If you are suffering from a serious financial setback, do not worry- you are not alone, and there is a solution.
In fact, COVID-19 has justify many people in the same position. And if COVID crises aren’t enough to take you down, it seems most people found their way to financial setbacks through more traditional routes such as overspending, bankruptcy, medical bills, or divorce. The actuality is more people than ever face severe financial difficulty today.
Your path to recovery will require a standard set of action steps despite what caused your financial setback. You might believe your situation is unique; however, many have walked this path before you. The steps to financial recovery are fully proven.
Process that will help you recover from any financial disaster.
Know your option
Your recovery from debt is only possible in one of a few methods. For every creditor who you are indebted to, you can:
- Apply for a progress loan
- Declare bankruptcy
- Attempt to negotiate your debt settlement with the creditor
- Payback what you owe in full
The aim is to be able to take the last route whenever you can. Even though this is not possible for all debtors, it is by far the best way to set yourself to financial recovery. This is because the act of repaying your debt rebuilds your credit outright. It puts you back on the route of financial tools such as loans, that can also be utilized to pay off debts with higher than average interest rates.
Start living lean and cut unnecessary expenses
Many people manage their debt situation without the willingness to make changes. Think of it this way-If you added an excessive amount of weight, and it was affecting your weight, you would have to go on a diet. You have to do the same thing to your lifestyle when you are recovering financially from debt. Living lean is similar to dieting on a struggling budget. Start to reduce unnecessary expenses. Do you have to go to the cinema every week when you already pay for Netflix? Do you really have to purchase the most expensive brand of chutney when there is an affordable version available? You do not have to live lean and cut out all your comforts forever; however, you need to begin cutting back now to see a difference later.
Be picky about service providers and go for affordable ones
You possibly have a variety of monthly expenses that you need to pay for per month. You possibly signed up for these expenses a long time ago. Think about your mobile phone package, your internet provider, your car insurance, or your heating service. All of these expenses are a necessity; however, you do not have to pay high prices if you can get cheaper prices elsewhere. Go through your bank statements and create a list of all of your monthly services and expenses and the amount you spend on each. Then make it your mission to check if you can find the same or a similar service for a cheaper price. Any savings is worth making and can go a long way in getting you back on your feet.
Keep calm
If you invest in a brokerage account or contribute to a retirement plan, do not forget that your future account balance depends on what you do today. Thus avoid making moves based on emotion instead of rational planning.
If you have a retirement savings program underway, with asset allocation appropriate to your long-term goals and risk profile, you possibly want to keep on following your plan. The easiest and most proven way to recover quickly from a disaster in the market is to stay the course by keeping your funds invested. So you need to resist the temptation to panic sell, which is usually a costly mistake.
If you get scared and solid your stocks when the markets are down, you might miss the recovery or never get into the market at all.
Get guidance from a trusted financial professional. Typically, the more investors embrace the discipline behind the procedure of long-term investing, the more financially secure they become.
Get a long-term loan
You can amalgamate your own debt by applying for a long-term loan and putting it to good use towards your financial recovery. You might be wondering why this appears hard, especially since you might already be blacklisted or have a less than perfect credit score. The thing is that these long term loans are designed to assist people, even though their credit history has not been the best. It is for people who have had poor credit in the past.Â
What is they want is for you to prove that your financial situation has changed, and you are in a better position to handle your current debts well. If so, a long term loan will not be hard to attain. Those people with poor credit scores, however, should expect a slightly higher rate of interest. That’s it.Â
With this type of loan, you can add up all of your outstanding debt, get the money you need to be moved into your bank account in as little as twenty-four hours, pay everything off, and then have your one small loan account to worry about per month.
Keep saving
There is nothing much to be gained in exhausting all the financial resources you have in the financial recovery from the debt process. Running out of money reserves while trying to repay debts will most possibly result in the use of even more credit. This will put you back where you began. Even though saving a modest amount slows the repayment of your debts to some extent: so be it. The savings you make today will be your platform for regrowth in the future.
Prioritize your debts
Some debts are more time-sensitive, and others are larger than others, while others have interest rates that differ. Understanding which ones to target first is vital. Most debt advisors will recommend that you first try to clear away debts with the highest interest rates. This is because you will instantly be saving more money on interest rate payment costs, and this money can be moved back into your repayments on other debts and your own savings.
Try to earn better
After you are wading your way through debt, you may think budgeting is the best thing you can do; however, it is not. Just setting a budget in place will get you on the right track; however, it will not fast track your financial recovery. One of the best methods to get your feet faster is to try and boost your income. Look for freelance jobs and part-time jobs that you can do, offer writing, dog walking services, or lift clubs.
Do whatever you can to ensure that you are bringing in a few extra pounds per month. If you are supporting teenagers or legal earning age, encourage them to look for part-time jobs to fund their entertainment expenses too. This can offer a bit of financial relief.
Negotiate your rates
If you have credit cards outstanding, some of them will be delighted to negotiate a lower interest for you. This is mainly the case if you have been handling your account well and explaining your current situation to them. Even though your interest rate only goes down a fraction of a percent, it is a decent saving over the long term.
Insulate yourself for next time
No one knows how far the economy may fall due to COVID-19; however, you can safely presume it will not be the last financial crisis we will experience. As you take steps to restore your financial well-being today, do not forget to insulate your finances for tomorrow.
If you don’t already have one, begin putting money away for an emergency fund to pay the bills during bouts with job loss or when unexpected expenses crop us like medical bills and home repairs. Having savings set aside prevents you from having to depend on credit cards or drain your retirement account in a pinch.
Most financial professionals suggest you set aside at least three to six months’ worth of living expenses in a liquid, interest-bearing account. Have up to a year’s worth of expenses saved if your income is unstable.
Also, assess your insurance coverage to make sure that your family is protected no matter what. Beyond basic health insurance, you might wish to consider life insurance to protect your family if you pass away prematurely. Also, consider disability income insurance to assist replace a portion of your income if you should become injured or too ill to work.
Recovering from debt can be tough. It will take dedication and hard work; however, if you put your mind to it, put in the effort, then you will most certainly come on top.
