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10 Ways to Make Sure You Never Have to Face Financial Crisis

10 Ways to Make Sure You Never Have to Face Financial Crisis

Samuel Johnson once said, “A man who both spends and saves money is the happiest man, because he has both enjoyments.” He couldn’t have been more right. It’s not enough to earn money. It’s equally important to spend and save money wisely. On one hand, we need to spend money to fulfill our needs. On the other hand, if money runs through our hands as soon as we get it, we are in the state of perpetual deprivation and are unable to save anything for the future.

Many of us have to face a point in life at which we are in a terrible financial condition. Your savings could be low, you may have recently (or not-so-recently) lost a job, or you could lose your savings due to battling illness. There are so many possible paths to arrive at that dreadful situation, but we can surely avoid it with proper planning and forethoughts. Below are 10 ways to help you make sure you never have to face a financial crisis.

1. Maximize your liquid savings.

Liquid assets such as cash in hand, cash in currents, saving and money market accounts, and certificates of deposit are our most important financial assets to ensure financial safety. The value of these assets doesn’t fluctuate with market conditions, unlike stocks and index funds, and we can have them at our disposal any time we want, without any financial loss. Maximize your liquid savings. It’s very important to not invest in stocks or other higher-risk investments until you possess several months’ worth of liquid cash.

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2. Keep record of all your earnings and expenses.

The principal reason people face a personal financial crisis isn’t that they do not earn enough but that they don’t save enough. It’s easy to advise someone to save, but equally difficult to actually save something on your own. However, much of the trouble can be spared by keeping a record of all of your earnings as well as expenses. Keeping track of money coming in and going out will help you know if you are overspending or living within limited means. This will help adjust your expenses to align with your income.

3. Prepare your monthly budget and live by it.

When there is no bar set for tour expenses, you are more likely to end up overspending. Monthly budgets prepared at the end of the previous month can help you balance your finances. Prepare a well-organized monthly budget clearly specifying the budget for food, rent, recreation and so on. But remember, there’s no point in making rules if you can’t live by them. You also need to live by your monthly budget allocation if you want to ensure sound financial health besides setting it.

4. Keep your possessions in good condition.

Keeping your possessions in good condition is another effective way to avoid financial crisis. Keep everything you possess, from your car and household utensils to electrical and electronic appliances, in proper working condition. It costs much less for routine maintenance compared to the price you have to pay when they stop working completely, either to replace them or while repairing them. Investing small amounts to keep your possessions working will reap greater rewards in the long run, as money not spent is also money earned.

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5. Stay healthy.

Just as routine maintenance of household appliances helps to save significant amounts of money, maintaining your body also helps the cause. Most often we visit doctors only when the problems we’re facing have become severe. This traumatizes the body and requires significantly higher medical costs. With regular exercises and healthy habits, along with frequent medical checkups, you can pretty much avoid the possibility of major financial setback on the back of substantial illness.

6. Pay off your debts on time.

The best advice would be to never take any debt. But it doesn’t mean that your financial condition is doomed forever if you have taken debts. The first concern of any debtor should be to pay off all debts in full. Having existing debts doesn’t only distress our brains continuously, but also means that we can’t afford further debts, which would be necessary in the face of the adversities. So plan wisely and allocate a portion of your monthly budget to pay off the debts.

7. Safeguard against job loss.

Losing a job is the major event that leads a person to financial crisis. With the loss of job, a person doesn’t have any money to use, particularly if the person has never spared any thoughts for saving before. Safeguarding oneself against potential job loss is a chief way to avoid financial crisis. This could be done via unemployment insurance from your office or the purchase of a private unemployment insurance on your own. You can also find an alternative source of income besides your primary job.

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8. Save a portion of your earnings every month.

Saving shouldn’t be thought of as a luxury, something that you do when you feel like it. You should cultivate it as a habit. There’s no better way to save than putting away a certain amount of your earnings every month. The popular 50/20/30 rule suggests you allocate 20% of your monthly earnings for things like debt payments, retirement funds and savings. If you’re not in any debt as of now, saving 20% of your monthly income would be a wise idea. However, even if you’re in debt, save at least 10% of your earnings, as you need liquid cash in hand in case anything serious happens in future.

9. Try to minimize your monthly bills.

Just because you earn enough and are not facing any financial setback as of now doesn’t mean that the case will be the same forever. Try to minimize your monthly bills before the alarm bell rings. The focus for minimizing the monthly bills should be on cutting out unnecessary expenses as soon as possible. Look over your expenses and find out possible ways to deduct them. You could be turning on your heater or air conditioner even when you’re not home. Simply turning those appliances off when you’re not home will help reduce energy bills and thus, the monthly bills, significantly.

10. Spend wisely.

“Every penny saved is a penny earned.” You won’t be financially secure all the time, unless you are wise enough to spend wisely. Spending wisely is an art in itself. There are several techniques to spend wisely. One is to abstain from buying things you are hardly going to use. The other could be to compare prices amongst multiple vendors and go for the best deal. This could even mean spending money as an investment for the future, as the money you spend today could generate you further capitals tomorrow.

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Featured photo credit: money career upstairs/Anatoly Tiplyashin via fotolia.com

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Nabin Paudyal

Co-Founder, Siplikan Media Group

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Published on November 20, 2018

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

Why Your Past Prevents You from Saving Money

Are you constantly thinking about your financial mistakes?

If so, these thoughts are holding you back from saving.

I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

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How to Effortlessly Track Your Spending

Stop manually tracking your spending.

Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

The Truth on Why You Keep Failing

Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

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Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

  1. Save more than 50% of your available money (after expenses)
  2. Only buy nice things after saving
  3. Automate your savings with automatic bank transfers

These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

How to Foolproof Yourself out of Debt

Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

So how can you separate yourself from the 60%?

By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

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Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

A Proven Formula to Skyrocket Your Savings

Having proven systems in place to help you save more is important, but they’re not the best way to save money.

You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

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Transform Yourself into a Saving Money Machine

Saving money isn’t complicated but it’s one of the hardest things you’ll do.

By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

What are you waiting for? Go and start saving money, the sky is your limit.

Featured photo credit: rawpixel via unsplash.com

Reference

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