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How can I Survive any Financial Crisis, Economic Downturn or Recession? Key Tips on How to Survive a Financial Crisis and Prosper: (Surviving the Global Financial Holocaust, Great Recession or Global Economic Meltdown)

There are several instances that can lead to a personal financial crisis. This can be bankruptcy, medical emergencies and many other instances. A financial crisis can lead to several consequences that can affect a person psychologically. Be it emotional stress, confusion, loss of control, insecurity or loss of confidence, the consequences are the same. 

 

 

 

 

The good thing is that there are several measures you can take to survive any financial crisis. While enduring a financial crisis can be challenging, there are several measures that you can take to minimize your chances of getting into a financial embarrassment and ensure you stay financially afloat. 

 

 

 

 

Here are some tips to survive any financial crisis:

Invest and widely diversify your portfolio

We all know that investments are a good way of using our money. Investing in a very profitable venture can assure you financial security and reduce your chances of getting in a financial turmoil. However, there are many risks in the financial environment that can crack down your investments. Some of them include government regulations, international laws, political instability and many more. When these things occur and you have not diversified your portfolio, you are prone to financial loses that can lead to personal financial instability. The concept of diversification in investment means creating multiple investments to minimize the risk associated. A well-diversified portfolio will help you make the most from your investments. This way, losses from one investment can be covered by profits from the other investment. There are several ways that you can diversify your investments but the following are the most common.

 

 

 

 

1.     Spread the risk - Diversification is all about spreading risk. Investing all your money in the shares of one company is a very risky decision to take. In case of any financial instability in the company, you could lose almost all of your money. So, instead of investing in a single share or bond, you invest in a portfolio of shares to avoid frustrating moments. If the shares from one company drops to the rock bottom, you will still have profits from the other shares which are performing well.

2.     Asset allocation - One of the most sophisticated way of risk-reduction strategy is dividing your investment capital into different asset classes. Where there is a downfall in the returns from one asset, there will be other assets that are holding strong. Profits from these assets will cover losses from the crumbling asset. You should also invest in assets that are not correlated. This will ensure less volatility and less loses when things get crazy. 

 

 

 

 

3.     Diversify your holdings within asset classes  Generally, investors understand the concept of investments and risk. The higher the risk the greater the returns - so regardless of the concept that investments in shares and government bonds has the most risks, they still hold the greatest returns. The rule of thumb here is to invest in all the four main types of assets. The reason behind this is to be able to survive the heat when the house of cards is coming down.

4.     Rebalance your portfolio -This is a very crucial way of reducing risk when the market movements upset your allocation to asset classes. If a certain investment performs well, it should make up a greater proportion of your portfolio. This may require you to sell some of your assets and reallocate them on the investment class that is giving huge returns. This doesn’t mean you have to abandon the other investment all together. You can sell the assets until each asset class represent the right proportion of your portfolio according to the degree of profitability. 

 

 

 

5.     Consider investing in a pooled investment -This will ensure that the risk of losses are spread to each investor and hence the impact of losses will not be that huge on you. Unless you are wealthy, investing in the shares of several companies that are doing good should be in your mind. You can diversify your investment by simply considering investing in collective investment schemes. In these scenarios, a professional will take the responsibility of diversifying and investing your capital. Since the managers are highly qualified and experienced in this venture, there are less chances of loses associated by poor management and lack of time.

There is no correct number of assets and investments that you should take in order to be fully diversified. The correct way is to diversify your investments until the chances of loses from all the investments are minimal.

 

 

 

Reduce your debts

When you are under a burden of huge debts, you lose control of your money, assets and you lack financial security. This means that it is the creditors who are in control and hence you cannot be able to make any impactful decisions without the accreditation from the creditor. However, it is difficult to avoid debts completely. We need debts to raise money for a startup company or growing our businesses. Debts allows us to pay for a new car, house and other assets that you may need for personal life or for your businesses. If you have access to low interest loans then debts are a good way to pursue an aggressive growth strategy.

However, if debts are not managed well they can lead to a very unpleasant financial turmoil. The most obvious disadvantage of debts is that you will have to pay with an interest. If you borrowed to invest and the business has no enough returns to make the payments, you are likely to get in a state of bankruptcy which we already stated as one of the cases for personal financial crisis. The creditors can throw you in jail in case of unsecured loan, or foreclose your home. All this will led to a state of disturbance to you and your family.

 

 

 

The worst of all is borrowing to buy a private home or a private car. These will not raise enough money to repay the debts and hence you may subject yourself into recovery measures such as liquidation. If you have a huge debt with your bank and by bad luck you lose your job, then you are likely to lose some if not all of your assets. But if you don’t have debts or you have minimal debts and you happen to lose your job, the chances of getting into a financial crisis are minimal. You will avoid the worries of paying debts and losing your car or house.

