A financial crisis occurs when a person or a business is unable to pay its debts. Complete protection from the financial crisis is not possible. However, there are many ways that you can use to minimize the risk of financial problems.
The first thing I would advise is not to panic! Panic is not a solution to any problem.
There are two major types of financial crises; (i) personal financial crisis and (ii) government-created financial crisis.
It is a kind of financial crisis that is created from a series of unexpected events. It could be anything from loss of employment to business failure. People face a financial crisis when their expenses are more than their income.
Government-Created Financial Crisis
This happens because of the poorly managed public policy of the government. The most common example is that of the 2007 global financial crisis, the memory of which still frightens people. It results in people losing their jobs, businesses, and homes.
Recently Covid-19 is the most significant example of the financial crisis. According to a financial expert, Covid-19 brought on a sudden economic disaster; people and businesses were not ready for it. It resulted in a massive financial crisis for individuals and businesses worldwide.
One research found out that millions of Americans lost their jobs in just one week. Almost 40 percent of the US citizens did not have enough cash to pay for their expenses. These people would either borrow money from their friends or families or sell something they owned, while many of them requested a bank loan or get a payday loan.
Most of the people reported that they did not get money by any means. This means that it is wise to be prepared for a sudden financial crisis. Below are some of the useful tips to protect yourself from the financial crisis and not only protect yourselves but for your loved ones also.
1. Keep A Check Of Your Cash Inflow And Outflow
Monitoring your cash flow is an important step to do if you want to avoid a financial crisis. Even if you earn handsomely, keeping track of your money is advised. Make sure that you know:
Where are you keeping your money?
Track and keep a record of your monthly spending.
Note down your debts/borrowing/liabilities
The amount of money you have saved
Amount of cash that is liquid.
It is important to keep track of your income and spendings so you know from where you can get the money instantly in case of an emergency.
2. Avoid Unnecessary Expenses
Track where you are spending unnecessarily. Cut those expenses. By doing this, you are collecting the amount in case of any unforeseen emergency.
What you can do is prioritize things and look for ways from where you can save.
Do not shop unnecessarily
Cut down on eating out habits; dine out once a week
If not using, cancel unrequited memberships
These little steps can help you save more and cut down on frivolous expenses.
3. Reduce Your Bills
This is another good way to cut off your expenses and save money. Negotiate how much you are paying for multiple services in a single month. For instance, if you have a gym membership, and you only go on weekends, ask your gym manager, to reduce the gym fee, or else you are not taking their services.
4. Sell Items You Don’t Need
We agree that saving and spending are important for managing your assets, but another way to collect money is to earn money. What you can do is sell items that you do not need anymore.
It does not require much effort. You can sell anything from your home that you do not need anymore. You can arrange the auction in the backyard of your home, or the best way is to sell them online. Amazon, Etsy, and Craigslist are the best platforms to sell products.
5. Avail Multiple Ways Of Income
Availing multiple ways of income lets you save more. It is wise not to depend on one income only. This helps in increasing your income. I can give you a few ideas, how you can do that:
Start Freelancing
Tutor Students
Provide Consultancy Services
Provide Mentoring & Coaching
Dabble in referral Marketing and Other Passive Income Sources
If you have skills, sell them to people. For instance, if you are an HR person, you can provide consultancy, or if you are a professional CPA or CFA, you can help people with the taxes. A marketing person can help people with developing business plans.
With any kind of marketable skill, you can increase your income. Try to figure out what is yours. Also, you ask your company you are already working with for an appraisal, payment for overtime, bonus, or allowances.
6. Maximize Your Credit Score
Another way to save more is to increase your credit score. The lenders and landlords are interested in your payment history before they decide to extend credit or a lease agreement. Try to pay your utility bills and credit card bills on time to leave a good image and get the loan or lease approved on time.
Final Thoughts
A financial crisis can strike at you at any time, so it is wise to be prepared. Keep tabs on your cash inflow and outflow, cut down on unnecessary expenses, sell items you don’t use anymore, generate multiple sources of income, and increase your credit score to prepare yourself.
Complete protection from the financial crisis is not possible. However, I am sure that the above tips can help you create a cushion if a financial crisis strikes you suddenly. Do you have any other tips for our readers? We would love to hear them!
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Author Bio: Shaheryar provides ghostwriting and copywriting services. His educational background in the technical field and business studies helps him in tackling topics ranging from career and business productivity to web development and digital marketing. He occasionally writes articles for Carpet Cleaning Maidstone
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Thanks for sharing this informative blog. Keep sharing.
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