WAYS TO MANAGE FINANCIAL CRISIS

It’s that time of the month when you look at your account balance before initiating any transaction. P.s this is still a good phase. Usually, it worsens to having to split the bill between your multiple accounts, take 5k from here, then remove 2k from this one.

Sometimes you will give part cash and part bank transfer – again, this is not the worst. You still paid for it, didn’t you? If you’re already in the described situation or on a bullet train headed in that direction, here are nine tips to help you manage a financial crisis.

Identify the Cause

Hear us out; how do you intend to solve a problem if you don’t know where it is coming from? The first step to solving your financial crisis is identifying its root.

If you skip this step, you may trim branches while the root of your problem burrows deeper. You can achieve this step by going over the activities that have a share in your income. It will give you an idea of what usually tips the boat over.

Be Prudent with What’s Left

Stress has a way of blocking our thinking faculties. It’s easy to get overwhelmed, thinking you don’t have enough money to handle your difficulties.

However, it is unlikely that you are entirely out of money. There’s usually a small amount left, and the key to getting past your financial crisis is being as prudent as possible with that little.

You can start by categorizing your expenses into needs and wants. Then, postpone wants for a later period when you can afford them and divert your remaining income to the essentials.

Make a Budget

It is one of the easiest ways to deal with a financial crunch. The wonderful thing about budgets is that they allow you to kill two birds with one stone. Not only do you get to manage your spending activities, but you can also save for the future. A budget shows what happens to your money for some time.

With this knowledge, you can make the necessary changes to get your money life back on track. In addition, there are lots of applications that help with keeping track of your expenditure.

You can do it in Excel or Google Sheets if you’re old-fashioned. Of course, there’s also the good old pen and paper. A good place is to take note of your monthly take-home and recurring expenditure such as electricity, gas, fuel, etc.

Avoiding the Plague – Debt

Debt is a lot like fire. It can be good or bad, depending on how it is utilized. Through debt (loans, debentures, etc.), people can finance their businesses or investments that return revenue in the future.  This revenue is used to repay the debt and set them up for life. But on the other hand, poor debt management can get you in serious trouble.

You may find yourself diverting all your funds to repaying loans with interest and borrowing more money to stay afloat. It’s a dangerous cycle.

We advise avoiding taking debt to handle recurring expenses during a financial crunch. Instead, work out a comfortable plan to repay any debt you have so you can enjoy your money in the future.

Earn Some Extra Cash

If you thoroughly went through your inventory, you’d be surprised how many items are of little to no use in your homes.

A financial crisis could be your cue to declutter your home and earn extra cash. Many online marketplaces, such as eBay, Kusnap, and Etsy, make it easy for you to carry out such transactions.

If you have valuable skills like graphic designing, content writing, or social media management, you can also start making money off this.

Platforms such as Upwork, Toptal, and Fiverr are just a few examples of mediums that make it hassle-free for talented persons like yourself to connect with potential clients and make money.

Build an Emergency Fund

For some of us, a financial crisis results from a sudden loss of your income stream and not poor money management. Or perhaps an unforeseen circumstance like an illness or a major car accident.

Life is unpredictable, and these things can happen to anyone. However, they leave us in a lot of turmoil when they happen. It is especially true for those unable to deal with these circumstances rather than those who were financially challenged after dealing with them.

Building an emergency fund for such instances can be a lifesaver because you never know when you will need it. Place priority on saving up living expenses for three-six months before contributing towards a long-term savings goal such as an emergency fund.

The best way to do this is to set up an automatic savings system that regularly deducts a fixed amount or percentage.

Take a Loan

Yes, we know we said to avoid debts like the black plague but hear us out. Many people have the potential to startup viable businesses but lack the capital needed to do so. A loan from your bank or any financial institution(FI) can help. FIs are more willing to loan their money to people who invest them in activities that generate income.

Depending on the viability of your startup, you should be able to generate enough revenue to repay the capital and any interest on it.

Focus More on Liquid Assets/Investments

There are few things as painful as needing money, knowing you have the amount you need, but not having access to it. If you’ve been in this position before, you already know how embarrassing it is to borrow money, with your best line for repayment being “I have the money in x, but I don’t have access to it.”

You can avoid this by saving your money in liquid options, i.e., investments that can easily convert to cash. A great example of this is a Money Market Fund. They are low-risk forms of investment that allow you to recoup your cash at any time.

Get Help

Not everyone is a finance expert that knows how to manage rough patches in their financial habits. Nevertheless, it’s nothing to be ashamed of. Some people are trained in helping you take control of your money life and ensuring you experience these periods less.

Don’t feel bad about admitting you need help. On the contrary, it’s admirable to know when something is beyond your capabilities.

If you have people depending on you, your welfare also affects them. And it would be best if you were always willing to make decisions that benefit you and your dependents, even if it means asking for help.

Key Takeaway

It’s better to identify the root cause of your problems so you don’t proffer temporary solutions to them.

It’s never too late to regain control over your finances; even if you are on your last twenty thousand, you can make it count.

Budgets will help you manage your expenses and save money, so make one today.

You get to dictate how debt should affect your life by being intentional about what you do with the money and how you repay it.

Let go of things that don’t serve you; they’re probably the reason you have no money.

Save! Save!! Save!!!

Don’t be shy to ask for help when you need it.

Conclusion

We hope that reading this piece helped you gain valuable insight into ways you can manage your financial crisis. Remember, it happens to everybody; what’s important is dealing with it.

Source:

financialquest.com.ng