Most people struggle with their finances from time to time. For example, a sudden job loss or medical bill can impact your budget and happen without warning. If this happens to you, don’t feel like you’re alone. More than 75% of people have worries about financial security.
Whether you’re reeling from the past year, a job loss, or other issues that negatively impact your finances, there are some solutions to alleviate your problems and even get you on the path to financial stability.
Cut Costs
Cutting costs is the easiest thing you can do to help stabilize your finances at home, but it is not a strategy toward increasing your wealth. Instead, cutting costs is a short-term strategy to help during lean times, whether due to sudden job loss or an economic downturn such as during the Pandemic.
Analyze the different expenses you have and see if there are any you can eliminate. For example, you don’t need costs, such as that Peloton membership you don’t take advantage of or multiple streaming services you subscribe to when you predominantly watch only one of them are good places to start.
Eliminate extra trips out to a restaurant or other quality of life experience. When you begin to cut costs, analyze how much you spend dining out or for entertainment. There are hidden costs associated with these activities that can add up.
For example, did you really need to order an appetizer before the entree and not eat all the food? Probably not, so a good suggestion would be to order appetizers to share and skip the entree, or vice versa.
Another suggestion to explore is cheaper options such as happy hour deals rather than a full dining experience. But, again, we’re not advocating a spartan lifestyle. On the contrary, you should still have a quality of life even in difficult financial moments. Just learn to be more disciplined in your activities.
To cut costs, consider unloading a second car or other luxury items you make payments on but don’t need. A simple online search can show you the value of your vehicle. For example, type in “sell my car for cash,” and you should see a variety of options to explore and give you a good idea of the value of your car.
As mentioned, cutting costs isn’t a long-term strategy toward financial stability. Still, it is a good starting point toward reducing wasteful spending that can help you establish more discipline in your spending habits.
Unload Bad Debt
There are two types of debt, bad debts, and good debts. Bad debts are defined as interest on loans and credit that don’t appreciate the value of your loans, meaning you pay more for the purchase over time than if you had made it with cash.
A credit card is a type of bad debt. By using the card and not paying it in full immediately, you end up paying interest charges on the principal amount of your purchase, making that $400 item much more expensive.
Of course, a credit card is an excellent convenience for larger purchases, but treat the purchase the same as you would if you buy with cash. For example, pay the bill in full immediately after the purchase rather than making monthly payments that accrue interest over time.
To establish more financial stability, you need to find ways to lower your bad debts or eliminate them.
Leverage Good Debt
All debts are not equal and are opposed to bad debts that you end up paying more than the original price for an object. Good debts are ones that the value of the debt decreases while the value of what was purchased increases.
Stocks bought on margins are an excellent example of good debts.
When you buy on margins, you’re, in essence, borrowing money from the broker to put or call a large volume of stocks. If you call, you buy stocks at a specific price point, whereas you are selling stocks at a predetermined price with a call. Thus, you are leveraging your debt. Buying on the margin is to use someone else’s money, the broker, to make a profit.
The trick is to buy or sell before there’s an unexpected price change to the stock. Otherwise, you could end up owing a lot more. Because of the risks involved with buying on margins, it’s crucial you understand the market, and this form of good debt is only recommended to the most experienced.
Another way to leverage debt in a good way is to invest in Real Estate. Real Estate is a safer alternative to stocks and is easier to get involved with regardless of your experience.
There are various ways to make money in Real Estate and create financial stability if you just know the options available to you.
