6 Keys to Bouncing Back From a Financial Disaster
One way to dismantle an impending financial crisis or begin the recovery process is to create a budget. A budget will give you a clear picture of your financial situation.
Begin by adding up all of your recurring bills. When calculating your expenses, keep in mind that some of your bills may be paid annually such as property taxes. Take the amount that is owed yearly, divide by 12 and add it to your budget.
You should also include in your budget items that are unexpected such as car maintenance. Total all of your expenses. Next, total your monthly income. Now, subtract your expenses from your income.
If the amount is negative, it is imperative that you cut back your expenses in some areas. If the amount is positive, pat yourself on the back and put that extra amount in savings each month.
Vanessa was a single mom of two teenagers who kept overdrawing her checking account. Even though she made a good income, she found herself short of cash each month. She knew if she didn’t get her finances organized, she was going to find herself in serious financial trouble.
Vanessa decided to make a monthly budget to get a better handle on her finances. Within a couple of months, she was not only able to make ends meet, but she could also begin saving money.
Another action to offset a financial crisis is to have a savings account. The ideal amount to have saved is three to six months of living expenses.
If you are married, and both you and your husband are working, the minimum amount for you to save is three months of living expenses. If you are single, or only one spouse is working, the amount you should have in reserve is six months of living expenses.
Don’t get discouraged if you feel that these amounts seem too high or unreachable. Put any money you can into savings, even if it is a small amount. Did you know that saving only $167 a month equates to more than $2,000 a year?
Becoming debt free will also help you when facing a financial crisis. Make a list of all your debts. See where you can make extra payments and pay more than the minimum balances. Paying more than what is owed per month on your credit cards will greatly reduce the amount of interest and shorten the repayment term.
Sometimes, no matter what we do, we still find ourselves faced with a financial disaster. The worst thing you can do is panic and lose hope. Fear and panic will paralyze you from making a plan. The Bible says, “For God has not given us a spirit of fear, but of power and of love and of a sound mind” (2 Tim. 1:7, NKJV). A sound mind will help you stay focused to formulate a plan.
When a crisis hits, the following proactive steps will help you begin the process of turning your situation around:
