Welcome to Day 14 of 30 Days To Your Financial Freedom Challenge!
If you’re already in a financial crunch, understand that life is full of ups and downs, and you will find your way back up again. When you’re in a good spot again, don’t waste time by partying. Instead, plan for your future, including future financial crunches. With solid financial planning, you can reduce the damage and whether any crisis.
Planning For Future Financial Crunches
Here are 10 ways for you to plan for a financial crunch.
#1 Identify Spending Problems You Have
You probably thought of things right off the top of your head that you waste money on. It might be a daily coffee shop delight, or it might be going out with the gals for drinks every Friday night. While these things are fun and give you pleasure, they are not needs and should be identified as areas you can cut when needed or reduce to help you meet your goals.
#2 Know Your Financial Priorities
Make a list of the priorities you have that money is going to help you with. For example, what are your plans for education, or health care, or shelter now and in the future? If you’re not working toward those goals, they won’t happen.
#3 Get Your Family or Business Partner On The Same Page
Don’t ignore other stakeholders in your research or during your due diligence. Your spouse and your kids and your business partner all need to offer budgeting and financial input in terms of goals and desires.
#4 Set Up a Budget or Spending Plan
Once you know where you are and where you want to go, set up a budget or spending plan. Whether you choose one idea over the other depends on your personality.
#5 Build an Emergency Savings Account
Your very first priority should be to set aside money in cash that is easy to get to that you can live off for at least three to six months. To determine how much you need, figure out your needs-based budget number.
#6 Know Your Needs Based Budget Number
When you take out all the wants from your budget, what you have left is your real needs and the real monthly amount you’re going to need to bring in during a financial crunch to see it through.
#7 Mind Normal Maintenance on Everything
As you create your budget, don’t discount the importance of remembering to fix things as you go instead of waiting for them to break. Skipping your car oil change or your dental cleanings is not really going to help you that much when it comes down to it. Of course, if you have to delay things for a bit, that is okay, but don’t skip these important things.
#8 Stay Out of Debt
The best thing you can do for yourself is to not get into debt in the first place. Remember that sometimes debt is really an investment, and in that case, it can be okay. For example, a home loan at a low-interest rate with a reasonable 20 percent down payment is a good use of your money and of debt. But, buying a sports car with no down payment on credit is a terrible use of debt.
#9 Develop Multiple Streams of Income
One of the best ways to protect yourself from financial issues is to set up a system in the first place where you can make money from several sources. That way, if one source is problematic right now, the others are likely fine.
#10 Reduce or Eliminate Bills
If you have consumer debt, consider paying it down as fast as you can, even if you use your savings. Consumer debt that has no collateral usually carries very high interest, so you’ll earn more on your money by paying it off and voiding that type of bill. For other bills like entertainment, gaming, and any subscriptions can be reduced or eliminated again based on need during any financial downturn.
Financial planning for both your personal life and your business life is imperative if you want to be successful long term. For most people, there will be twists and turns and times they are up, and sometimes they are down. This is normal life. If you’re ready for it, it won’t be as horrible as you may think. In fact, doing with less sometimes is a fun challenge. Try periods of cutting back even when you’re in the black so that you know your plans work.
You really can spend less eating than you may think. Get out your bank statements for the last three months and add up what you’ve spent on food. Then think about what you’ve probably thrown out too. With better planning, you and your family can actually eat better and healthier meals during a financial crunch than before.
Please leave any comments or questions below.
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