Financial planning makes many young adults shudder with fear. You often avoid talking about your financial crisis. Whenever you do come out in the open, you do not get all the necessary information or guidance to take charge of your financial troubles.
With the current pandemic, the world outside seems to have come to a halt. Although there is so much happening around, newspapers are full of articles about the financial crisis the pandemic may pose and the increasing unemployment rates. This financial uncertainty might be triggering you to take steps to secure your future.
But not knowing the basics of finance could become a major challenge for you. Therefore, it is advisable to take a well-researched approach to secure your future.
This article talks in detail about 8 such important things which equip young adults to deal better with their financial troubles.
Avoid Being A Shopaholic
This is applicable to everyone and not just people undergoing financial distress. While shopping for products and services might impart a blissful feeling, you certainly do not want to ignore the looming financial distress. Controlling your urges is the best bet in such cases.
A moment of pleasure is not worth the agony it can cause in future. If you have recently started working and have a student loan or some debt, it is advisable to pay your EMI as soon as you get your salary as that will prevent you from defaulting on your EMI.
Also, if you suffer from impulse buying, remind yourself of the times your impulse buying led you into a crisis. Sometimes, guilt trips down the memory lane can save you in the hour of need.
Have Multiple Streams Of Income
Again, while most people advise you to create multiple sources of income, what remains hidden is the “how”. How do you look for other sources of income when you barely have time for yourself? It is easier said than done.
The first step is to manage your time and make sure you schedule all your tasks in a manner that you have ample time for a side hustle. Remember, consistency is the key.
Also, you should always choose the side hustle based on your interest and not something which pays well. This ensures that despite the lack of time, you will not procrastinate and finish your tasks.
Do Not Invest In High-Risk Funds
If you do not know it, don’t do it, especially when you are a newbie or are facing financial trouble. Investing is good; however, you should always balance your investment portfolio. Not only should you balance the risk, but also the liquidity of your assets.
High-risk funds might be enticing as they promise higher returns. However, they require a lot of research and patience. Wanting to earn money quickly by taking higher risks is a wrong strategy, and something everyone should stay away from.
While some risk is encouraged at the time of investment, you should always focus on building a balanced investment portfolio. Balance is the key to success and to avoiding financial troubles.
Budgeting seems like a no-brainer, and almost everyone will advise you to do it. But no one would actually tell you how to budget your finances. You might already be limiting all your unnecessary expenses and trying every hack in the book to become frugal.
While those are good practices to build capital, these require a lot of time and efforts and are seldom useful in avoiding the looming financial crisis. These hacks will buy you time, but will not eliminate the risk.
However, if you start practising the art of budgeting diligently, you will notice the red flags long before they become a serious crisis. A financial crisis occurs when we have lesser assets and more liabilities. Liquidity is another essential aspect of monitoring the financial health of a person.
In times of crisis, having a good amount of liquid assets is more profitable as it will allow you to steer clear of the financial uncertainty.
Keep An Eye On Your Credit Score
A credit score is a good way to keep your financial status in check. You should inculcate the habit of checking your credit score once in 6 months and plan your budget and investment options accordingly. Go online and check your credit score for free to stay on top of things.
A low credit rating is a cause of concern and might have implications on your housing and employment. Just like your budget, if you keep a regular eye on your credit score, you will hear the alarming bells long before the financial trouble actually begins.
Always have an emergency fund. If you have recently started earning, the temptation of spending would be very high. However, control your spending habits and make sure you save at least 20% of your monthly income as an emergency fund.
Bear in mind that you cannot break this fund because you need money for the latest iPhone or other frivolous expenses. As the name suggests, you should only use this money during emergencies such as losing your job or a medical emergency.
Review your financial situation frequently with the help of your credit score as well as your budget. By monitoring your expenses at least once a month, you can avoid financial troubles.
Noticing your patterns and accordingly changing your budget is a good habit to inculcate if you have recently started working. Always review and then plan ahead to figure out the best way to manage your money.
While every individual is different in the way they spend and save, the above simple rules might fit everyone’s financial needs. This is the best time to not just up-skill yourself or spend time developing your hobbies but also to understand how money works the best for you.
Utilise this time to map your patterns and create a plan that works the best for you. Use your credit cards wisely as they can either be a blessing or a curse. Make all your bill payments on time and get experian boost uk to improve your credit rating.
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