Planning For A Sudden Change In Your Finances
Like many things in life, our finances are never certain. You never know when something might happen that reduces your income or hits your savings hard. While you might not be able to predict when these things will happen, you can prepare for them.
Get smart with your money by learning how to plan for a sudden change in your finances.
Create an ongoing household budget
Many people feel like they only need to create a budget when they need to save for something or when they need to tighten their belts. However, sticking to a budget is a sensible way to handle your finances, and allows you to be more flexible as your finances change.
It’s easy to create a budget, and once you have a clearer picture of your outgoings and income – you’ll be able to manage your finances much easier. Use your budget to help you put aside some savings for whenever you might need them. You can also highlight areas that you know you can reduce if it ever comes to it.
Setup a different savings account for emergencies
You might already be putting aside some money each month to go into a savings account to buy a car, a house or maybe even a vacation. It makes sense to have a separate account for emergencies as something you can dip into without having to disturb your other savings.
Take a look at this account of why a savvy saver uses different accounts for different saving goals – it offers some great insight into how you can make it work for you. Setting up advanced payments means you can make sure different amounts go into different accounts so that you don’t have to worry about manually depositing different amounts each month.
Don’t spend before you receive
When there’s promise of a big payment or bonus coming your way, it can be tempting to spend it before it’s actually in your hands. With money that isn’t a sure thing, this could spell disaster for your finances. Try not to spend your money until it’s in your account, that way you know it’s yours.
A classic example of this is with compensation claims. While you might be convinced your case is a sure thing, it might not necessarily turn out the way you hope. Choosing a reputable lawyer who can help with personal injury claims can help you get the best chance of a successful outcome. Remember it may take some for your claim to be processed, so be sensible with your finances in the meantime.
Try to forecast the year ahead
If you can, try to plan out the year ahead so that you can establish where the crunch points are. Christmas, vacations and birthdays can be key points in the year where your finances might be a little tighter than usual but, if you’ve planned for them, then they should be easy to manage.
If you work for yourself, you might have an idea of which times of year tend to be quieter than others. During the months you know are going to be good months for your business, put some extra money aside to help you make it through the tougher months. Paying yourself a basic salary can help you to regulate your freelance income, paying yourself bonuses during particularly profitable months.
Pay off your debts while your finances are good
It’s a common thing you’ll see on your credit card or loan statements: paying off the minimum balance means it will take you longer to clear your debts. It may sound like you’re being preached to, but it’s true. While your financial situation is stable, make an effort to clear your debts by paying off as much as you can. That way, if your finances take a downward turn, you’ll have less to worry about.
Paying off the minimum may be tempting, especially if you have 0% interest rates, but the more you can pay off, the more comfortable your situation will be. Try switching between providers where you can benefit from the latest offers to help you clear your debt easier. Understanding how balance transfers work can make them work in your favor and stops you making any costly financial errors.
While you might be afraid of planning for the future, doing so could save you much more hassle later down the line. Becoming better with money can ensure you’re prepared for most situations that come your way. Use the advice in this post to take control of your finances to help you feel ready for anything.