Source: Universal Publishing Service
Are your debts mounting each month? Are you finding it harder to juggle the bills? Do you find yourself relying on cash advances on your credit cards to get you through your pay day? Anne Starke shares 10 tips on how to navigate through credit crunch as painlessly as possible.
Fretting over unpaid bills is a terrible energy-sapper. Money worries hang over your head, undermining your self-confidence and your sense of security.
But things usually aren't as bad as they seem and the worst thing you can do is accept the situation and continue living hand-to-mouth, day-to-day.
Regardless of age or income, everyone has the potential to be financially secure, and to enjoy the self confidence and feelings of personal power that come with it. It is not a matter of earning higher wages, but of working smarter with what you've got. Work out your budget woes with these tips:
1. Stay calm
If it looks like there is no way out of the maze of bills, stay calm. After all, it is only money. Lots of people and many businesses face a credit squeeze at some stage and most work their way out of it. The important thing is to have a plan – and follow it through.
2. Is the crisis short-term or critical?
Work out if your difficulties are only temporary or if it is a long-term problem, such as illness, loss of your job or possible bankruptcy. If it is a major crisis, you may need professional help immediately. Contact your lawyer, accountant or your friendly bank officer.
3. Will your credit rating be affected?
Do your best to protect your credit rating. If you are downgraded, it could jeopardise your chances of obtaining a loan in the future.
4. Work out which bills to pay first
When cash is tight, you need to set priorities as to which bills to pay first. Check which unpaid bills are likely to affect your credit rating. For example, a friendly landlord might allow you to pay the rent a week or two late, but a default on the electricity account will not only put you in darkness – it could mean a black mark on your record.
5. Money-stretchers
When money is short, you need to work with the money you have got to make it spin out as far as possible.
• List all the bills you owe.
• Note the due dates and grace periods.
• Pay your bills only at the end of their grace periods. A computer won't care that you paid on the last possible day.
• Pay only the minimum due but pay something on all of your bills. Do not pay all of one bill and only some of the other.
• Don't charge anything on a due-in-30-days basis. Try to arrange credit over a longer period of time.
• If it looks as if your money problems will last for a while send a note to the people you owe when you send part-payment. Make it brief and to the point: "I am experiencing problems that should be resolved soon. Here is part of the payment. I will pay the full amount as soon as I can."
6. Watch the cents
Until you work your way out of debt, you will need to take special care with your spending. Try to put off buying clothes or items for the house until you are on a firmer financial footing. Work out how much you can afford to put aside each week towards paying off your debts – and then work out how long it will take until you are debt-free. Now you have a personal goal to work for - that marvellous day when you won't owe anybody anything!
7. Don't be too hard on yourself
Financial fitness takes discipline but it does no good to impose too strict a budget. Chances are you won't be able to stick to it. Then, on top of everything else, you will have to deal with that depressing feeling of failing to meet your own expectations.
8. Take control
Successfully settling your debts after a spending blow-out is a big achievement. The important thing once you are debt-free is to make sure you do hot slip back into the red again. More importantly, now is the time to get your money working for you to build up financial security for the future.
9. Make money work for you
Sometimes as little as S$50 a week is enough to get you started towards building up a fat nest egg for the future. You also need to work on accumulating an emergency cash reserve. The best way to begin a plan is by learning how investments work. An understanding of the system gives you the knowledge and confidence to win. Most of the major financial planning companies run seminars that provide a useful starting point.
10. Seek professional help
Nowadays there are many different Investment products available. No one can be expected to choose from these and come up with the right answer every time. You will need help from qualified adviser. Choosing an adviser is an important decision because you should expect to be working with this person over a long period of time. She can show you the way to achieve your goals, prepare a plan – even be your motivator – but in the end your future is up to you. Your security and the lifestyle you will enjoy in the future are dependent on the financial decisions you make today.
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