The degree of economic contraction that the country has suffered in the past few years is nothing short of phenomenal. People are picking up the pieces, and for now, things seem to be progressing in the right direction. Your personal finances must have suffered some serious setbacks as well. Since you cannot accurately predict when such a situation may occur again, you need to figure out ways to stay financially stable to withstand these events.
Sound financial planning begins with putting an effective budget in place. This is the only way you can monitor your expenditure and prevent accumulation of debts. When you assess your personal finances, you can figure out ways to cut back on things you don’t need. Learn to differentiate between wants and needs. Minimize spending on your wants but don’t ignore your needs. Make sure that you spend wisely and save for a rainy day.
No matter how much you earn, your financial stability hinges on how much you actually save from your earnings. If you find that your income is not sufficient to meet your needs, then look for ways to add to your income. Earmark a fixed percentage of your paycheck for savings every month. This fund will help you in a financial emergency like job loss.
Invest a part of your income. Choose diversified options for a well balanced risk profile. Your portfolio should have adequate exposure to different types of sectors and different kinds of financial instruments like stocks and bonds. You should ideally have a combination of short term investments for quick gains and long term ones for sustained profitability.
Repay your debts
If you have piled up a lot of debt, it is time for some debt management to improve your situation. You can consolidate all your debts under one loan or choose to deal with multiple lenders. The key to being debt-free is to keep paying. The more you pay, the less you owe. It’s as simple as that. If you default on your payments, you’ll end up facing late payment fees and huge interest charges, especially if your debt is high interest, like that on credit cards. To avoid this situation, use credit cards only when you have no other alternative.
Turn financial discipline into a habit and get your family involved in meeting financial goals. It’s a good way to keep your financial situation stable even during a crisis.