16 Tips to Help You Avoid Financial Trouble
More than half of all women and men believe that financial matters cause the most stress to them. If you’re struggling with money matters, there are things you can do to help improve your situation. If you ignore your money woes, they’ll keep getting worse. By choosing to take control, you can improve your quality of life and achieve greater success with your dreams. Here are 16 tips for avoiding financial problems.
Determine Financial Priorities
One of the first steps for avoiding financial problems is determining what your financial priorities and goals are. Identify the issues that may create the biggest difficulties and make a plan to address them. Determine whether you want to pay off credit cards or save for house repairs first. By prioritizing your goals, you’ll focus on the financial issues that can create the biggest impact so you can avoid them from becoming major obstacles later.
Write your goals and priorities down and come up with a realistic timeline for achieving them. Some goals may take a few months while others can take a few years. To avoid overwhelm, choose three to five financial matters you need to address the most over the next five years. Review your priorities periodically to make sure you’re staying on track. You may need to fine-tune as you go.
Cut Off Spending Leaks
The best way for avoiding financial problems is to cut off unnecessary spending leaks. If you don’t keep track of where your money is going, it can be frustrating and challenging to take care of your responsibilities. One of the most obvious leaks you can control is your credit cards. Leave your credit cards at home and delete them from online accounts other than bills to prevent temptation. Make a decision moving forward to pay for all purchases using cash on hand.
To figure out where your spending leaks are, it’s a good idea to track all your expenses for a couple of months. This will help you figure out where you can make cuts so you can use the money to pay off debts. Some cuts you may want to consider include unused subscription and takeout. You may also be able to negotiate your utility bills. There are various apps available you can download to help you record your expenses no matter where you are.
Create a Budget
Creating a budget is essential for avoiding financial problems. Once you start tracking your expenses, you can gather all that information into one document to create an ongoing financial plan. Record both your fixed and variable expenses and separate them into different categories. Determine how much you can spend on each category. This can help you spot potential spending leaks you may not have noticed.
Analyze your budget over the next three months. You can use a spreadsheet to create your budget or use apps and software you can download online. You can even use your budget to track your savings and investments. By keeping a close eye on where your money is going, you can avoid getting into unexpected financial trouble.
Have an Emergency Fund
An emergency fund is another solution for avoiding financial problems. If you experience a sudden job loss or medical emergency, this fund can help you survive. Ideally, you’ll want to have enough said for six months of expenses. You can automate savings to help you build an emergency fund. You can transfer a portion of your paycheck to a separate bank account so you won’t be tempted to touch it. You may want to consider opening up a money market account or high yield savings account to earn more on the money you save.
Saving six months worth of expenses can seem overwhelming. Start building an emergency fund by setting an easy target to reach. Make it a goal to save $500 over the next few months. Break down that amount into smaller chunks. If you save $25 per week, you can reach your goal in five months. Look for things you can cut to help you come up with that amount. By setting your initial target amount low, you can help build up your confidence and snowball your efforts.
Protect Yourself With Insurance
Avoiding financial problems can be made easier with the proper insurance protection. Make sure you have an adequate car, home, and health insurance. You may also want to consider protecting yourself with disability and life insurance. Increase your deductibles to lower your premiums. It’s a good idea to comparison shop various policies in order to get the best coverage. You can also save money by bundling several insurance policies together.
Eliminate Your Debts
Addressing your debts can help in avoiding financial problems with creditors in the future. Contact your creditors to try to resolve the issue. You may be able to set up a payment schedule with them. You may be able to settle for less than the amount owed. If you can’t resolve the issue yourself, you may want to consider consulting a chapter 13 bankruptcy attorney.
Filing for a bankruptcy chapter 13 should be considered a last resort when all other options have been exhausted. Bankruptcy is filed on your permanent record and can affect your ability to access loans or other forms of credit in the future. If you have significant debts beyond your ability to pay, you may want to consider researching bankruptcy law for your state.
Obey the Law
Obeying the law is a good way for avoiding financial problems. If you’re arrested, you may have to post bond in order to get out. These fees can cost you thousands of dollars. The amount that’s set is determined on how likely the courts think you’ll run away from the charges. To pay the debt, you may need to hire a bail bond service. You’ll have to provide enough collateral to the bail bondsman in order to secure the funding to get out of jail.
