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| Strategies for Reducing Financial Stress and Improving Your Finances Posted: 14 Jan 2021 09:04 AM PST By Katie Tejada If there's one lesson that Covid-19 has taught us, it's that unexpected disasters can and do happen. And for the 63% of Americans who currently live paycheck to paycheck, an unexpected job loss, drop in income, or large medical bill can be enough to send your finances over the edge and cause an enormous amount of financial stress on you and your family. Fortunately, there are several things you can do to regain control of your finances and reduce the stress caused by a plunging bank balance. Find the road back to financial freedom with these reliable financial-disaster-management tips. Accept your new reality and cut your costsThe first and most important place to start if your finances have suffered due to the pandemic is to take stock of where you are now and adjust to your new reality immediately. Waiting for "things to get back to normal" is the worst mistake you can make and will only drive you further into debt. For some people, this might mean moving into a smaller house; for others, it could mean trading in the Mercedes-Benz for something more affordable. Whatever your new reality might look like, you need to begin by assessing the situation. Take stock of the situationTogether with your partner or a trusted financial advisor, make time to sit down and take stock of your assets and debts, including:
When reviewing your overall financial situation, you should consider your overall balance as well as your remaining income level (if any), redundancy packages, Social Security payments, other government payments, and early release of retirement funds. These are resources you will be able to draw on either now or further in the future. Create a financial planA financial plan is not just for the rich—it's for everyone who wants to achieve a goal. Put simply, your financial plan is a document that outlines your short, medium, and long-term goals, including your savings goals and debt repayments. If you're feeling stressed about finances right now, make a financial plan that includes the following immediate financial goals:
Suggested medium-term goals:
Longer-term goals:
Once you have decided on your goals, plan out how you are going to achieve them. Generally, this will mean creating a budget that reduces the spending portion to a bare minimum for a while to allow for savings and debt repayments. Make a budgetMaking a budget reduces financial stress by putting you back in the driver's seat. No matter how tight things are right now, working out how to live within your means will take a huge weight off your shoulders and allow you to start moving in a better direction. When creating a budget, begin by writing down your expected monthly income on one side of the page and expected monthly costs on the other. After essentials like food, shelter, and bills have been accounted for, you will see how much is left for savings, debt repayments, donations, and discretionary spending. The aim of a budget is to be left with $0 on the expenditure side of the page so that you're putting every dollar to good use. Related articles from AllBusiness.com
Figure out ways to cut backWhat most people find when they prepare a budget is that they spend a lot more of their income than they'd like. To save more money, consider the following ideas:
When you really think about it, you can dramatically cut down on your spending, leaving more money in your pocket at the end of the day. Like me, you're probably spending a lot more time at home right now. This presents a great opportunity to save a lot of money on food by eating in instead of eating out. Take one day a week that you would normally order takeout or delivery and cook instead, and see how much money you save! Find out what resources are availableTimes might be tough, but that doesn't mean you have to go it alone. There are several resources you can access in times of financial stress and difficulty, including priority loans and early release of retirement funds. Refer to the following acts to see what help you might be eligible for:
Once you receive some funds or relief from the government, it's a good idea to consult with an experienced financial advisor to make a long-term plan for these funds. Once the money's gone, it's gone, and it's far better to spend a little extra cash sharpening your skills for the new economy than to splurge on a luxury and sink into debt. Consider the advantages of filing for bankruptcyIt might seem counterintuitive, but filing for bankruptcy might be the difference that turns things around. Before heading down the road of considering debt versus bankruptcy, find out what your bank's policy is for economic disaster relief and negotiate with your loan providers and creditors. The advantages of declaring bankruptcy are a clean slate and the end of debt collection. The disadvantages are that you might lose your home and/or items of value and the bankrupt status remains on your record for the next 10 years. Oftentimes, an experienced lawyer can help you file for bankruptcy without losing your home or vehicle to pay back the portion of your debts that you can. Again, this option should be considered a last resort if your situation is pushing you to the brink of despair. Take one step to reduce financial stress nowWhether it's making a new budget or applying for relief, take one small step today to get started on the road to financial recovery. Reaching your goals might seem impossible right now, but when you break the process down into smaller steps, the task will seem less overwhelming and you’ll begin to feel more hopeful and optimistic. If you have complex financial needs during the crisis or decisions to make regarding your business, consider consulting with a fiduciary financial advisor. A fiduciary advisor has a commitment to give you comprehensive information and always put your best interests first—and in a crisis, that's exactly what you need. The post Strategies for Reducing Financial Stress and Improving Your Finances appeared first on AllBusiness.com. Click for more information about Guest Post. Copyright 2020 by AllBusiness.com. All rights reserved. The content and images contained in this RSS feed may only be used through an RSS reader and may not be reproduced on another website without the express written permission of the owner of AllBusiness.com.  |
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