Have Emergency Funds
They say you should have an emergency fund in a separate account that is enough to pay 6 months worth of your living expenses. That in itself might be a daunting idea for most people, but there are a lot of simple things that you can do to consistently put just a little bit of money aside each month. You'll probably be surprised to see how quickly you can build up an emergency account to protect yourself against going into debt when unexpected expenses arise. Here are 21 strategies for creating an emergency fund and why it's critical.
Limit new loans and credits
It sounds like a no-brainer, but the American public often time misses this simple common sense concept. When you are considering making a significant purchase for yourself or your family - a new car, a new house, a new computer - ask yourself "Do I *really* need this?" Especially if you're close to financial struggling already, it's an important question to ask. If the answer is "no", it's time to walk away. Save yourself the pain of falling into debt if you don't absolutely need whatever it is you're trying to get a loan for.
Many stores offer lines of credit or credit cards when you purchase something from them. It's become almost typical to hear a credit card offer as you make your way through the checkout aisles of most stores. They try to reel you in by offering a discount on your purchase if you sign up for one of their credit cards. This is a great moment to "just say no". Chances are you don't need that additional credit card, and by having it you've only got one more way to slip easily into debt.
If you simply can't get by without that new credit card, or if the savings offered on your initial purchase is worth it, simply mark your calendar after the first billing cycle of that new card and remind yourself to cancel it right away.
Keep low credit cards balance and beware of late fee, default interest fee, credit limit.
The best and most ideal situation is to pay your credit card bill in full every month. However, many people cannot manage that. If that's the case, be aware of the fees associated with your credit card.
Late fee: The fee charged by your credit card company if you did not pay the minimum amount by the due date on your statement.
Default interest rate: The interest rate charged to you by your credit card company when you have failed to pay your bill.
Credit limit: The maximum amount of money that your credit card company is willing to extend to you for spending.
Pay off debts
A credit crisis forces us even more than usual to pay down debt instead of buying other things we want with our disposable income. Experts agree that paying off whichever debt you have that has the highest interest rate should be your priority. If you have the means, pay a little extra on that debt until it's paid off, making sure to continue paying the minimums on any other debt you might have. If you can double or triple your payments to your highest interest rate debt, do so.
Review investment strategy and portfolio
Managing your own investment strategy and portfolio is no easy task, especially with the tumultuous nature of the markets these days. But it's important to be aware of your holdings of stocks, bonds, mutual funds, your 401K, etc. so you are not surprised when you're looking to count on that money. You can hire an investment manager to help manage your investments, sell when the time is right, and buy safer investments if possible to protect your money.
Be proactive in contacting potential bank, mortgage companies, or lender of any impending financial problems such as layoff. There may be some helps from the mortgage companies as they do not want foreclose homes. Did you know that over 50% of credit card holders call to ask about lowering their interest rate? If you aren't able to pay off your credit card in its entirety each month, you could save hundreds by spending 10 minutes on the phone. Calling to say "I'd like to inquire about lowering my interest rate..." could lower your rate 3 or 4 points... or more!
Personal financial responsibilities and self-discipline in limiting spending and other personal expenses.
We've mentioned it before in this very article... if you're out shopping and see something you want, before you take it up to the counter, ask yourself "Do I *really* need this?" Americans have been trained to think that everything is within our reach and our means, and that we deserve that. And while the later might be true, some discipline is a must, especially in a credit crisis. Search the web for ways to save, go to the library to borrow a book instead of buying one, buy coffee in bulk instead of two $4.00 cups of designer coffee per day... there are hundreds of ways to save if you exercise a little bit of common sense about your personal expenses.
Budget personal income and expenses and prioritize bills payments.
Know where your money comes from and where it's going. Many people use software or even a basic spreadsheet to keep track of where their money gets spent each month. It's easy to lose track when it's not on paper right in front of you, so a spreadsheet combined with a written list of essential monthly bills can go to greath lengths to give you a clear picture of whre you stand with your finances. Having everything in a list in front of you will also help you prioritize. It sounds simple but you'd be surprised at how much clearer things can be for you.
Protect credit rating and response to calls from lenders.
The easiest way to protect your credit rating is to check your credit report on an annual basis and ensure that it is accurate. You can get a free credit report right now at no cost. There are also credit monitoring services that will keep an eye on your credit score for you and notify you immediately if anything peculiar shows up so you can take care of it immediately and not have it affect you long term.
Beware of scams There are dozens of financial scams out there that you need to be aware of. Emails about winning the lottery, work-at-home schemes and credit scams flood email boxes these days. Here are a few tips to identify and avoid these schemes.
Make sure you recognize the organization contacting you and know that you have an account with them.
Send any email about winning a lottery from a foreign country right to your trash.
For organizations that you have enrolled in paperless statements from, make sure that either your full name of the last digits of your account number show up on the email so you can confirm it's legitimate.
Be aware of the current scams that might be going around by checking government and trusted financial websites.
Limit new loans and credits