Finance Lifestyle

Know how to deal financial crisis with effective planning and management

People often regard going through a financial crisis as one of the lowest points of their life. And often it is as a result of ignoring small errors in personal finance which piles up into one big chunk or as a result of poor decisions or budget deficits.

Most of us have been there or at least know someone who has felt the cold touch of a financial crisis. It may feel like all the plans for the future are fading away right in front of your eyes and there is nothing you can do to stop or reverse it.

If you are in that situation or if you know people facing it, know that there is a way out. A financial crisis is like a wound; if one acts consciously and takes proper care it will heal over time. If you just sit and worry about the wound, nothing good is likely to come out of it, and it only worsens the situation. So, instead of worrying about what has already happened, pull up your socks and starting working to come out of the situation.

Below are some simple steps which can guide you to come out of a financial crisis

Acknowledge

The first thing people tend to do in times of a financial crisis is to resist the situation out of agitation or lack of confidence in facing it. It is the first and primary thing to avoid in such times. Accept the situation rather than ignoring the responsibility of handling it.

During this time people often feel both physically and mentally weak.  People also tend to postpone dealing with things for later, hoping the situation will improve and waste their time and energy thinking what they could have done in hindsight; rather than actually working on the problem to solve it.

Acknowledge the fact that you are in a financial crisis and promise yourself to work on coming out of it. Tell yourself that time heals everything no matter what the situation is. For that to happen, you will have to work smart and hard with conscious decisions in every step.

A wise man accepts the situation without blaming others, takes necessary actions to come out of the situation, and learns from the mistake. Always remember that worrying only makes the situations worse. So, we should always put our time and energy into working out of that situation which will surely lead us into a bright future.

Also, make sure that your family is aware of the situation, as it is or will be something that affects them also. Additionally, they may have ideas to help you come out of this situation.

Remember, if you want to prevent your children and younger family members from making the same mistakes and ending up in such a situation, it is important to teach them about good money management.

Budget

Improper or lack of management of finances is a big culprit when it comes to the financial crisis. You may be making more money than usual, yet the situation never seems to improve. Rather than lose sleep over it, take action and think about ways to come out of the situation. May be better control over your expenditure can ease the burden a little. Read this article on how to draw up a personal budget tool.

Free Entertainment

Being in a financial crisis doesn’t necessarily mean that you have to restrict yourself from enjoying life or prevent your family members from enjoying life.  

However if your idea of enjoying life means meals out everyday and holidays away – this might prove to be a problem in such a situation.

There are ways to enjoy your life which comes at the cost of almost nothing. Instead of buying expensive subscriptions, try watching free movies or shows that are shown on regular TV. This may also be the time to start reading books, and you may not realize, but books are one of the best tools to sharpen your brain.

Pick a book that matches your interest or about finances which can come handy especially in these situations. This is also a good way to get your kids into the habit of reading ( by reducing screen time).

It also doesn’t mean that your children need to be cooped up indoors all the time. There are plenty of amusement & recreational parks or exhibitions which are free or charge very less. You can take them out whenever you are available, plus a breath of fresh air is always refreshing.

If you are living in London, read this article on getting the best out of free entertainment. 

Extra Money

While in crisis, getting additional income by working extra hours or getting a part-time job is helpful, primarily in two ways; It gives you extra cash in hand and it eases your worries about the current situation.

If you have some old items like clothes or any items that you do not use anymore(unless they are a memorabilia), you can even sell them. Instead of paying for someone to help fix things at home or clean the house or garden, this is a good time to put your DIY skills (however good or bad they may be) to use.

Read this article on part-time jobs to explore your opportunities for making extra money.

Cards or loans

Credit cards or loans are one of the most common burdens for a person in a financial crisis. If you have existing loans or credit cards with high interest rates; try consolidating them or transferring it to another credit card or loan that offers either zero and low interest rates.

Also, ensure that you don’t get yourself into additional debt. Using your credit card should really be only a last resort.

If you have savings, emergency or retirement money, think twice before you spend it and be very careful how you spend it. The reason being your current financial crisis may be smaller than you imagine, and there may be no real need to use that money now. Check all the possible alternate solutions before resorting to using this money.

Backup Plan

Planning your goals with attainable actions is a pivotal weapon to fight the financial crisis. Write down how much you owe, how much you make, total assets, and how long it takes to come out of the situation. Things may not go as you plan, so be flexible and modify the plan as you go along.

Conclusion:

Having a financial crisis has become very common these days with fluctuations in the economy, inconsistency, and various things which makes a person want to spend more than they should.

Some may recognise the problem in the early stages of the crisis, while others may only realise it at a later stage.  No matter what, a smart plan and consistent work will help anyone come out of the situation in no-time.

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