Do you think you can improve your financial situation despite all your debts? It will be hard, but it is not impossible. Debt has always been a part of our life in this consumerist society. We have always used it to help make our purchase transactions convenient. And people have become successful financially despite the presence of debt in their lives. If they can do it, so can you.
You have to keep this in mind amidst the difficult situation right now. Because you will need this information to survive the current financial crisis that the country is going through.
According to the April 2020 version of the Economic Well-Being of US Households, fewer people are claiming that they are doing okay financially. If you feel the same way about your finances, you need to be proactive about it. You have to make sure that you will position your finances to be stronger to survive this.
Of course, you should know what you are doing first. There are so many options and strategies that will allow you to improve your financial situation despite the presence of debt. But the truth is, it all boils down to your financial habits. No matter what debt solution you use to pay for your debts right now, it will not matter if you don’t have the right habits that will support it. Because even if you get through the financial crisis right now, it can still happen again. Something always happens that compromises our finances. So the best way to prepare for that is to have the right habits that will help your finances survive anything.
The question is, how can you develop the right financial habits that will improve your financial situation?
5 tips to improve your financial situation while paying off debt
Developing the right habits would mean doing the right activities repeatedly. Fortunately for you, getting rid of debts will force you to do these activities. As long as you stay committed to your debt solution, you can work on developing these habits.
Of all the tasks that you have to accomplish while getting out of debt, there are also 5 things that you need to work on. These tasks will not just help you with your debt struggles, it will also help improve your financial situation.
Set financial goals
Start by setting goals. Regardless of your current situation, you should always have a goal. Without goals, you will just be aimlessly working on paying off your debts. Other than that, there will be no direction for your finances. While paying your debts is an act of financial improvement already, it won’t be enough. Set goals that you can accomplish after you get out of debt. Ask yourself, what do you want to have after you make your last payment? Do you want to start saving up for a new home? Or maybe you want to start your own business? You can start working on these goals even while you are paying off your debts. If anything, having a lot of goals will motivate you to work harder.
Align your budget plan with your goals
Another thing that you should do to improve your financial situation is to have a budget plan. This should be a budgeting strategy that will support your pursuit of debt freedom. But apart from supporting your debt solution, it should also be aligned with your other goals. So if you are saving for the down payment of a new home or a business, your budget should reflect that. That means your budget should allot funds for your debt payments, saving goals, and basic necessities. You need to find a way to meet all of these financial needs so you can improve your financial situation.
Choose a debt relief plan
Apart from the goals and your budget plan, you should also focus on getting the right debt relief program for your debts. There is usually a debt solution that will help you save money even as you pay off your multiple credit obligations. That way, you can hit two birds with one stone. To find the right debt relief program, consider the type of debts that you owe and your payment capabilities. It will give you an idea of what program you will qualify for. If you choose the right debt relief plan, it will increase your chances of getting out of debt.
Diversify your income
If you want to improve your finances, you should also diversify your income. Some people think that increasing their income is enough. It will help, that’s the truth. But it will not make your finances secure as you try to improve it. When you diversify, you open other sources of income. That way, if something happens to your day job, you still have another source of income to rely on.
When you diversify your income, make sure that you choose another source that will not stress you out. Maybe you can opt to capitalize on a hobby. Or you can start an online freelancing job. Don’t stress if the earnings from this side gig are not too big. As long as you have one, it is already one step closer to improving your financial situation.
Monitor your spending
The last thing that you need to work on is monitoring your spending. If you really want to be financially successful, you need to focus on how you spend your money. Because it doesn’t matter how much you earn. If you don’t know how to use your money to your advantage, you will just abuse it. And if you are not careful, your overspending habits can make things worse for you.
If there is one trait that you need to make sure you have, it’s being wise about your spending. Even if you only earn a minimum wage, you can still improve your financial situation as long as you know how to spend your money.
2 ways to secure your financial situation while in debt
Some people might think that it’s very hard to improve their current financial standing while they are paying off their debts. Admittedly, it will be hard. But the fact that you are trying to do something about it is already a win on its own.
One thing that you can do to make things easier is to secure your financial situation while you are trying to solve your debt situation.
To do this, there are two things that you can do.
Have enough emergency fund
When the coronavirus pandemic tipped the country into recession, a lot of people felt stressed about their finances. Some were concerned about their retirement, monthly bills, and job security. But most people were worried about their emergency savings. If you really want to protect your finances, you have to make sure that you have enough emergency funds. It’s hard to determine what will happen in the future. So it’s best for you to have sufficient emergency funds so you won’t have to compromise any of your payments no matter what happens in the future. Even if you can only save a small amount each month – that’s okay. It will soon grow into a significant emergency fund after some time.
Monitor your credit score
The second thing that you need to work on is your credit monitoring habits. Sometimes, people land in debt because of identity fraud. Someone got a hold of their personal information and used it to borrow money. If that happened to you, that will leave you with a huge amount of debt that you did not borrow.
This is why you need to protect yourself from identity fraud. Make it a habit to look at your credit report regularly. You can request a free copy of your report from the three major credit bureaus. You are allowed to get one from each bureau every year. That means you get three free reports. If you get one every 4 months, you should be able to spot any unauthorized transactions. The earlier you can report these, the higher the chance that you can prove it’s not your doing.