Individuals living from paycheck to paycheck often find it hard to save. It is the reason; they find themselves in financial mayhem. Not having sufficient cash to close an upfront need makes one panic. However, panicking is natural but not the solution. Here you must hold your mental well-being and do what you call – The need of the hour.
Individuals often skip this and fear:
“How will I arrange money for the emergency?”
“How does this sudden requirement impact other aspects?”
One faces a million thoughts like this in a single go.
The fact is- one must adapt to the situation. So, if the emergency need strikes, let loose the old financial habits. Instead, revise your financial behaviour to ensure better control over finances.
The blog states ways to shift your financial behaviours in times like emergencies.
5 Ways to Alter your financial behaviour
Overcoming an emergency situation with an intact take towards finances may not help. You must prioritise life-critical needs and work accordingly. It would help you avoid overspending and losing your financial bottom line. If you are wondering – how to achieve so, read ahead:
1) Figure out mandatory and non-mandatory expenses
In emergencies, it is one of the most critical aspects. Differentiating these would help you avoid overspending over unnecessary things like- dining out frequently, ordering food often, shopping, and applying for credit cards when you are already in debt.
Instead, save and invest the income towards- paying utility bills, groceries, clearing debts, child’s education fee, rent and medicines. These are some life-critical needs that may impact the lifestyle. On this, non-mandatory expenses affect life the least. Instead, it helps you save more.
2) Avoid using credit cards for atleast a month
According to Forbes, “If Your credit utilisation ratio is over 30%, then you are in a high debt.” Depending too much on credit cards for medium or heavy purchases is unhealthy for your finances. It is especially when undergoing a critical financial crisis or an emergency.
Furthermore, credit card entails high-interest rates. Excessive usage implies more payments and limited savings. If you cannot save much in strict financial circumstances, avoid using it for at least 30 days.
Within this time frame:
- Do not plan any big purchases, as your finances do not support
- Avoid applying for multiple credit lines
- Avoid requesting an additional credit limit
- Switch to other less expensive resources like – short-term loans
Apart from this, work on your expenses and credit. You can do so by:
- Keeping the credit utilisation ratio low by lowering debts
- Seek a hike in income or an additional income source
3) Consider borrowing funds to calm urgent costs
As mentioned above, investing in credit cards is an unnecessary expense. Unless you want to utilise the interest-free period to buy anything, it is not much helpful. Moreover, it becomes a liability when your income falls or in emergencies.
Additionally, having multiple credit cards increases debt payments. If you fail to pay, you may enter default. The provider may then ask you to pay it along with the penalty fees.
How will you do that with disturbed finances and zero savings?
Though, you get a 30-day window to clear your credit card dues. What if you cannot? If will enter default. The consequences would be worse. You may:
- Encounter a sharp credit score drop
- Expenses increase
- The providers may reject your request to extend the limit or credit cards
The most tragic of these is – Sharp credit drop. It impacts your current and future chances to qualify for external facilities.
“Okay, but I cannot pay the debt now. What should I do?
If you can by no means pay the bill now but want to avoid penalties, check an emergency loan in Ireland city. You can get it immediately without any bad credit worries. You can get short-term cash if you earn it and can provide proof of the same. However, as evident from the name, you can use it for only emergency and critical circumstances like the credit card one.
It would help you pay the dues before 30 days and prevents your credit score from falling.
4) Make disciplined payments over liabilities
Ensure discipline payments if you have an online or offline payment arrangement for multiple liabilities. For regular payments, mark it on a calendar. You can also set up payment reminders for every bill payment. It would help you avoid missing any payment and paying extra for it later.
However, every individual shares different financial obligations and lifestyles. Still, one can draw up a possible arrangement where the basics remain the same.
For example, whether you earn £30000 or £35000 per month, you both may have utility bill payments. Here, direct debit may emerge as a suitable solution for both individuals. However, direct debit also depends on the amount you save every month.
It may not be ideal if one among these has less than £5000 as a disposable income. Here, you can manage the payments by budgeting for them. Utility payments do not change much. Identify the average amount you pay every month and save a flexible sum. If you receive a monthly bill of £800 on average, put £900 towards savings from income.
5) Always carry a list while shopping
It is one of the best ways to avoid overspending and save more. While shopping for groceries, you can try the trick. Just mention everything your need for the next week (not above that). Revise the list and tally it with the items you have. It would help you avoid the not-so-good- surprise later. Moreover, avoid carrying excessive cash. Take only what’s required.
However, things do not end here.
You will have to prepare your mind and instincts as you hit the store. You may find so many deals going on. You must restrict the temptation there.
In this way, you only shop for the things required.
At times, things do not work out as expected. Even if you put temptation on hold, the grocery prices may emerge as a shocker. If you dread not having enough cash, private loans in Ireland can help. You can get it immediately in your account. Instead of paying cash, you can opt for online bill payment in that case. However, if you want, you can also get the cash at the doors or virtually. It depends on all your convenience and need of the hour.
Bottom line
If you have been facing a tough financial time, the tips may help you restore calm. Re-arrange your finances by adopting the proper behaviour towards them. Avoid taking rash financial decisions in panic-like situations. It could deter the situation further. Instead, save what you already own with financial accountability.
Caleb works as a senior content writer at Financealoan for the past 3 years. He is a writing enthusiast and invests a good time in exploring and writing about financial trends. His keenness in exploring a topic to create a research-based piece is simply unmatched. He believes in including a texture of authenticity with real-time examples and facts.
Caleb’s blogs and articles reveal deep-seated knowledge and expertise. His educational qualification forms the base of his excellent command over the industry and Jargon. He is a postgraduate in Finance and is currently involved in exploring the world of the stock market.