If you don’t appear in court after posting bond, the court may issue an arrest warrant. You may also face a lawsuit with the bail bond agent. The court may keep any collateral and revoke the original bond. This makes it difficult to find any other bail bonding companies that may be willing to work with you. The best way to avoid all this financial trouble is to prevent it from happening in the first place.
Prevent Estate Disputes
If you have a trust set up for your estate, you may want to consider protecting it from potential litigation in the future. When you die, your heirs may fight each other in probate court for access to it. There are things you can do to assist in avoiding financial problems with your estate. You can explain your inheritance decisions to your family or provide a signed written statement with the document drawn up by the trusts attorney. Keep beneficiaries away from estate planning meetings.
Organize Your Financial Paperwork
Organization is vital for avoiding financial problems. You can start by gathering all your financial paperwork and deciding on one place to keep all of them. You can keep your documents in a filing cabinet or an accordion file folder. Assign various contracts and bills to specific folders that are labeled according to the contents. When you receive bills or statements, file them in the appropriate folder immediately.
Hire a Financial Advisor
Hiring a financial advisor is an excellent decision towards avoiding financial problems. A financial advisor can take an objective look at your current financial situation and make recommendations for moving forward. You can work with them to create a plan for your situation and learn how to invest for retirement.
Pay Bills On Time
Paying bills on time is crucial for avoiding financial problems with credit. If you have bad credit, it can be difficult to get a loan, buy a car, or rent an apartment. Anytime you pay a bill late by 30 days or more, it can create a ding on your credit report. If you’re struggling with paying your bills on time, you can talk with your service providers. There may be assistance programs to help lower your monthly bills.
Consider Divorce Mediation
If you’re going through a divorce, avoiding financial problems is crucial. A divorce can get expensive with all the fees from the court and attorneys. A typical divorce can cost you $10,000 or more. Divorce mediation can save you time and money if you and your spouse are willing to negotiate. You may also want to consider filing the papers yourself for a low cost divorce. Filing on your own can cost you $500 or less, depending on your circumstances.
Earn Extra Cash
The more money you can have on hand, the better the odds are for avoiding financial problems. You can earn extra cash by getting a side job or selling unwanted items around your home. Pawning jewelry or other high ticket items may be necessary. You may even consider reaching out to family and friends to do errands to earn extra money. Anything you make can be put towards savings or used to pay down debts to avoid chapter 13 bankruptcy.
Consider a Loan
A loan can be a temporary fix for avoiding financial problems if you’re in a bind. If you decide to take out a loan, only take out as much as you can reasonably payback. There are several types of loans you can consider. If you have bad credit, you may be able to take out an unsecured personal loan. These loans have higher fixed interest rates and have term lengths of two to five years.
If you’re a homeowner, you may be able to qualify for a refinance loan if you have equity in your home. Peer-to-peer lending can match you up with an investor, depending on your credit score. If you’re really in a tight spot, you can take out a 401k loan. You may face penalties and taxes if you don’t meet the repayment terms or lose your job before the debt is repaid. However, you can qualify easier because you won’t have to meet a certain debt-to-income ratio or credit score.
Buy a Used Car
If you need to buy a car, you’ll want to buy one you can afford to help you towards avoiding financial problems. You’ll most likely have to take out a loan to pay for a new car, and monthly payments can get expensive. You’ll also have to pay more for auto insurance until the debt is paid off. If you can’t make your payments, the car can get repossessed and your debt will go into collections. Used cars cost much less, and you can save money on insurance if you pay in cash.
Communicate With Your Spouse
Discussing money matters together can go a long way in avoiding financial problems. Money is one of the biggest causes of arguments in a marriage. Sit down with your spouse and discuss your expectations, fears, and goals. This can help you come up with a plan that you can both stick to. You need to decide who will be responsible for various expenses and how the money will be spent. You may decide to pool your money together or have separate accounts.
It’s highly likely that you and your spouse won’t agree on everything. Many couples typically feature a spender and a saver, which can create conflicts on how money is handled. If you can’t agree on your finances, you may want to consider reaching out to a third-party professional for assistance to avoid. A financial counselor can help you compromise and negotiate so you can both achieve your financial goals and avoid a Chapter 13 bankruptcy.
Avoiding financial problems can be a tough challenge. By following these tips, you can navigate your money situation and build for a better future. Addressing money problems early can minimize long term damage. The best way to avoid financial trouble is to take action toward mitigating it. Make a decision today to protect your financial health.