It is literally easy to get into debts but very difficult to get yourself away from the repercussions associated. It can take just a month to accumulate thousands of dollars and take you five or so years to repay. 

 

 

 

Here are some of the ways that you can follow and avoid, reduce or eliminate debts:

1.     Avoid creating more debts - Creating more debts will project you to additional burden of settling huge balances with your bank. If you continue accumulating more debts then you will not make any significant progress in your way to settle them. Adopt ways that will help you reduce the temptation of getting into more debts. These may include cutting your expenses until you settle debts, cutting up your credit cards or even freezing them altogether.

2.     Increase your monthly payments - In order to settle the debts that you have already accumulated faster, increase your monthly payments. This will reduce the payment duration and eventually reduce the risk of unforeseen future. You don’t know the time you can fall into a financial difficulty and hence you need to stay prepared by settling your debts on time.

3.     Get loans from the creditors with low interest rates -The worst thing associated with loans is that you will have to pay together with the interest associated. The longer you take to pay the higher the accumulated interests and the more serious the situation gets. You can ask your creditor to give you low interest rates and you can also consult or research for creditors with low interest rates. Most often, customers with a good repayment history can negotiate for lower interest rates from their creditors. 

 

 

 

4.     Get loans to invest not for personal consumption Getting loans to finance your personal expenses is the worst thing you can ever do under the sun. If you consider investing then you are on the right track. You can use the returns from your business to repay the loan and eventually you will be free.

5.     Cash out a life insurance policy - A rational thinker is a risk averse person. They will have accumulated some funds with their life insurance provider. You can use the insurance to settle your debts and later continue paying for your insurance. You can as well surrender the insurance and use the surrender value money to settle your debts and later invest back to your insurance. 

 

 

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Build your investment portfolio to maximize your returns

The reason why we invest is to get enough money to consume and reinvest. Investing in different sectors will ensure that you are getting enough money and hence less likely to fall into a financial crisis. You should take due actions to invest greatly so as to always have financial freedom. Some of the biggest business tycoons that we see in our society are great investors.

Great investors know how to protect their portfolio. In this world full of investment risks, the key to huge returns is not getting the most profitable companies in the market. Rather, it is determining the comparative advantage of that company and protecting your portfolio like buffet. You should take your investments into fields and companies with products, services and business models that can stand the test of time.

If you are focused to raising enough money from your investments, invest on getting a better advice. Get investment advice from qualified officials who will guide you on this journey. Even if you are smart or lucky enough to have all the capital investment requirements, you know you cannot walk this journey without qualified management staffs and personal advisers. Bet investment opportunities lie on the hands of other people. Maybe you want to invest in a field that you are not well versed with. Selecting planners and advisers on the same field is crucial.

 

 

 

Most of the time our businesses get into economic problems not because of our mistakes but the mistakes of those that we trust to plan and manage them. When selecting planners and business managers, do not just consider their disciplinary records and fees associated, also invest in getting their academic qualifications and success experience from their former employer. This way, you will reduce the risk of your business failing and have all the reasons to smile in case of a financial turmoil.

Only smart investors have compound eyes. Eyes to see all corners of the market and utilize every investment opportunity that comes their way. The economic environment of many countries in the world has many gaps that you can invest in and make money. You need to be smart and learn from every mistake that investors made in the past. 

 

 

 

Make smart choices

Tight financial strains are the leading cause of depression, emotional stress and other associated diseases among the people between the ages of 21 to 50 years. All of this is avoidable if you make sound financial decisions. So make smart decisions regarding your finances in order to avert any financial crisis or getting your way out of it. There are several things that absorb your money every month that you don’t notice immediately. Your children, lifestyle and debts. You need to teach your children about managing finances. If your children are older, then teach them how to make good financial decisions and how to be resourceful and generate some income themselves. You should also involve them in every household decision making regarding finances. This way, you will be able to cut on extra expenses that consume your monthly income and make it difficult for you to save for the future.

Ensure every month you have a special meeting with yourself to review your finances. This way, you will be able to identify and fill any loophole that may be unnecessarily consuming your income. You have to cut on those additional but unbeneficial and unnecessary personal expenses and concentrate on adopting ways to minimize consumption. This doesn’t mean you should have no time and resources to treat yourself and your family from time to time. What I mean is that every successful individual is well versed with the term of minimizing expenses. While minimizing your expenses, you should ensure to maximize your satisfaction and maintain a better lifestyle. 

 

 

 

Make informed decisions regarding your saving strategy. In order to avoid financial stress in the future, you should learn to sacrifice. Sacrifice today’s consumption for tomorrows. Economists say that a shilling saved now is worth a lot in the future. When it comes to making sacrifices and being devoted to savings and investing, you should be at the front line in your family. Teach your family members including your children how to make sacrifices and save. Make them understand every time you want to cut on a certain family expense and investing or saving the money.

