It can happen to the best of us. We can be wise with our budgeting and spending, and suddenly something happens to upset the apple cart. There are unexpected medical fees, redundancy, or the loss of a partner or spouse. Others fall into debt through irresponsible spending or gambling addictions.
Whatever the cause, the need is the same: people need to implement a strategy to pay off their debts and have an ongoing budget in place so they can get through this season. That’s what this article is all about.
Consider Alternative Sources of Income
With the COVID crisis globally, many people are seeking alternative ways to bring in some extra cash. When it comes to the subject of earning money, the experts say one doesn’t have to give up one’s present job in order to do this. Some of the possibilities could even be achieved by people who travel for a living. People can rent out a room in their house with Airbnb.com. People’s cars are great assets, and they can be used as a taxi or be rented out to others.
Individuals familiar with office work can take up freelance content writing or proofreading jobs. Creatives can consider making money through blogging on sites like Medium.com, or self-publishing a book on KDP Amazon Kindle. Teachers are often in demand and can offer online tutoring to people anywhere in the world. It’s also possible to teach people who don’t have your language as their first.
List All the Expenses and Create a Budget
It’s wise to go through one’s bank statements and make a list. A full year’s worth will help people identify the bills that only come once a quarter, half-yearly or annually. Write down each party that will need paying, then put the list in priority order, showing the most urgent debts at the top.
One must note all the incoming money and all the outgoings. Then create an ongoing budget that is manageable and sustainable. One should identify all the non-essentials such as takeaway meals, gym memberships, and cinema trips. These will need to be stopped. All the family must be brought on board with this as there should be no weak links in the chain.
Speak to the Top Priority Parties
There may be some unexpected solutions at this stage. If one cannot pay mortgage payments due to sudden unemployment or sickness, it may be that the company will provide a mortgage payment holiday. If someone took out a mortgage protection policy, it may apply here. During the COVID-19 crisis globally, many companies and organizations have provided ways for people to get through these times of less or no income. You may get a call from Portfolio Recovery Associates and you should know how to deal with them properly.
Be Accountable to Someone
It will be good to get someone involved who is personally good with money. Just as it’s easier to lose weight when one is part of a Weight-Watcher’s club, it is easier to be self-disciplined with money when knowing a friend will be regularly asking.
Consider Borrowing Money
In some cases, family or friends are able to temporarily loan people the money they need. It’s important not to risk losing friendships if one cannot repay, however. The benefit of borrowing from friends is there will be no interest on the loan.
It is possible to apply for a personal loan. This should be the last resort as interest rates can be high. Some loan companies use peoples’ possessions and homes as collateral. That means they could be lost if the borrower is unable to repay the sum. It is highly important to research all the fees, the repayment amount, interest rates, and the loan term before proceeding.
Some people remortgage their homes, putting the debt amount into the overall sum. This is a better deal as the mortgage interest rates will be lower than those for personal loans or credit cards. It’s always good to consolidate one’s loans wherever possible.
If things get really serious, one should look at one’s home. If it has extra bedrooms that no longer house any children, the possibility of downsizing becomes valid. People who own more than one car should also think about whether one of them could be sold. The final option may be to file for bankruptcy because this can include writing off debts. This will have financial implications, however.
Once the debts have been identified, alternative ways of getting money should be sought. This can come from a second job or selling something. A practical budget should be put in place to get the individual through this difficult time. Each family member will need to be accountable for following it. If borrowing has to occur, there are several options available. Once things are back in the black, it’s important to create a new budget that will keep everything afloat longer term.