Making improvements to your personal financial status is a lot easier to do when you have good control over it, a stellar credit history, and sufficient know-how to help you get through financial challenges. A good credit history alone means you have more options when it comes to financing.
Making the same improvement is difficult when you are already in a bad financial situation. A bad credit history and living from one payday to the next – and not being able to fill gaps in your cash flow – hamper your progress in more ways than you can imagine.
Before you can start building your wealth and improving your financial status, you have to solve the fundamental problems first. That is why we are going to review the best tips on how to get out of a bad financial situation.
Make Drastic Changes
Forget about the conveniences you are trying so hard to maintain. Stop worrying about not being able to get coffee and enjoy breakfast at your favourite coffee shop. These expenses are the first ones to cut when you are in a bad situation.
You cannot improve your personal finances while making small, unnecessary expenses here and there. The only consolation I can give you right now is the fact that you can return to the lifestyle you enjoy once you are in a better place.
For now, review EVERY POUND you spend and cut everything that isn’t absolutely essential. Reducing expenses allows you to start saving for other things.
Prioritise Your Bills
While you may not have enough to pay all of your bills and loan repayments after cutting the unessential expenses, you can still work towards reducing the gaps in your personal finance. The key here is prioritising bills and loan repayments.
Some bills are critical, so they are the ones you need to cover first. Rent, mortgage, and utilities are among those critical bills.
Next, list all of the loans you have to repay and review them closely. Take into account the loan principal amount, the interest rate you pay, fees and other charges (including the late charges you need to deal with if you miss the payment deadline) and the repayment date of each loan.
Make a list and start prioritising your loans. You can either prioritise them based on the principal amount, starting with the smallest loan to the biggest, or the cost of the loans, from the most expensive to the most affordable. With the list compiled, you should be able to determine the best route to repay your loan.
Consider Consolidating
When you have too many loans to deal with, consolidating them into one more manageable loan is an option worth considering. Not only will you make repaying the loans easier, but you are also saving a lot of money on interest rate and other charges.
Getting another loan to consolidate unsecured debts is also easier, especially now that you have debt consolidation guarantor loans. As the name suggests, debt consolidation guarantor loans are loans designed to help you consolidate your other debts with a guarantor securing the loan. Since this type of loan is classified as a secured loan, you can expect a much lower interest rate.
Finding the right loan for consolidating your other debts is easy. For example, you can check out the TrustTwo guarantor loans which are designed for people who are struggling to get one in their own name. Take a look at what they offer on their website if you’d like to learn more about how this financing option can help you.
Find New Sources of Income
When you have reduced your expenses to the bare minimum and you are working to repay your loans, finding new sources of income is the next step to take. You can only reduce your expenses so far; at some point, you need to start thinking about earning more to improve your personal finance.
Fortunately, you now have the internet on your side. There is an endless array of opportunities to seize if you are serious about making extra money. You can work on micro-projects through sites like Freelancer and Fiverr. You don’t earn much for each project, but you can work on a lot of projects for a lucrative extra monthly income.
You can also open your own online store, particularly if you have products (i.e. shirts you design or make yourself) and services (i.e. digital marketing, copywriting, photography, etc.) to sell. You can connect with potential customers directly and start earning more income in no time.
Stick to the Plan
Getting out of a bad financial situation requires immense discipline. One last thing to keep in mind as you start working on improving your personal financial status is sticking with the plan. Keep at it and you will see your financial state improving.
With one loan repaid, for instance, you can allocate more money towards the remaining loans. This means you can repay the next loan in your priority list faster, and then allocate the extra money to the third.
Before you know it, you are back to the ideal starting point – earning sufficient income with little to no loans to repay. At that point, you will have the whole world of opportunities to seize and new heights to achieve.