Saving money can help you greatly to become financially secure. This means that in case of any emergency, you will be able to respond swiftly and deal with the situation. We already know that medical and other emergencies are the leading cause of financial downfall among many people in the world. Learning the art of savings is the first stem in providing a seal between you and the situation.

Savings is also a good strategy to provide for your retirement. In case you retire today, you will need income to cover for the lost income that you were getting every month. A good way to raise this income is from savings and investments. 

 

 

 

Invest in quality stocks

As we already discussed, investing is one of the strategies to overcome any financial recession. Investing in quality stock is one of the ways to get a better risk-reward ratio in the event of a market pullback. The ambitions of every investor is to get in touch with a portfolio that is exposed to potential upside and at the same time trying to deal with downside risk. One place that is getting full attention from the investors is ‘’high quality’’ stock. These are stocks that have several distinguishing characteristics that keep them different from the broader market.

Investing in precious metals is one of the ways of ensuring that you get towards financial freedom. Although investing in bullions is characterized with several advantages and disadvantages, the pros outweigh its cons and hence it is one of the best ventures that you can consider investing in. However, when it comes to investing in precious metals you need to be extra careful. Ignorance in this venture is not a good thing. You need to know the basics and how the whole process goes before making any step. You can get enough advice from experts who have been in this venture for a long time. 

 

 

 

Investing in bullions involves costly intake of capital and is also characterized with risks. The venture is full of scams and counterfeit products that can make you lose your principal investment.

There are several benefits of investing in gold that can assure you freedom from any financial crisis. One of the major reasons why investing in gold is a good decision is knowing that your money is not subject to inflation and other financial market disturbances. Unlike investing in stocks, bonds or mutual funds, you will not have the worry of the company’s performance if you put your investment in gold and other precious metals.

Investing in precious metals is also a very straight forward venture. A venture that even an individual with no experience can take part in. It is also a very good way of hedging against market crashes. In order to get yourself the security of surviving any personal financial crisis, consider investing in those markets that guarantees you a return of your principal and profit. 

 

 

 

 

Plan and budget well

One of the most common and most effective ways of avoiding a financial crisis is having an informed spending. You got to have a well-structured financial plan and always spend on a budget. You can always sit down with a pen and a paper at the end of every month to remark every expense, your income, any tax information and anything else that can affect you financially. This is one of the ways of knowing your position financially and hence be able to plan better for the future. You can get a financial manager, or use some of the computer programs that can help you to get a detailed financial report of your earnings and spendings. The reason why this is important is because you have to get a clear picture of what is going on in your life financially.

If you are overspending and understating savings and investments, you can cut on your budget and ensure you save more every month. The budget should not be understated too, it should cover all the basic areas of your finances and deal with the rest.

Your monthly plan and budget should also include investment ideas, ways to reduce overspending and auxiliary measures that you have to adapt to and cut on spending. In case you are having problems with overspending.

 

 

 

Here are the key measures to take and you will help yourself greatly:  

1.     Find the least expensive basic items - There are those items that have different prices but are of the same quality and they serve the same purpose. These are the things to start using. It can help to reduce your monthly budget considerably. These includes the car you drive, the places you go for holidays, the food you eat in the house to the insurance you have for yourself and your family.

2.     Reduce or eliminate consumable habits - These are the unnecessary consumption expenses that you impose on yourself. You can cut or eliminate alcohol consumption altogether. Although this is not the largest area that will save you enough money, it can work a great deal.

3.     Drive smarter -You need to change your driving habits if you want to save on gasoline and eventually money.  Take due care to reduce instances of damage and accidents. This way, you will save enough money from repairs and maintaining your car. Also adopt ways to optimize your driving route and stop unnecessary driving mostly on short distances.

 

 

 

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4.     Cut down on entertainment - Entertainment consumes a greater part of our salary. Although it is important, if you are considering to save and invest a part of your savings then you should consider cutting on it.

5.     Be very aware on the impact product promotions and advertisements have on your purchase ­- Most of the time, product promotions will lure you into extra consumption and also extra spending. You should maintain your normal purchasing power and avoid extra spending. If you just want the product because it is stuck on your face, do not purchase it. However, if you need the product for a certain use that is reasonable, then purchase it.

 

 

 

Invest in treasury bills and Bonds

Here are two investment areas that can really help you survive the uncertain financial future. The only difference between the two is the maturity period. Treasury bills have a maturity period of one year or less. Treasury bonds are long term investments that mature within period of 10 to 30 years. They are both the instruments that the government uses to borrow money from the public. As seen earlier T-Bills are used to borrow many for short periods that do not exceed a year. They are also used for domestic borrowing in the domestic currency. The government exchanges paper work with money and when the maturity period is over, the government will return the money borrowed with the interest.

