily purchases and study your purchases based on amount and frequency. Likewise, the tracker will show how seemingly small purchases can add up over time or when they’re purchased frequently.
Once you’ve taken a closer look at your spending habits, you can then devise a plan to address your financial situation. Tracking and scheduling expenses are key in staying within budget and avoiding impulse purchases.
Aside from that, scheduling purchases and expenses lets you manage your due dates better and avoid paying interest charges due to late payment. If you’re frequently running out of funds — like every month — scheduling and tracking your expenses will definitely solve this problem.
Pay Off Debt
If you’re using all your credit cards and missing due dates now and then, it’s time to consolidate your credit card debts and pay the total amount in full. As mentioned earlier, getting a new loan to pay off a loan may be sub-optimal. Still, it’s better to get a fresh loan that lets you pay the principal and interest at the same time than incur huge interest every month because you can only pay the minimum amount on your credit cards.
Once you’ve consolidated and paid off your debt, organize your credit card usage. It’s much easier to keep track of your individual expenses when you charge a particular type of expense per card. For example: have a card for fuel expenses and another one for groceries. If possible, use a different card for take-outs and online purchases and set a spending limit. Separating your essential purchases from convenience purchases is necessary for staying within budget and avoid overspending on wants.
Aside from keeping track of your purchases, it’s also much easier to keep an eye out for fraudulent transactions on your account and report it as soon as you see any irregular transactions.
You can also change your billing due to effectively manage paying off your credit card bills. You can schedule your due date after your payday to make sure you can pay on time. However, changing your due date won’t take effect until the next billing cycle. The sooner you do it, the sooner you can start with your financial scheduling and tracking plans.
Create a Realistic Savings Plan
More often than not, we hear financial experts say that we should put all our available funds towards paying off debt. However, it does depend on the amount of debt and how much money comes into your account on a regular basis.
While saving and paying off debt isn’t something that makes sense for everyone, it does work for some. Therefore, one can save and pay off debt at the same time. As mentioned earlier, if you’re stuck paying off the minimum amount on your credit cards, it’s better to consolidate them and get a fresh loan — if you don’t have the available funds to cover the entire amount — and pay off the new loan in installments that work for you. This way, you can pay off your principal and shrink your interest rate as your loan amount goes down.
Start with whatever amount you can; what’s important is you start saving and develop the habit of putting a portion of your earnings in your savings, eventually building your emergency fund.
Make sure that your savings plan is realistic and achievable. When you set goals and targets, make sure these are completely possible to achieve; this will give you a sense of small victory that will keep you pushing towards your main goal.