A large number of people have faced difficult economic times over the last few years. This makes it important for you to take precautions in order to avoid a financial crisis. There are several easy steps you can take to stop a financial disaster.
- A good financial plan offers an effective way to prevent financial problems.
- Note down all your sources of income and amount of money you receive each month. This can also be done on a yearly basis but a monthly income breakdown is a good start.
- Identify all your monthly expense. Some expenses are recurring while others may be a one-time expense. The expenses should include any loans that you are repaying.
- Include taxes in your budget because they influence your financial situation.
- A budget will allow you to determine if the income you receive is sufficient for your expenses. If your expenses outweigh your income, you need to identify particular items that you can exclude from the former.
- Make smart purchase decisions by comparing prices from different stores.
- Select cheaper brands to help you save money.
- Take advantage of sales to make bulk purchases as part of your cost reduction measures.
- Negotiate for lower prices if possible to spend less on products and services.
Get Medical Insurance
Some people assume that they do not require medical insurance because they do not suffer from any medical conditions. Medical insurance can help you to prevent a financial crisis by limiting out of pocket medical expenses.
- A medical emergency can lead to a financial crisis if you do not have medical insurance.
- Find a medical cover that suits your lifestyle and income to help you cater to any medical crises that may occur. You cannot prevent medical emergencies therefore it is advisable to have a medical cover.
Limit Credit Cards
- Credit cards can be useful if they are well utilized but most people get into a financial crisis because they rely on them for everyday expenses.
- Reduce the number of credit cards in your possession. This will reduce the likelihood of misusing them.
- Shop wisely for credit cards to get the lowest interest rates. Interest rates can burden you and increase your expenditure. Negotiate for lower rates if possible to reduce your credit card payments.
- Limit credit use to emergencies to lower your credit card payments. Using credit cards for basic items is dangerous because it is easy to go beyond the limit. Use cash for your daily expenses instead.
- A financial crisis is possible if you do not save for emergencies. You should save about 10% of your total income.
- Savings will allow you to cater for emergencies without running into financial ruin.
- Prepare for job loss or illness by saving. The savings should be able to cover your expenditure for between 3 and 6 months.
Reduce High-Risk Investments
- High risk investments increase the probability of a financial crisis.
- Stay away from penny stocks and speculation to protect yourself from financial ruin.
- Select conventional investments like government bonds because they are safer. You can obtain investment advice from dwp.