The reason why you should consider investing in government securities is that they are considered to contain less risk as compared to other assets. They are back with the full credibility, faith and the strength of the borrowing state. 

 

 

 

 

The returns are predictable. The government offers well-structured terms of investing and therefore you can be assured of a certain return in a certain period of time. Treasury bills and bonds are known to endure the turbulent waves in the stock market and hence less risk is associated. This is the reason why you will not have worries about your financial future. In case your finances crumble down, you will have somewhere to run to.

They also have a high-interest income. It is one of the best ways to invest your money and be assured to make a huge return. They pay a high interest rate compared to other assets. What this means is that you will be able to raise enough money to sustain you and your family in case of any financial crisis. Apart from saving your money in the bank, invest in treasury bills and bonds and you will be financially secure.

 

 

It is also a form of diversifying your investments. It is one of those ways of not putting your eggs in one basket. You can have other investments and at the same time choose to put some of your capital in this area. If all your eggs on the other basket fall and they are crushed, you will still have another way to raise money for your personal expenses. 

Look for a side hustle

Having a side hustle guarantees you extra earnings. This is one of those ways that you can use to reach your financial goals. Sometime a side hustle can raise more cash than your job. Having a very reliable side hustle is one of the ways to seal against financial crisis caused by loss of job. You will be able to survive even after you lose your job and hence get rescued from the frames of financial dire straits. 

 

 

 

Do not be dared to believe that you are supposed to work mundane 9 to 5 jobs for your entire life. This will not assure you financial security in the long run. You need to understand that your earning potential is limitless and you can earn as much as you want. You can start utilizing that free time on weekends or after work in the evening and get a side job or a private office in town to make some extra cash.

Even if you have a job you love and are comfortable with, I don’t see the reason why you should be blind folded not to see other opportunities in your daily life. Many people are not motivated to work more and hence you will have that room to utilize their absence in the market and make money. You don’t have to sit down and complain about the things you cannot control such as tax and the economy. 

 

 

 

Having a side hustle is one of the ways to mitigate your risk. Have you ever wondered what could happen if you woke up one day and your job is no more?  Combining earnings is the best way to avoid stress and depression in such a time. Side hustles can be freelance businesses that can generate extra cash outside of your normal job. They are a blog site that you own that you can be running after work or the time you are free. If you are a professional doctor, you can establish an office that you can be running on weekends and making appointments when you are free. Side hustles are countless and are readily available waiting for you. 

 

 

 

 

Set financial priorities

Every person has several and competing financial allocation. Choosing between them and determining the one that should be given a higher priority can be challenging. You have to decide whether you will pay all your debts before starting to invest, whether you should fund your retirements or you can invest in taxable accounts, should you get a health insurance or invest your money. The list is endless and hence you need to be prudent in making such decisions.

Setting financial priority should be different from setting financial goals. The two aims are approached from a different perspective. Everybody has a detailed financial goal, but the question is do they rhyme with your priorities? You should be able to determine those things that should come first in your life.

When making a financial priority, age is a critical factor. A student will have several financial priorities different from someone who is about to retire. No matter how old you are, anybody can face financial crisis. Therefore, figuring out your financial priorities is the best thing you can do to yourself. Although the process of deciding what comes first in your life can be challenging, there are several things that you can do and be sure of what to do first with your money.

1.     Put things in perspective - being able to decide on the thing that comes first with your money is a very beneficial thing in our daily life. If you put things into perspective by writing down which thing comes first, then you will always be financially stable. You can consider paying all your debts first and then come to other things.

2.     Pay off your consumer debts-This doesn’t exclude people of a certain age. Paying your financial debts should always be at the top of the list. This loans accumulates a lot of interest with time and hence they can lead you into a financial crisis. 

 

 

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3.     Consider saving - Saving your monthly earnings is another priority. In fact from paying your debts, you should structure a share of the remaining money that you are going to save. The first savings goal should be your emergency funds. You can set aside a small amount of money every time for your emergency funds.

4.     Understand your finances - The way you spend your money should also be a factor to consider. Take a clear cut between reasonable and unreasonable spending. All you need to do is assign and allocate money for top priority spending and the other things can wait.

5.     Think in terms of goals - Establish a list of your financial goals and later determine the ones that should come first. You may set a goal of being financially able to manage emergencies and the associated priority is saving in an emergency funds. You should separate these goals from how you will achieve them and therefore you will be able to get a creative way of determining your financial priorities. 

 

 

 

Setting a financial priority is like adopting a good diet, it will save you from misusing your money or using it on things that could wait and otherwise underestimating those that matter now. One of the restrains from making a good list of financial priorities is setting of unrealistic financial goals. Goals and priorities go hand in hand with success. 

