Preventing Financial Difficulties
Money, we all understand its value differently. Because of this fact some of us are more likely to encounter financial difficulties. Kids who are raised to understand the value of money and are taught basic budgeting skills are less likely to be the victims of money problems. However it’s never too late to learn how to prevent financial difficulties, all you have to do is know how to read the warning signs.
People that frequently use credit cards are most likely to have money problems because credit card users are sometimes unable to „stop shopping”, leading to a bad behavior that can rapidly cause credit trouble. So your number one objective to keep an eye on the warning signs of credit trouble.
Warning signals of impending credit trouble:
• Having to work more and more just to keep up with basic expenses;
• Regularly taping into your savings to take care of day to day expenses;
• Reaching the maximum spending limit on your credit card;
• Inability to pay the monthly bills on time;
• Having to rely on cash advances to make the payments;
• Being rejected by lenders due to your credit.
When you notice some of these warning signs you should immediately start reducing your expenses and taking care of your debts, as they can snowball if you fail to pay attention. Generally it’s a bad idea to take out payday advance to pay off other debts but short term loans can help if you are sure you can pay back the loan on time.
How to prevent and avoid financial difficulties:
Here are a few actions you can take that will help prevent financial difficulties from bothering you in the future:
• Start budgeting. Budgeting is a necessary skill that all of us should be accustomed to. The first thing you should do when starting a budget is to review your monthly expenses and income. When you take care of the expenses part of the table make sure you subtract average monthly expenses, like food and free-time expenses.
At the end of the month, if you don’t have at least 5% of your income left from your savings you should consider lowering your expenses.
• Avoid impulsive purchases. Although it may seem convenient to buy items that are on sale you should avoid this kind of behavior and start planning your purchases carefully. Budgeting is all about planning.
It is also a wise idea to avoid purchasing in installments, even though the cost of the product is low because it is on sale.
• Keep an eye on your debt. If you want to avoid financial difficulties you should always be aware of what you owe. Never be surprised when the credit statements arrive. A good way to keep an eye on your expenses is to save receipts, you should consider this.
• Avoid borrowing money If you are in the situation of not being able to pay the bills a cash advance will not help you unless you receive an extra boost of cash next month that will cover your expenses and the interest rate of the loan. These types of loans should only be used for emergencies, never when in financial trouble.
Once you start seeing the warning signs you should have no problem adjusting your expenses to help prevent money problems. Hopefully these ideas will help you with your finances in the future.
I am Chris Smith and while working in finance I have encountered many people with financial difficulties and it is my goal to help prevent these money problems as much as possible.