Everyone is subject to finding themselves in a bad financial situation. No matter how much you may prepare, you’ll certainly face challenging times with your finances.
Luckily, you can anticipate these hardships and prepare by setting aside money in an emergency fund, spending moderately, and by keeping your finances organized. But what happens if you find yourself in a really bad financial situation and you aren’t sure how to fix it?
Being in a tough financial situation can fill you with real fear. But don’t lose hope – no matter where you find yourself, you can always fix your financial situation.
If you find yourself in a bad financial situation, here’s what to do.
Don’t Panic
It’s natural to stress when your finances are a mess. But panicking won’t fix anything or help to improve the situation any. In fact, panicking can cause you to make some poor decisions that can make your current situation even worse.
Try not to panic. Instead, start thinking about how can you turn your situation around. No matter how bad of a situation you find yourself in, you can always reverse your financial situation. It’s only as temporary as you make it.
Dip Into Savings
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If you have an emergency fund, now is the ideal time to put it into action. While it is never fun to have to spend the money you worked hard to save, it’s better to use the cash you have available instead of relying on credit cards or loans.
Cut Back on Spending
Next, take an in depth look at your budget. See what expenses you can cut back on, or better yet, cut out entirely.
Essentially, you are trying to find spare cash within your budget. Unnecessary expenses, such as shopping, eating out, and entertainment are likely line items that you can cut out for the time being.
And don’t forget to see where you can cut back on your necessary expenses. Can you turn down the air conditioning to save on utilities? Cut coupons to save on groceries (or use Ibotta)?
Talk to Your Lenders
If you’ve tried everything and still have bills that you are unable to pay, it may be time to fess up to your lenders. Though it won’t likely be a fun conversation, if you can’t pay a bill, a company wants to know about it. Some companies will even work with you to set up a payment plan. It’s not ideal, but it’s better than simply ignoring the problem, which can get you into major financial and legal trouble.
Give your lenders a call and let them know what’s going on. If you have some extra cash, see if you can at least make a partial payment until you can get them the rest of the money you owe them.
Prioritize What You Can
What bills do you owe in the short-term? Which ones are most pressing to pay? Make a list of all of your bills, how much and when they are due, and then reorganize them to put the highest priority bills at the top of your list.
It’s a serious thing when you owe other people money, but if you’re struggling, you may not be able to pay all of your bills. At this point, the most important thing is to make sure you and your family have food and shelter, so prioritize those bills first.
Start Hustling
If a shortage of cash seems to be at the top of your problems, starting a side hustle is one of the best ways to improve your financial future. A side hustle can help to break the cycle of living paycheck to paycheck and will help you get your finances in order.
There are so many side hustles that you can start today to begin earning extra cash. You could start waiting tables on the side, pet sitting on the weekends, drive for Uber or Lyft, or start mowing lawns for pay. Some side hustles, like blogging and freelance writing, take awhile to build up to become profitable, but are also great ways to be able to earn money from home.
Create a Long-Term Plan
If you are in a bad financial situation, it may take some time to recover. You may need to catch up on overdue bills, replenish your emergency fund, and fix your credit score.
Create a plan to recover your finances and prevent such a situation from happening again. Consider increasing your emergency fund to give yourself extra security against rough financial times.
Related:
Have you been in a tough financial situation in the past? What did you do? How do you protect yourself against financial emergencies now?
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I’M AGREE, DON’T PANIC CUT SPENDING AND UNDERSTAND THE IMPORTANCE OF BUDGET, SAVINGS AND FUND FOR EMERGENCIES!