 

 

 

Start saving from your personal expenses

You can get a 3 to 6 months’ worth of savings if you want to get out of financial crisis. Saving is a very hard thing to do but it has a huge impact on a person’s financial stability. Life is full of uncertainty and hence what is stable today may be unstable tomorrow. With a comprehensive savings plan, you will be able to handle most catastrophes that may come up tomorrow. You don’t know what can happen in case you lose your job. This is very possible and therefore you should seal yourself from it through savings. Having a 3 to 6 months savings cushion can allow you enough time to find a new job.

Having savings reduces the risk of getting back to debts in case something terrible happens in our lives.  It also gives you a sense of security in your daily life knowing that you can be able to survive any economic crisis in your personal life or at your home. Although investing your money looks as more beneficial between the two, savings should be part of your personal life. 

 

 

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For students who have no enough money to spend and consume, they can as well start with small savings out of the little that they get in a month. You will be surprised to find out what that saved coin can do at the end of the year.

Short time savings also give you an immediate access to your money in case you need it for an emergency.

As I stated earlier, saving can be difficult to implement in case you have several expenses waiting for you. Sometimes saving means a personal sacrifice from unreasonable spending. However, there are several strategies that you can implement and start saving your money successfully.

 

 

 

1.     Record your expenses -You need to establish how much you spend every month. This way, you will be able to know and detect where most of your money goes. Establish a strategy of accounting for every penny that you spend as the first thing of avoiding unnecessary expenses.

2.     Avoid unnecessary spending - Spend your money on those things that really matter. Cut down the habit of making some purchases that are unreasonable. What this means is that you will save a greater part of your salary. This is where we go wrong. Most of the time we spend a lot of money on buying things that we do not need.

3.     Make a personal budget - Once you detect where you are spending your money every month, the next thing is to make a list of these things in order to avoid overspending. The budget should outline how your expenses measure up to your income. Do not overestimate your budget, instead ensure that your budget gives you some space to save.

 

 

 

4.     Have a good plan -You now have to include savings in your budget. Leave 10-20 % of your earnings for savings every month. If you notice that your expenses are too high to save something enough, then you should consider cutting on your budget.

5.     Choose something to save on - In order to have a drive to save, have a target. You can decide to save on a car, your school or for buying land. What this means is that you have something to motivate you. Figure out how much it costs and divide the amount with the number of months you want to save for it. You can use goal calculators to get help on the savings time frame.

You should consider savings as your daily habit the same way as with food, dressing and other things. This will help you develop a good savings habit. 

 

 

 

Invest in real estate

A successful entrepreneur knows how to diversify their business into more than just a savings account. Investing in real estate is one of the ways that you can use to build wealth simply and easily. When you buy a rental property using mortgage then you are assured that you will be able to pay your debts. It is the money from the tenants that will be used to clear your loan. This gives you peace of mind.

Another important reason why investing in real estate is a good thing is the reality that a rental property can never depreciate. While you are able to repay the loan, the value of real estate generally appreciates. You will not have to worry about the future and the selling value of your property in case of an emergency.

It is also a very effective way to hedge against inflation. In a financial market that is coupled with risks, investing in real estate will protect your money against inflation. Many people are sensitive to inflation. Some of the governments also reward rental property owners. This way, you will be able to get tax benefits from the government. The government offers tax benefits such as depreciation and significantly lower tax-rates.

 

 

 

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Investing in real estate also gives 100% control. It is different from investing in stocks where you need a blocker to handle your trades. Once you decide to invest in real estate and you actually implement the idea, you directly own the property and have 100% control over it.

One of the ways that a real estate property can help you survive a financial crisis is the net income or the amount of money a rental property generates. This will help you build up wealth to take care of your expenses and emergencies. 

 

 

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Manage your finances well

You will never see a personal financial management subject taught in school. This doesn’t mean that personal financial management is not important. As a matter of fact, it is something that nearly everyone has to deal with at one point in their life. In order to survive any financial crisis you need to manage your finances well. Statistics show that many people do not really understand the concept of managing their finances well. Those who know about financial management do not take it as a serious matter. In USA only, 58% of the people do not have a retirement plan in place for how they will be able to manage their finances when they get old.

Taking time to manage your money better can really pay off. It can help you be able to stay afloat whenever others are facing financial crisis. The extra money can be used to settle your debts or at the same time put it towards your pension plan. 

 

 

 

Better managing your finances will keep you focused on your goals and ensure you will be able to meet them. You will avoid unnecessary spending and save the remaining money. What this means is that you will be financially secure and be able to deal with emergencies as they occur.

Managing your money will keep you aware of what is happening with your money. You will be able to notice where you are overspending and cut on it if necessary. With a detailed budgeting, you will keep track of the amount of money going in and out of your pocket each month.

A good manager will always stay in front of the park with the ability to deal with financial problems. Those who manage their finances properly are able to invest well and raise a lot of money from the projects. This way, they will have enough money to spend, save and reinvest.

