6 Ways to Avoid Financial Hell

Don’t end up struggling if you can avoid it.

With all the changes going on in the world and in our personal lives, COVID-19, redundancies, and so on, it is so important to take steps to protect yourself financially. None of us can predict the future, and god forbid if you were to get ill or be made redundant. What would you do? And how quickly would you run out of money?

If you can’t work, your outgoings will likely remain the same, causing added pressure to the situation. You may have a family, children, or other people that rely on you for your income, and this makes it important to plan ahead. As the saying goes:

“Failing to prepare is preparing to fail” — Benjamin Franklin

In most cases, there are things that you can do ahead of time, to avoid being in this type of situation. If you already struggling financially, you can also help yourself in certain ways.

Let’s take a look at what you can do:

Pay Off Debts

If you are currently earning an income, great! You should be aiming to reduce your debts each month, by paying off as much as you can comfortably afford. By reducing your debts you, in turn, reduce the amount of interest. Interest on borrowing can end up costing a lot, especially on credit cards.

In the event of any unforeseen circumstances having less debt will give you a head start.

Save Money

There is a lot to be said for saving every month. Saving will not only give you that magical feeling of security, but will also put you in a much stronger position.

“Spare and have is better than spend and crave”— Benjamin Franklin

You should aim to have between 6 and 12 months’ salary saved. Having funds to cover you in emergencies means that you can continue to pay for your essential outgoings. When saving, it is a good idea to put money aside as soon as you get paid, so that you don’t spend it. Another thing that you should consider is opening a separate savings account. By opening a separate savings account there is less risk of you spending the money.

Look For Side Incomes

Consider if there are things that you can do as a side hustle. You may have some spare time, and have a hobby that could be turned into an income.

If you have a talent you can earn a decent amount of cash on the side

Having a side hustle does not have to take up all your time. You could work on this for a few hours a week. Things like selling on eBay, or tutoring, can be lucrative.

Before you start your side hustle it is a good idea to decide what you will do with the extra money. You may decide to save it, or do home improvements. Whatever you decide, spend it wisely to achieve your goals.

Insurance Policies

Insurance policies are a great way to cover yourself. There are policies that will cover you for periods of unemployment, sickness and life insurance covers major events. These types of policies are affordable, and will pay-out for a change in circumstances.

The peace of mind that these policies offer, makes them worth every penny. If you decide to take out a policy, make sure that you know exactly what you are covered for. Some policies may only cover you for a certain period of time, or may have certain exemptions to paying out.

Do You Need It Now?

So you’ve seen the perfect item and even though it’s expensive you want to buy it. Take a step back and consider if you need it right now. Could you put some money aside and buy the item in a few months?

We now live in a culture where everybody wants everything now, and this has seen an increase in peoples’ personal debt. Remember that you can still have items by putting some cash aside, and this will mean that you do not have to worry about how to pay your creditors back.

Get Ahead

Consider overpaying each month. There’s nothing wrong with getting ahead of the game. If you have a mortgage, a lot of mortgage lenders will allow you to overpay, usually up to 10% a year. If affordable, you could also consider paying for your car insurance in one lump sum, because this reduces the annual cost of the policy.

The above should only be done if affordable.

What if you have already lost your job and are struggling financially? The following tips may help you:

Contact Your Creditors

If your circumstances have changed and you can no longer afford your outgoings, a good place to start is to contact your creditors. This will allow you to explain your situation, and you can discuss reducing your monthly payments.

As long as you stick to the agreed reduced monthly payments, creditors are normally quite accommodating.

Seek Financial Assistance

There are many charities and organizations that will give you free advice on your financial situation. It is important to take the advice that is available. These free services will let you know what options are available to you. Some of these organizations will also contact your creditors on your behalf.

Food Banks

If you feel that you are really struggling, food banks are a great way to keep your head above water. Food banks give free food parcels to people who are struggling, and since the pandemic, these services have increased.

With the help of food banks, you can ensure that you are having meals and getting the essential nutrients that you need.

Job Applications

If you are looking for a job, consider applying for jobs that are different from the type of job that you would normally go for. You will likely have many transferrable skills that you could use to do a different type of job.

Take advantage of the skills that you have, and apply for a variety of jobs.

Final Thoughts

Circumstances can change and it is important to plan ahead. Although you cannot control every life eventuality, you can put steps in place to reduce the damage if your circumstances change.

Sometimes we do not think about situations like this until things have changed, but by implementing some of the strategies in this article, you can save yourself and your loved ones a lot of stress.

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