Turning Financial Disaster To Financial Benefit
There are many financial issues that will arise as you get older and not all of them will be planned. Some of them will be unexpected and could end up costing you a significant amount of money. In some of the worst cases, you could end up in financial ruin.
However, when your personal finances are at their lowest, that is when you can start to make the biggest changes for the better. It might seem counter productive at first but it really isn’t, being that when you have nothing to loose, you have everything to gain.
Think of it as a chance to start over and get your personal finances back on track so you won’t end up in the same situation again.
Reassess your financial situation
Now that you are in a place where you don’t have a lot of funds and could be swimming in debt, you can start analyzing the steps that got you where you are. Look at your financial history through your bank statements and bills and see where you could have gone wrong.
Sometimes, one missed payment or a lack of awareness for a couple of months could have been the difference between saving and not having any debt. Poor spending habits are a common culprit, as well as bad money management skills.
Take this opportunity when you are at your lowest financial point to make drastic changes and improve for the future. Knowing where you stand will be key to knowing how to be more fiscally responsible.
Reorganize Your Budget
A budget is key to any successful financial plan, without a budget you are walking blind into a financial situation. Being that you are now finding yourself in a compromising financial situation, it’s probably do to a lack of proper budgeting skills. This is because a good budget plans for every possible financial outcome even the ones you least expect.
This is also known as a savings fund, which is meant to be a backup plan for any unexpected financial situation. A savings fund, will be the account you turn to when you have a medical emergency or you suddenly lose your job, or anything that requires a large amount of money fast.
A savings fund will prepare you for any situation, especially the ones you least expect. As they say the perfect offense, is a perfect defense, which is a savings fund. Start small, a couple of dollars a week and when you are able, start making larger deposits into the fund.
Check Your Credit Score
This is the worst part of your situation because you probably know that your credit score isn’t that great or is about to take a massive hit. In the end, you are most likely going to end up with a poor credit score, but knowing where you stand on the scale is the most crucial thing.
Just a reminder that credit scores are measured on a scale from 300-850 and a good score is usually in the 600 range, while a bad score is under 500. However, this scale is sometimes subject to change depending on the creditor.
You can check your score at a number of places, some great resources are CreditKarma.com and AnnualCreditReport.com, who offer free credit reporting with the three credit bureaus, Experian, Equifax and TransUnion.
Simplify Your Finances
Now that you are suffering financially, this is a great time to go ahead and set your fiscal responsibilities. This is the time to reset your priorities and begin to understand how you should be allocating your money.
Make a list of the most important financial responsibilities in your life like your bills, loans and utilities and then see if you need anything else. By breaking down this list to only a few things, you will simplify your spending. You will only have to worry about a few important items without feeling overwhelmed by having so many things to pay off at once.
This is also good to do with your credit cards, try to consolidate your credit card debt into one payment. You will no longer have to keep up with multiple payments and you won’t have to worry about missing any monthly payments. Check with your bank for your options when it comes to debt consolidation, you can sometimes even decrease your interest rate.
Take This as A Learning Experience
You might think at first that being at a financial disadvantage is a bad thing, but you can learn a lot about your spending habits when you are at your lowest. Not to mention, this is the time to evaluate how you got to this financial position and how to make sure to be successful in the future.
If your feel that you are headed toward financial ruin do to this unexpected financial situation, there are other options.
Seek Professional Help
Sometimes the best thing to do, is talk to an expert, that person had the expertise and tools for making sure that you are able to make it out of this financial disaster. In addition, they will be able to give you a comprehensive assessment of your current finances and of your options.
This should only be a final resort and should not be taken lightly. Bankruptcy is a very serious personal financial decision and will stay on your credit for up to 10 years. You should consult a professional before choosing this option. You should exhaust all other options before resorting to bankruptcy.
If you are experiencing financial hardship due to an overwhelming amount of debt, try a debt relief company. They will be able to assess your situation and get you the help you need. Make sure to find reputable company and one that is favorable to your specific debt issue. You should look around at all of your available options before settling on one.