Good financial management allows you to know what you can afford at the time and that which you have to wait for. You can hence have informed details regarding what you purchase at every point in time. You will as well be able to set financial priorities and determine what is important based on how you allocate your money.

It helps you to organize your spending and savings. When managing your finances, one of the ways is to divide your money into categories of expenditures and savings. By doing so, you will be able to determine which category takes the large share of your income. It hence becomes easy to adjust your budget and establish the one that matches your ambitions.

The main reason why we value financial management is the reality that you will be able to save for the expected and unexpected costs. This is what we have been talking about the entire time. If you can be able to deal with unexpected expenses then you can be able to survive every economic crisis during your entire life. If you can track all your finances then you can also be able to communicate with the significant others about your financial decisions. In case you want to cut on any family expense so that you can save for a certain goal, you will be able to make your spouse and children understand. 

 

 

 

If possible, invest in education

You can lose your job but you will never lose the knowledge you acquired through education. It is the essential foundation for prosperity and opportunities. Investing in education is also a very crucial thing in your life. It will ensure that you will be able to pick up fast enough in case you lost your job.

Education will also guarantee you of promotion in your job and this means you will attract a higher pay. This way, you will be able to accumulate wealth. You will also have adequate knowledge on how to manage your finances.

Education will increase a person’s chances of living a healthy life and also reduces several other kind of diseases.

On a more personal level, each individual should understand the need of educating themselves and their children. It opens up peoples understanding of the world around them and gives each of them a chance to utilize every opportunity that can improve their lives financially.

Education is also one of the ways that can help you escape from poverty easily. When you get educated, you get the knowledge that can help you take beneficial chances in your life. It will also equip you with the tools necessary to get ahead.

Although education is not a guarantee of a better life, investing in it reduces your chances of falling into a financial crisis. You can be able to recover quickly in case of a money threatening situation in your life. It is obvious that there are several instances that education can help you in life. Therefore consider furthering education apart of your investment portfolio. 

 

 

 

Create a financial back-up plan

We already know that the leading cause of any financial crisis is the rise of an emergency at one point in our life. You are not sure exactly what life holds tomorrow and hence you need to be prepared financially. In this world full of uncertainty, it is important to have a financial back-up plan more than any other time in our history.

Financial drawbacks and emergencies can drain even the most carefully planned budgets. Having an effective financial backup plan can greatly rescue you in times of financial problems. You are supposed to have more than one financial backup plans in order to be secure in your daily life. 

 

 

 

Several emergencies such as medical emergency, lost job, accidents, and many more can arise without a warning. Those who have a financial backup plan will feel confident at times of emergencies because they know they have somewhere to run to.

One of the most effective ways of creating a financial back up is by creating an emergency fund. You will face emergencies several times in your lifetime. You may need to cover for those emergencies without running to credit cards. We had already stipulated that if you want to be financially stable you are supposed to avoid or reduce your credit borrowing. Therefore, if you think that your equity line of credit cards can work as your emergency fund then you need to rethink. You need to build up your emergency funds before thinking of other plans like saving towards your retirement.

You should also keep bad debts in check. If you considered your credit line as a source of your emergency funds, then you need to keep a good repayment plan with the creditor. That makes sense because you will improve your credit. Some emergencies are so huge that you can use thousands of dollars to cover. Imagine that you fall sick and you have a hospital bill of more than $1000 and you didn’t create a backup plan earlier. Being in good terms with your creditor can save you greatly in such a situation.

 

 

 

You can be tempted to buy a bigger house, a better car, to buy a rental property and so on. This doesn’t mean that your retirement should not be something to consider. You should have a priority to save for your retirement especially if you are 40s.  You can explore other goals after you make sure that your retirement savings are on track.

What would happen if your sources of finances suddenly come to a standstill? How do you think your family can survive in such a situation? Having a financial backup plan can be there to save you in such a situation. Some of the emergencies are manageable but they can drain your financial tanks within a day. Therefore, you need to get your Emergency Landing Equipment in place before it’s too late.

You can as well buy a life insurance to shield your family against unnecessary struggles in case of a death. Death is uncertain but once it occurs, life has to continue for the family and relatives. You don’t know what could happen in case a family member succumbs to death. If you are a person who is passionate about family life and the future of your children, then you need to have a way to provide for them when you are no more. The term insurance plan promises to pay a lump sum amount in case the insured die. That amount of money can be able to cater for the necessary bills.

Cash is King

When you are manoeuvring through a financial crisis, you need to know that cash matters. You need to take full measures in the canopy of risks. In the flight to safety, you need to have a mechanism of raising enough cash for your expenses and to save. Having cash on hand will help you take every investment opportunity that arises in the market.

