Challenges like Job loss, health issues, high levels of debt, divorce, poor money management, natural disasters, economic recession, business failure, and the rising cost of living are some of the common causes of financial crisis.
When passing through trying financial times resulting from any of the causes of financial crises I have listed above, here are 8 spending habits you should imbibe to help you come out of your financial crises strong.
1. Live Within Your Means: Embrace Frugal Spending
If you intend to live and keep your finances afloat in the proper economic sense, you need to save money and not spend as much as you earn.
This way, you can fully cater to your family’s expenses, take care of bills, and do much more.
As a financial expert, I will advise that you maintain a record of your spending and compare it with your income.
If your expenses are higher than your income or you cannot save money for emergencies, then you should try to reduce your expenses in order not to sink financially during financially trying times.
Read Also: 9 Financial Habits of Women Who Are Never Broke
2. Create and Stick To a Budget
Budgeting prevents you from overspending, and at the same time, lets you spend your income predominantly only on what matters.
There is a recommended split of your income as proposed by experts in the 50-30-20 rule, and this can, in some ways, be adjusted depending on certain factors unique to you.
For example, you might have to reduce the amount budgeted for wants to 5% or less when faced with low or dwindling income.
When things get much worse, you might have to fall back on a bare-bones budget by cutting down on your expenses to only what is needed.
- 50% of your income should cover basic needs like food, housing, transportation, utilities, and insurance.
- 30% goes to saving towards an emergency fund, investments, and other essential financial goals
- 20% to satisfy your wants, which include eating out, vacation, and impulsive shopping. During a financial crisis, stripping off the 20% from your wants will make more funds available for savings or basic needs.
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3. Avoid Incurring New Debts
Debts like credit cards and other loans contribute heavily to financial crises.
Hence, taking new debt worsens your financial crisis and makes coming out more difficult.
Therefore, you should focus on working to reduce your debt-to-income ratio to a minimum, lower than 36%, which is the ideal figure.
You can avoid getting into more debt by cutting down on your budget – screening out items that are not important, negotiating with your lender for a lower interest rate, or consolidating smaller debts into one large loan to reduce your monthly interest payment.
Read Also: How Do I Pay Myself from My Small Business?
4. Cut out Recurring Expenses from Your Budget
Recurring expenses like streaming services subscriptions, gym memberships, meal delivery, newspaper and magazine subscriptions, cloud services, paid apps, online gaming, Cable TV, and online learning platforms drain your finances further in hard times.
Hence, cutting out such unneeded expenses will help you save up or channel more funds to meeting up with your needs.
Unless a recurring expense is essential, you should cancel or pause present subscriptions to help you weather the storm. As they say, ‘tough times require tough measures.’
Read Also: How to Live Below Your Means: 7 Hacks You Were Not Told
5. Avoid Eating Out
Eating out or ordering takeaway can further put a drain on your finances because it is far more expensive than cooking your meals.
You can limit eating out to the barest by planning your meals, creating a grocery list and cooking your meals at home.
Likewise, carrying your lunch and snacks can be more economical than buying mid-day meals at your workplace.
But if you are a person who does not cook, then this is the perfect time to learn cooking as one of your hobbies.
Read Also: 6 Habits You Can Learn from Successful Savers
6. Put a Hold on Major Expenses
While passing through a financial crisis, making major expenses like a down payment for a home, buying a car, electronic appliances, furniture, home renovations, wedding, vacation, luxury items, and non-essential medical expenses will worsen your financial crisis further and make coming out quite challenging due to more debt piling up as a result of making such heavy purchases on loan.
To help you overcome financial challenges faster, you should delay making such heavy purchases until your finances are better.
However, if you must make such purchases, go for second-hand options, especially for cars, electronic appliances, and furniture, which are available at a fraction of their original cost.
Read Also: 9 Practical Budgeting Tips for Easy Money Management
7. Re-Negotiate Your Bills and Expenses
In hard financial times, re-negotiating bills and expenses is often a welcome development.
For example, during the COVID era, bills and expenses were renegotiated to lower interest rates, and debts forgiven in some instances.
Therefore, you should try renegotiating your bills and expenses like mortgage, utility, rent, credit card rate, medical bills, and insurance.
Doing so will help you to free up more funds by reducing your debt.
For a successful renegotiation, you should:
- Review your current bills by checking through your bills including credit card statements, utilities, rent, and insurance for unnecessary charges, and reach out to the service provider
- Weigh the options available by researching other providers and making comparisons. This gives you leverage during negotiations, thus forcing your service provider to reduce your interest or offer you further discount in a bid to keep you
- Contact the necessary agencies or service providers for negotiations
Read Also: 7 Signs that you’re Financially Smart
8. Have Additional Income Sources
If you’re going through a financial crisis, you should consider having additional sources of income such as freelancing, setting up side businesses, or rental properties to augment your income, increase your emergency savings, cater to your needs, and offset your debts.
Conclusion
Imbibing these eight spending habits during a financial crisis helps you to achieve financial stability and better financial control, reduces financial stress, improves your savings, gives you more buffer to weather the storm, helps you to make better financial decisions as a result of mindful spending, reduces your debt, makes you more accountable to yourself, and empowers you financially.
Read Also: How to Be a Rich Girl: 7 Financial Tips Every Woman Should Know
