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

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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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Last Updated on January 5, 2022

33 Painless Ways to Save Money Now

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33 Painless Ways to Save Money Now

In a difficult economy, most of us are looking for ways to put more money in our pockets, but we don’t want to feel like misers. We don’t want to drastically alter our lifestyles either. We want it fast and we want it easy. Small savings can add up and big savings can feel like winning the lottery, just without all of the taxes.

Some easy ways to save money:

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  1. Online rebate sites. Many online sites offer cash back rebates and online coupons as well. MrRebates and Ebates are two I like, but there are many others.
  2. Sign up for customer rewards. Many of your favorite stores offer customer rewards on products you already buy. Take advantage.
  3. Switch to compact fluorescent bulbs. The extra cost up front is worth the energy savings later on.
  4. Turn off power strips and electronic devices when not in use.
  5. Buy a programmable thermostat. Set it to lower the heat or raise the AC when you’re not home.
  6. Make coffee at home. Those lattes and caramel macchiatos add up to quite a bit of dough over the year.
  7. Switch banks. Shop around for better interest rates, lower fees and better customer perks. Don’t forget to look for free online banking and ease of depositing and withdrawing money.
  8. Clip coupons: Saving a couple dollars here and there can start to add up. As long as you’re going to buy the products anyway, why not save money?
  9. Pack your lunch. Bring your lunch to work with you a few days a week, rather than buy it.
  10. Eat at home. We’re busier than ever, but cooking meals at home is healthier and much cheaper than take-out or going out. Plus, with all of the freezer and pre-made options, it’s almost as fast as drive-thru.
  11. Have leftovers night. Save your leftovers from a few meals and have a “leftover dinner.” It’s a free meal!
  12. Buy store brands: Many generic or store brands are actually just as good as name brands and considerably cheaper.
  13. Ditch bottled water. Drink tap water if it’s good quality, buy a filter if it’s not. Get 
      a reusable water bottle and refill it.
    • Avoid vending machines: The items are usually over-priced.
    • Take in a matinee. Afternoon movie showings are cheaper than evening times.
    • Re-examine your cable bill. Cancel extra cable or satellite channels you don’t watch. Watch the “on demand” movie purchases too.
    • Use online bill pay. Most banks offer free online bill paying. Save on stamps and checks, and avoid late fees by automating bill payment.
    • Buy frequently used items in bulk. You get a lower per item price and eliminate extra trips to the store later on.
    • Fully utilize the library. Borrowing books is much cheaper than buying them, but in addition to books, most local libraries now lend movies and games.
    • Cancel magazine/newspaper subscriptions: Re-evaluate your subscriptions. Cancel those you don’t read and consider reading some of the other publications online.
    • Get rid of your land-line. Do you really need a land-line anymore if everyone in the family has a cell phone? Alternatively, look into using VOIP or getting a cheaper plan.
    • Better fuel efficiency. Check the air pressure in your tires, keep up with proper auto maintenance, and slow down. Driving even 5MPH slower will result in better fuel mileage.
    • Increase your deductibles. Increasing the insurance deductibles on your homeowners and auto insurance policies lowers premiums significantly. Just make sure you choose a deductible that you can afford should an emergency happen.
    • Choose lunch over dinner. If you do want to dine out occasionally, go at lunchtime rather than dinnertime. Lunch prices are usually cheaper.
    • Buy used:  Whether it’s something small like a vintage dress or a video game or something big like a car or furniture, consider buying it used. You can often get “nearly new” for a fraction of the cost.
    • Stick to the list. Make a list before you go shopping and don’t buy anything that’s not on the list unless it’s a once in a lifetime, killer deal.
    • Tame the impulse. Use a self-enforced waiting period whenever you’re tempted to make an unplanned purchase. Wait for a week and see if you still want the item.
    • Don’t be afraid to ask. Ask to have fees waived, ask for a discount, ask for a lower interest rate on your credit card.
    • Repair rather than replace. You can find directions on how to fix almost anything on the internet. Do your homework, and then bring out your inner handyman.
    • Trade with your neighbors. Borrow tools or equipment that you use infrequently and swap things like babysitting with your neighbors.
    • Swap online. Use sites like PaperBack Swap to trade books, music, and movies with others online. Also, look for local community sites like Freecycle where people give away items they no longer need.
    • Cut back on the meat. Try eating a one or two meatless meals every week or cut back on the meat portions. Meat is usually the most expensive part of the meal.
    • Comparison shop: Get in the habit of checking prices before you buy. See if you can get a better price at another store or look online.

    Remember that saving money is not about being cheap or stingy; it’s about putting money into your bank account rather than giving it to someone else. There are many ways to save money, some you’ve never thought of, and some that won’t appeal or apply to you. Just pick a few of the ideas that sound doable and watch the savings add up. Save big, save small, but save wherever you can.

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    Featured photo credit: Damir Spanic via unsplash.com

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