You may have accumulated valuable assets in your lifetime but if you don’t have cash at hand in times of a crisis then you are likely to face it the hard way. Things will get worse in such situations since it is not easy to convert some of the assets into cash when need arise. You will also face problems in case you want to leverage them as a collateral on a loan.

One of the most successful ways of surviving a financial crisis is to have cash at hand. You should remember to stay liquid if you think of staying afloat in this era full of uncertainties.

If you have a business and do not convert some of their sales and profits into cash then you will need to borrow to pay suppliers and pay wages. This is a very good reason why you need to have cash at hand or invest in those assets that are easy to convert into cash. This way, you will be able to cater for small financial expenses if need arise.

It doesn’t matter the kind of emergency that you are anticipating in your life. Sometimes it could be minor, you go to shop with your family and sometimes the credit cards stop functioning. You will have a hard time to raise the cash to complete the shopping. Other times you get a mere headache and need to buy drugs at the store but you did not carry cash. These are examples of minor emergencies that require you to always keep cash with you. 

 

 

 

Cut your expenses

 You will find at the end of the month that a significant share of your salary goes to unnecessary spending habits. In order to ensure you are financially stable, you need to know which expenses are necessary and which are not. If you detect that a certain expense gets a share of your income but it doesn’t add any value to your daily life, you should consider reducing the amount of money spent on it or abandoning it all together.

One of the biggest challenges in personal finance is figuring out how to spend your money. If you are trying to save some money to cater for emergency cases in the future, then cutting out a few monthly expenses can make a significant impact.

You should consider cutting on your bills. Lowering your electricity, water and phone bills can greatly affect your savings. If you detect that your family uses a lot of money on clearing electricity and water bills, then you should put some measure in place to ensure you cut on them. Make sure you are using energy efficiently and water sparingly. You can buy energy saving appliances and at the same time switch off bulbs every time you do not need the lighting.

A good way to reduce shopaholic expenses is to have a well written list of monthly personal expenses. You should then arrange them in descending order according to their degree of need. You should then cut on trivial things but with a solid reason why you are cutting them. If you don’t have a reason and a financial goal that will keep your finances in one direction, you will get back into overspending.

In order to avoid disappointments, you should stop using your money on small things that do not matter. You might not see how much a roll of cigarette a day costs you in a month. In fact purchasing small things will blind fold you from the goal of saving for the better things that will come later in life.

You should go for quality things over the quantity. You can choose to buy a fancy high quality dress that will not be torn by tomorrow. High quality home decorations will save you a lot of money on repair and maintenance over the long term.

Another important way of cutting your expenses is the use of 30 minutes rule. You should think twice before purchasing a commodity. Ask yourself the following questions; ‘’ do I really need this item? Am I really going to use this item more than 30 minutes a day? Is this item really important to me? If the answer is ‘’yes’’, then go ahead and purchase it. If the answer is ‘’no’’ then consider cutting on it.

Take a look at your house and sometimes at your personal items, how many items do you really need or how many things that your spouse and children really use in a day. I can bet there are several things that your family purchases and they are not really important to any of them. These are the things to avoid.

Cutting down your expenses is a smart idea, especially if you have a higher goal to reach. Everybody has an ambition of becoming better in the future. If you cut on your expenses and save a greater share of your salary, you will have guts to face a financial crisis with confidence. Think twice before spending your money on some things. Teach your family to use the 30 minutes rule. Tell them to take at least thirty minutes thinking about a commodity before rushing to a cashier to purchase it. This way, you and your family will be able to survive any financial crisis and pay for other important expense with ease. 

Start a high yielding savings account

Having a high yield savings account is one of the ways of taking control of your finances. In America, approximated 26% of adults’ have no savings account. This means that in case of an emergency they may have no emergency cash in the bank to fall back on.

A savings account is very important in taking care of unforeseen spending. No one knows what tomorrow will offer. This means that if you don’t have emergency cash, you may fall into a financial crisis. It may be a minor emergency such as a vehicle repair or a broken house appliance. The impact of emergencies can leave you in a huge debt thereafter. It doesn’t matter whether you have invested in insurance and you are almost sure you can handle any emergency. You should be ready for small deductibles which can significantly affect your money. Life situations if not managed well can damage the budget of even the most financially disciplined people.

A savings account is one of the ways to protect your assets. You might be forced to sell your assets in an unfortunate time due to unexpected expense or an emergency. If you had saved enough money, you wouldn’t be forced to sell your car to cater for a serious illness that may strike. What this means is that a savings account will give you an alternative to selling your assets. You will be able to handle any unknown spending with your savings.

Every person should understand well that the main cause of financial crunch is our inability to deal with emergencies. If you have a well-planned strategy for raising emergency money when the need arise, then you are in a better place to survive any personal crisis in your life. You can consider a savings account as one of your family arms, teach your spouse and the children the importance of savings.

