Financial stress can leave you fraught with worry and anxiety but is more common than most realize. Over 77% of Americans have admitted to having some kind of debt including mortgages, personal loans, and credit card repayments. If you’re fretting over your money situation and worried for your future, follow our tips to help you out of your financial hole and back in your accountants’ good books.
Understand Your Debt
Getting to grips with your financial hole is the first step to moving forward. If you’re not sure who or what you owe it’s impossible to create a plan to pay it all back. If you have gotten yourself into some trouble with your taxes, using a tax relief program can be a good start to helping write some of your debts off and getting you out of hot water financially. Do your research and avoid any companies that offer relief that sounds too good to be true. Chances are it probably is.
Create An Action Plan
Once you understand your financial situation a little better you will be able to create a plan. Make a list of everything you owe and where you owe it too. Prioritize loans that have high interest and aim to pay those off first. If you can reduce your debts to those with low or no interest, then you will pay less in the long run. If you are really willing to sort out your money then consider getting one single loan with a bank to consolidate all of your debts such as credit cards and short-term payday loans, this way you will only have one channel of debt to deal with. However, this should only be an option if you can trust yourself. If you can’t resist a big splurge when you have a lot of cash in the bank then another loan should be avoided at all costs.
Switch Your Utilities
Bill payments are a necessary evil, but have you ever thought about how you could be overpaying for services? Do some shopping around and you could be surprised at how much you could save, just by changing your providers. Make sure you move to a supplier who has a no switch fee and don’t lock you into lengthy contracts, that way you can move again in a few months if there are better offers out there.
Cut Up Your Credit Cards
Credit cards are a nightmare. Whilst it’s handy to have some spare cash in case of emergencies, credit cards are easy to rack up but hard to pay off thanks to the huge amount of interest that they generate. The best solution is to destroy them to prevent any extra spending whilst you’re working on paying off your debts. Your credit score will thank you!
Make A List Of Your Absolute Necessities
Write down everything that you absolutely need to pay for each month. This should be rent, basic groceries, car payments, utility bills, and debt repayments. Do not include any beauty appointments, gym payments, meals out, morning coffee runs, or Netflix subscriptions – these are not necessities, these are indulgences. Compare your income to your vital outgoings and work out what you have left before you plan to spend one single penny on an indulgence.
Learn To Go Without
Paying off your debts should be your number one priority. If that means having to forgo your monthly nail appointment then so be it. You will have to learn to make sacrifices until your financial situation has cleared up, or you’ll never be able to get back on track (unless you win the lottery!)
Find Your Side Hustle
Every single person should have a side hustle that makes them extra cash outside of their 9-5. Try and turn your passion into making paper so it’s a fun hobby that makes you cash, rather than another chore to fit into your day. If you love what you do it doesn’t feel like work. If you can turn that side hustle into your main source of income, then you will be laughing all the way to the bank.
Start A Rainy Day Fund
Before you spend any extra cash on even more indulgences, start funneling your spare income into a rainy day fund. If you can save a lump sum you’ll be in a better position if you have car troubles, a broken boiler, or your kid’s last-minute field trip. Only use this for emergencies, a new closet is not a necessity!
Plan Your Goals
Having an actual goal will make saving easier. If you can picture what you need money for then you’re more likely to actually put money aside. Whether you want to buy a house, take a vacation with the kids or even just a nice new coat for winter, create a vision board and look at it daily. You can do this on Pinterest or if you like arts and crafts why not print pictures and make a huge, framed board and mount it to the wall? The more you see it the more motivated you will be to reach your goal. Alongside your visual goal reminder, set up a separate savings account and label it what you’re saving for. That way, if you’re tempted to dip into your separate pot, you’ll be reminded of what you’re taking away from.
Prep For Retirement
If you’re under 40 it can be hard to focus on a long-term savings goal for retirement. An employer back 401k is the best way to save for your later years but if you don’t have the luxury of retirement benefits, you’ll need to plan on your own. Whilst it’s weird to think about putting money away in your twenties, you’ll need to have enough income as a pensioner to sustain yourself. In the USA, the age of retirement is currently 66-67, whereas the average life expectancy is 78-79. This means that you’ll need to have enough in your pot to sustain yourself for around 13 years.
Have you been in a mess with your money? Share your inspiration tips to help others below.
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