All of us experience tough financial waters every now and then. You can prepare for these things, but sometimes the challenges are greater than our preparations. If you find yourself in a time when your money is topsy turvy, it’s important to keep your head and act rationally. The way you react to choppy financial waters could determine how long it takes to recover, as well as how good things will be on the other side. Here are some considerations to make when determining your spending and borrowing behaviors during this time.
- When You Can See Light at the End of the Tunnel. Lots of us have occasional financial trouble, but we know that it is temporary. Maybe you just have trouble making ends meet one month while you are waiting for your paycheck to come in. If this is the case, a combination of 1) living beneath your means, and 2) sensible borrowing can help you survive this little bump in the road. Living beneath your means is the essence of frugality. It can help you span the gap between income bursts without having to add debt to your life. If that is beyond your ability, loans in the short term may be your best bet. Make sure to repay them as soon as humanly possible, as interest payments aren’t something you want to add to your plate in big portions, even when your finances are more orderly and sustainable.
- When There is No End in Sight. If you are in real financial trouble with no end in sight, it’s time to reevaluate your spending and saving strategy from the ground up. This kind of financial trouble happens to people of all income levels. When this happens, it’s almost always possible to honestly evaluate your spending and make important cuts. This is especially true for people with fairly good income. When income is theoretically sufficient, out of control spending is almost always the reason why we don’t have the money we need. It is important in these situations not to use borrowing to keep our lifestyles on the rails. Borrowing money will only serve to further sink the ship.
- When You’re Way, Way Over Your Head. There are some cases where the financial ship is ruined, and you’ve just got to give up the fight. This doesn’t mean stopping forever, but it might mean declaring bankruptcy. Bankruptcy is an important measure made available to struggling people by the government. Your situation makes a lot of difference in what course is the best for you, but a bankruptcy lawyer can help you with those questions. You will be seriously handicapped for a number of years following bankruptcy, particularly in your borrowing options. But you won’t be as crippled by debt either. It’s a good way to start from scratch.
Depending on which of these options seems most like your current situation, you’ll likely make one of a number of diverse decisions. Don’t let bad financial habits stay in your life. By correcting them now, you can chart a course for a much better financial future.
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