5 Steps to manage personal finance in times of financial hardship

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By: MarieGarcia
on 20th Jul,2015

You just have to follow certain steps to manage your finances effectively even during tough times.
5 Steps to manage personal finance in times of financial hardship

Are you worried about managing your finances during times of financial hardship? You should know that managing finances during tough times is not as difficult as you think it to be. You just have to follow certain steps to manage your finances effectively even during tough times. Going through the steps mentioned below can help you manage your finances when you're going through a financial hardship.

1. Work out the figures - The first and foremost step necessary to get better hold on your situation is to have a clear idea regarding your financial condition. So, sit down with required documents, a calculator, a pen and a paper and start calculating the total income of your household. Then, deduct necessary expenses such as food, utilities, transportation, education, etc. from the total income. Doing so, you know exactly how much amount you spend on each and every items. Do not forget to allocate a specific amount towards emergency expenses, which if not required, can be used to reduce your debt burden more.

2. Identify where you can cut expenses - While assessing your financial situation, you may look for items where you can cut your expenses. You can choose to cut your cable line for several months till your financial situation improves. You can also reduce eating outs and enjoy meals at home, and you'll be surprised to see how much you can save. Moreover, the enjoyment will double if whole family prepares a weekend dinner. You can also opt for less expensive hobbies which you'd love to do during your leisure time.

3. Create a suitable spending plan - A spending plan is somewhat similar to a budget, only difference being that the former is a little more flexible. What you need to do is break your monthly income into separate categories such as, Grocery Entertainment, etc and assign a certain percent of your income to each of these categories. Whereas in a budget, you sub-divide the categories such as, Grocery: Food items, Grocery: Beverage, etc., in case of a spending plan, you just make a single categories. However, a spending plan helps more if you have more fluid income.

4. Look for an additional income opportunityIf you're laid off or your income is not sufficient to manage your finances, you should look for an additional income opportunity. There are several online money making strategies and you can choose one as per your suitability. You can just utilize your spare time to earn a substantial amount of money. However, while choosing an online income opportunity, make sure its realistic so that you can avoid being a victim of a scam as otherwise it may lead to losing more money.

5. Set limitations to your spending The couples can set limitations on each other's spending. It is an excellent way to check each other's spending habits. You can set an amount, say $250, beyond which you cannot buy an item without the consent of your partner. Along with this, make financial decisions involving each and every family member. Include your children if they're grown up to understand the concept of money management.

It is quite important that you don't increase your outstanding debt balance in times of financial hardship. One of the best ways to follow this is to think twice before swiping your credit cards. It is advisable that you make your spending plan in a way to avoid using plastic money for making necessary payments. Along with it, try to make as much as you can towards paying off your outstanding debts. Following these tips will help you manage your finances quite well even in times of financial hardship.

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