The pandemic has impacted people’s daily lives in more ways than one. Quarantine restrictions and lockdown measures closed down many establishments, causing many people to lose jobs. In addition to the unemployment problem, price inflation of goods and services also has increased significantly.
Due to the pandemic, it’s not uncommon to see many people struggling mentally, emotionally, and financially. Even with the gradual opening of establishments and businesses after the restrictions had eased, post pandemic recovery still slow for many people. People are recovering from the financial losses of the pandemic, but they are also making ends meet to continue an expensive lifestyle.
Only a few people are fortunate enough to have no experience with money concerns during the pandemic. But, many people still encounter financial issues and obstacles as they try to move forward in these trying times.
But, the good news is that with every problem also comes an immediate solution. You don’t have to deal with these financial challenges indefinitely. There are answers to any financial difficulty that can help you change your financial plan and increase your capacity to save for the future.
9 Solution of Financial Challenges
The article lists nine practical solutions to everyday financial challenges. Read further to know more!
1. Evaluate your expenses
Most people face the problem of having more money coming out than money coming in. Although this is a typical problem, many people still do not realize that they have this problem. In addition, in many cases involving poor communities, the expenses for survival needs are too much or just enough for their monthly income.
There are many ways to solve excess expenses. One solution is to set a monthly budget to avoid overspending. A monthly budget may help limit your shopping impulses and prioritize your needs first, especially for those big into shopping.
You will also recognize that you can significantly reduce some expenses with a monthly budget. Budgeting allows one to examine each monthly financial cost and analyze which can be eliminated or lowered.
Consider examining all of your monthly costs, including utilities, internet, phone plan, insurance, and more. Then see if there are expenses, like subscription plans, you can cut back on or cancel altogether. You may also start looking for savings for groceries and restrict your eating out expenses by cooking your meals. You may save money by ensuring you cover all your fixed costs and maximize your monthly income.
When the gap between your financial expenses and monthly income is too close, you may consider looking at possible extra sources of income. A second job will provide you with an additional salary to cover the high costs.
2. Consider buying second-hand cars
Buying a car is an investment, and the payment doesn’t stop once you pay for the vehicle’s down payment. You need to shell out cash for maintenance, gas, toll fees, etc. Indeed, car payments can eat off your extra salary, leaving no room for savings for unexpected costs.
You may feel that you’re always making auto payments yet never paying them off. If you get a car payable within five or more years, you have to ensure to set aside monthly payments for it. Things can get awry quickly when you encounter a financial hiccup and still have a car loan to cover and no extra savings or an emergency fund.
By altering your attitude toward automobile purchases, you may be able to limit your losses and lower the cost of car payments. Consider buying a second-hand car in good condition and would only require little car maintenance. It is also beneficial to buy a vehicle that uses a cheaper gas type than others.
3. Avoid credit card debt
Using a credit card is somewhat a common way to organize financial commodities. But most credit cardholders forget that they are only using and living off borrowed money. Even though many people are ready to pay double-digit interest rates on fuel, food, and other products that are gone long before the bill is paid in full, doing so is not a wise financial move.
Credit card interest rates significantly increase the cost of your purchases. In certain circumstances, borrowing means spending more than you make. Credit cards carry hefty interest rates on balances carried over from month to month. As you re-evaluate your budget and seek to cut spending, be sure you can pay off credit card debt every month.
Before using your credit card, always check if you have the cash to afford it. Otherwise, save up for it first to avoid potential debt.
4. Request for refinancing on your existing loans
Loans, such as SME loans, are great financial strategies when you need emergency and immediate funds for personal and business matters. However, if you tend not to pay off your loans faster, this strategy may cause you more harm than benefits.
Not only will pending loans limit your financial capabilities to spend on present and future expenses such as a new house, but they will only result in paying more interest over time. The additional claims pile up more on your financial stress.
You may consider using whichever debt-reduction technique will help you accomplish your goals. You may request lenders to refinance at a reduced interest rate to reduce the amount owed or raise monthly payments to pay off debt quicker. Either strategy might reduce your loan debt or help you pay off your loans faster.
5. Build your emergency fund
Shopping for personal desires is a joyous activity, as getting your hands on your wants can bring you instant happiness. However, although it makes you happy, living paycheck to paycheck is not a glamorous lifestyle. It promotes the absence of savings for emergencies or unplanned needs.
Life catastrophes such as a loss of income, car breakdown, injuries or accidents, or other unplanned occurrences can bind consumers if they do not have an emergency fund. Setting aside a portion of your monthly budget for this emergency fund may prevent future financial challenges.
Even the smallest amount you can save can make a difference. For instance, setting aside $20 a month can accumulate to a significant total after a few years.
6. Start saving for retirement
Your body at an old age simply would not allow you to work as productively as you were years before. Thus, you should start investing in your retirement funds as early as possible. There are a lot of ways to invest in peaceful retirement.
Contributing to designated retirement accounts every month is vital to achieving financial stability once you retire. You may also utilize tax-advantaged retirement funds or an employer-sponsored plan. Also, get a retirement program that increases interest over time.
But, before diving into these plans, you must understand how long your assets will take to develop and how much risk you are willing to take to ensure you have enough money for rainy days, your current expenses, and your future.
7. Consult before investing in real estate
With the increasing population and demand for housing, rent prices are also growing considerably. Thus, with the rising costs pinching consumer budgets, the debate of whether buying a house or renting is more financially strategic arises.
This debate is still up for the talk, as it depends on person-to-person and specific factors. One should consider sufficient household income and commitment of more than five years before investing in a real estate property.
To aid you in your decision process, consider talking to a financial advisor and real estate professional for sound advice on your financial capacity and the kind of real estate property that will work with it. Weighing the pros and cons with a professional is vital before making drastic changes.
8. Consider buying used items
Purchase second-hand items or trade products to upgrade (ex., trade your phone for a new one if you need it). There are several deals and trade possibilities when you look for neighborhood sales at thrift stores, online classified advertising, and Facebook.
Instead of buying a new device or shoes for an event, you may rent or borrow. This is a budget-friendly alternative for products you will only use once in a while. You may also make things yourself. For example, you can consider buying a second-hand home office table or renting a tux for an event before you think about buying new.
9. Plan for your financial future
Life can become hectic, but it does not mean you should forgo having a financial plan. Instead of spending your time scrolling on your phone, dedicate a few hours a month to plan out your finances for better money management. You can also review your spending habits and expenses and see where you can cut back on to increase your savings.
The COVID-19 pandemic has impacted the majority’s financial stability, as businesses have been closed due to government-mandated lockdowns and quarantine periods. Thus, monetary challenges are on the line with the slow post-pandemic recovery.
However, even without the pandemic, everyone is bound to have financial challenges at some point in their life. Hence, one must know the solutions to the top everyday financial challenges to avoid overwhelming financial stress. That’s why maintaining good monetary habits and having a concrete financial plan is vital to reaching financial stability. After all, it is better to be prepared than sorry.