Opening up a savings account can enable you to take advantage of possible profitable monetary opportunity in the market. This way, you will be able to build wealth and become financially stable. If you come across a wonderful business opportunity, you will not be able to invest because you don’t have money. Furthermore, without a savings account you may not be able to get credit with your bank for those opportunities. A savings account can tell much about your financial discipline and stability.

Having a savings account will give you peace of mind. You will be able to save your money for specific financial goals in your life and you eventually meet them. You will also be sure that in case of an emergency, you will have somewhere to run to. You may lose your job and rely entirely on your savings before you get another job.

A savings account is the best way to ensure that you have an easy way to access your money when need arise. Although investments are important, without a high yield savings account then you will not be able to get money for your emergencies spontaneously. Money put into a savings account is easily accessible and hence you will have confidence to face any day to day emergencies in your home.

Make sure you understand the terms of your savings account. Sometimes you may be given a limit on the number of withdrawals or the amount of money to withdraw at once. If you go above the set limit then you may be struck by a penalty fee. Ensure to open a high-interest savings account and your money will essentially be making you more money. Once you have opened a savings account, one of the most successful way of saving is to automate your account so that you will not have to be reminded to save. On your next visit to a bank, ask them about their savings account and open it before you get out of the banking hall. This will be your major step that will help you handle any financial crisis confidently.

When evaluating high-interest savings accounts, ensure you get clear information of several areas of concern:

1.     Required Initial Deposit - You should be familiar with their terms so that you don’t have to put yourself in a financial trap. Seek clarification on the amount of money that they require as the initial Deposit.

2.     Rate of interest paid - We are here talking about high-yield savings account. Therefore, you should open an account with the provider who offers a very high interest. How much interest will you earn from your savings and how long will it last. Ensure you understands their interest strategy well. Get clarity whether their interest is introductory. The one that keeps changing at different points in time.

3.     Get to know the bank’s compounding method - You should be informed on the method that they use to compound and calculate the interest. There are several compounding methods such as daily, monthly, quarterly, semiannually and annually.

4.     Links to a brokerage account - In order to be secure in case of an emergency, then you should be able to access your money easily. Ask the bank to explain clearly if you can be able to link with other accounts and brokerage accounts such as mobile providers for easy access to your money.

5.     Application/account setup and maintenance fee - How much will the bank or the credit union charge you to open and maintain the account. You don’t have to bump into your savings account and wonder where your money is going. You should inquire with your bank whether there is any monthly or yearly maintenance fee required.

This savings account should be just one portion of your portfolio. In order to stay financially stable, you need several other financial sources that will give you a source of money in case of a financial crunch. Consider how you can use the savings account to compliment your other mechanisms of dealing with emergencies. 

Plan your retirement Income

You should plan your retirement income well in order to have adequate funds to provide for the kind of lifestyle you envision. You need to make assumptions about your later life and see how much money you will require.

It doesn’t matter how much you love your work, a day will come when you have to punch out for the last time and start your retirement. When that day comes, I bet you would like to have a robust financial plan for yourself. Therefore, starting a plan for your retirement at an early time is critical.

When you are planning your retirement income, there are two aspects; personal planning and financial planning. Personal planning will determine how satisfied you are with your lifestyle after the retirement while financial planning will determine where the money to sponsor your lifestyles will come from.

Life is full of very many instances that require money. However, you will need to plan your retirement income. This should start at an early age in order to raise enough money. 

 

 

 

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There are several methods that you can adopt to ensure this is a success:

1.     Consider your consumption habit - You may be spending about 28% of your income on food, or spending about 58% of your income on mortgages, property tax, renovation and other things. Globetrotters spend a great share of their income on travelling. Whatever category that you are you should know that how you spend your money tends to change with age. You should then come up with a very effective mechanism of saving for your retirement.

2.     Start saving for your retirement as early as possible and allow your money to grow through compounding. Age will change but spending money will never stop. What I mean is that even after your retirement, you equally need money. Starting to save for your retirement early enough will give you enough money on retirement for spending.

3.     Sign up for a term insurance - Nobody knows what will happen to their family after they die. However, there is one mechanism that I know for sure will make you cater for your family even after you die; a term insurance. Death is uncertain, you don’t know at what time someone will leave us. You don’t know the kind of financial burden that you can leave your family in.

4.     Get an appropriate health cover - At a later age, people tend to fall sick severally. Health covers are a major part of your retirement and should be purchased early enough.

5.     Get rid of the outstanding debts - You don’t have to let debts follow you even after your retirement. Your retirement should be free from all the debts. What this means is that you are supposed to plan your debts and liabilities at least several years before retiring.

There are a handful of crucial decisions to be made across the way that can also affect your retirement. Take good care of your family to ensure that all your children are successful financially. This is also a backup plan for your retirement since your children can be able to support you in case of need.

Having an effective financial plan will help you overcome every financial trap that life brings.

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