What are you doing to make sure you are not financially vulnerable now and in the future? Do you have a budget? Are you drowning in debt? Is there anything you can do, even with your current financial stresss to ensure your financial future is more stable?
Did you know that 31% of Americans can not come up with $2,000 within a month’s time if the need for home repairs, healthcare emergencies, or car repairs should arise? How are you doing?
1. Have a Budget:
Even if you have a full-time job with a solid income, you are still in danger of financial vulnerability. In fact, it would be beneficial for you to follow these three steps, whether you are in a spot of financial distress or not. Financial fragility often starts with not being able to handle the shock of a large expense, such as an emergency room visit, or a major car repair. If you are in a financially stressful situation, the likelihood that retirement funds are being considered is nearly non-existent. In other words, the only thing on your mind in regards to finances is getting out of the current situation. When this happens, your financial future is in jeopardy.
2. Track your Debt & Budget:
Yes, it seems obvious; however, this simple task will open your eyes to your true financial situation and assist you with budgeting and saving. Using an income and expense report will help you clearly track your finances. Be sure to make a goal to save just a little each month. Putting just $20-30 into savings each month could make a huge difference in emergency situations.
Short-term borrowing – including credit cards, often comes with high interest rates. These rates and debts become increasingly detrimental if you are not paying off the card/debt or at least your minimum payment due each month. Taking on more debt, may provide you with increased liquidity in the sort term, but should only be used in emergency situations.
In turn, having debt piling up that you cannot afford to pay off, will lower your credit score. This will make it harder for you to obtain a home, car, loan or even credit cards in the future.
3. Keep track of and regularly review your balance sheet:
Are your debt and assets allocated according to your needs? Do you have a cushion for shock situations (i.e. – loss of income, unexpected car expenses, or extended hospital visits)? If your cushion is very small or nothing at all, what is your plan for raising the necessary funds if a problem should arise? Will you take a second job? Borrow? Or take out another high interest loan?
If you are not on track on any of these three steps; determine what you can do to create a better financial future for you and your family.
To learn more about saving for your financial future and creating a credit score you can be proud of – read our post from April 2018 here.