There are a lot of possible causes that can lead to financial distress and they can vary in their severity and gravity. In our current situation, since the coronavirus outbreak, many people have been facing difficulty earning money, handling their finances, and meeting their financial responsibilities. Many people have been struggling so much that they suddenly find themselves drowning in debt with no way out.
Reducing financial worries and struggles is essential for keeping the other areas in your life running smoothly. Not only does being in constant financial distress affect your mental well-being, but it can also have a severely negative impact on the quality of life you are leading. This is why it’s essential to put the time and effort into planning your finances to avoid this common problem.
To help you out, we have collected some important tips on how to handle and overcome financial distress.
1. Create a Budget
Some people don’t like managing their finances because they feel that this might add more to the financial stress they are struggling with. This couldn’t be further from the truth. The thought of creating a budget might be overwhelming at first, with all the issues you have to take into account, but it will help greatly in the long run. This not only helps to manage your expenses, but you’ll find that being able to keep track of your spending patterns will do wonders as well in terms of becoming aware of your habits.
This will help you realize the difference between what you need and what you want, and it will become much easier to hold back on unnecessary spending. Being able to take control of your finances will help in eliminating your worries.
To be able to accurately determine your budget, start by collating your income and calculating the amount of money you need every month for necessary expenses. Your spending plan should prioritize the immediate expenses and the amount of money you need for other basic needs and wants. If it’s possible, try to put about 10 to 20% of your monthly earnings into your savings account for emergencies. After deducting these amounts from your income, you should try and put aside10% of your income every month for shopping or hobbies.
2. Save Yourself from Bankruptcy
Many people who live in first world countries, such as Canada, the US, and the UK, where access to credit is easy, can still find themselves drowning in debt. Depending on credit cards instead of cash creates a problem due to the ability to spend more than you are earning. In 2018, this common issue has led to more than 125,000 people to file for bankruptcy or consumer proposals in Canada.
However, according to BankruptcyCanada.com, there are different steps you can take to avoid bankruptcy. If budgeting and other means don’t work after you have considered your credit history and the assets you have, you can always seek professional assistance. Considering bankruptcy is still an option, but you need to look at other ways first to determine which is more suitable for your situation.
3. Change What You Can
Unless an unforeseen event that took a sudden toll on your finances occurred, financial struggles can usually be a result of three main causes; you either have an income issue, a spending issue or sometimes, you might be dealing with a combination of both. If you are dealing with the first problem and have insufficient income to keep up with your monthly responsibilities and bills, then you need to try your best to avoid this problem.
If you can’t change your current occupation and increase your income, you can search for a second part-time job. If you haven’t had any luck with both of these solutions, then you can take another approach by trying to reduce your monthly expenses. This might seem impossible to some people, however, it’s still doable when you are willing to make some sacrifices. You can even find cheaper alternatives to some of the things you can’t live without.
4. Don’t Do Anything Rash
It might be tempting right now to throw your money on the fallen stocks. A lot of people might feel that this is the right time to invest in some stocks or projects to be able to gain profits. Bear in mind that many therapists have already noted that we are going through a collective trauma. The severe negative impact that is caused by the coronavirus is likely to affect our decision-making process.
It’s better to focus on fending yourself from the shock and protecting it from any negative affairs that might affect the quality of the life you are leading. This means that it’s better to focus on your job and what you can do at these moments to protect yourself and your family instead of thinking about big uncalculated financial investments.
5. Get Outside Help
Besides seeking financial assistance to help you out with planning your finances, there are other ways to seek help. There are classes that you can take up to learn basic money management solutions and ways to invest your money. Other people find financial planners to be of great help when they are trying to set financial goals and track their progress. Having an outside perspective helps a great deal in getting you to realize that perhaps the way you spend can be changed for the better.
Tracking your progress when it comes to the problems you can change and the other areas you have improved might not help you with your financial struggles, but this simple task can help greatly in reducing stress.
To avoid financial distress, you need to have a clear plan and budget to better understand your priorities and how much you can spend on secondary wants and needs. If you find it hard to manage your finances, then you can always get outside help by either seeking professional assistance, getting a planner, or signing up for money management classes. Reducing financial stress can have a positive impact on your mental wellbeing and your overall quality of life.