Managing Money Through Tough Financial Times

You should set aside some money, six to twelve months or so of expenses as a rainy day or contingency fund.  An emergency fund allows you to stick to your spending plan and still take care of that unexpected medical bill or car repair.  It also gives you confidence and peace of mind knowing that an emergency expense won’t derail your plan.         

The past couple of years have been tough financially for many.  Saving for the future and making sound financial decisions can help you endure the next economic downturn.  Below are some tips to help you manage through tough financial times.

Start saving for an emergency fund or rainy-day fund.  Do you remember when your grandmother told you to save something for a rainy day?  Today, this is an old-school recommendation that is made by many financial coaches.  You should set aside some money, six to twelve months or so of expenses as a rainy day or contingency fund.  An emergency fund allows you to stick to your spending plan and still take care of that unexpected medical bill or car repair.  It also gives you confidence and peace of mind knowing that an emergency expense won’t derail your plan.         

Make a plan to spend your money.  Most people do not deliberately plan to spend their money.  Bills come, and bills get paid.  Money comes in, and money goes out.  They go to the store and spend without a clear plan for their spending.  To manage money in tough financial times you should plan to spend your money.  Before you get paid, sit down and write out where you plan to spend your money.  If you can, try and base the spending on the previous month or prior spending history.  For example, if you spent $150 at the grocery store last week, you would probably spend $150, or close to it this week. 

Keep track of where you are spending your money.  Get a piece of paper and pencil and sit down and keep track of every-dime you.  By tracking your spending you accomplish two things.  First, you give yourself a benchmark to plan the next month or period’s spending; the next month’s spending plan.  Second, you begin to see where you can cut back on spending.  By writing down where you spend money you will begin to see patterns of behavior that can be changed to save you money and help you spend smarter. 

Use credit cards with care.  During tough financial times, keep your credit card spending in check and attempt to pay balances in full every month.  If you cannot pay the full monthly bill, at least pay the minimum balance due.  Every dollar over the minimum reduces the amount of interest you will pay. 

Comparison shop and get the best deals for financial products.  Shop deals on things like credit cards, loans, and other investments.  Avoid alternative forms of borrowing including, payday loans, pawnshops, and overdraft protection.  Keep away from these borrowing methods because they are very likely to have higher interest rates and can add up quickly.  This is as crucial as shopping for other big-ticket items like cars or appliances.  Saving even a percentage point on a loan can make a big difference to the bottom line.  And when it comes to your investments, compare fees on mutual funds and other investments       

Using the tips above will help you prepare and go through tough financial times.  As Maya Angelou said, “Hoping for the best, prepared for the worst, and unsurprised by anything in between.”

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