Needless to say, the global recession has left a lasting impact on everyone’s life. While some have lost their jobs, others have gone through salary cuts. Overall production throughout the country; investment expenditures; income; corporate profits; all have dropped to excessive low levels. Therefore it will take considerable time for this country to recover in the post-recession period.
Even if another recession should occur, there are some steps that you can take to minimize the impact. If you want to ensure that you won’t be facing undue hardship in the next recession, you may want to seriously consider the following five tips. They are personal finance tips and we encourage you to follow them carefully.
Repay your high interest rate debts: If you wish to improve your overall financial picture, one of the first steps that you need to take is to repay your high interest debts first. Among all the loans that you owe, you should choose the one with the highest interest rate and repay them first. Unsecured debts like personal loans and credit card debt need to be paid off first as they will normally carry a much higher rate of interest and will cost you more over the term of the loan. To get additional dollars to repay your debt, you may have to revisit your budget and see what expenses that can be reduced or eliminated.
Keep on saving funds and create an emergency fund: Did you know that even a small emergency or rainy day fund can help you in a big way in times of difficulty? Keep saving at least 10-12% if your income in your emergency fund so as to create a cushion that can be helpful during an emergency. Some financial planners say that an emergency fund should cover three to six months of expenses, but in a recession or loss of a job, that might not be enough.
Make a stricter budget: As you’re trying to come to terms with the post-recession period, you should follow a stricter budget. What that means is that you need to take control of all spending, and cut out the unnecessary expenses so that additional funds can be used to eliminate debt. Create a comprehensive financial plan and follow it religiously. It may be difficult for a short period, but once the debt is repaid, you’ll have surplus funds in your budget that can be allocated to savings. It’s very important that you get a good handle on your income and expenses, and do your very best to live within your means. It may even be helpful to take on a part time job as well to increase your monthly income, although this is not always possible in many cases.
Consider some serious downsizing: Do your best to reduce your expenses by purchasing only those items that you need and can’t do without. There are various ways to become more frugal and one is to use coupons. Just make sure that the coupons are for items that you normally use and not for unnecessary things. There are many families that can save well over 50% just on their grocery bill alone, by carefully selecting coupons. Just don’t start buying impulse items because you may have a coupon for it. Be careful when using a credit card for shopping as it’s too easy to buy items that aren’t necessary, and then the debt spiral begins all over again.
Negotiate with your creditors: Calling your various credit card issuers should be the first step in any debt reduction program. If you’re having difficulty in making the payments, you can request a reduction in your interest rate and most of them will go along with this. In cases where your card balance has a lot of accrued interest, they will even forgive some part of that. The important thing is for you to communicate with them and let them know that you intend to repay their balance and that all you need is some assistance. Credit card issuers don’t want a delinquent account that will be charged off, and will try to help you as much as possible. But, you must call them and be truthful and cooperative.
If it is difficult for you to use a credit card because of impulse buying, start using a debit card instead. This will help you to stay within your budget and to better control your spending. Instead of shopping just for fun, discover the fun of window shopping. Seek help of professional companies only when you feel that you can’t become debt free on your own.
Author Bio: Martha Jackson is a professional in the field of personal finance and uses her expertise to offer tips on debt related topics. At present, she enjoys an association with various financial websites where her articles are widely read. She can be contacted directly through e-mail at [email protected] Personal Finance Tips