- Emma Parker
- September 30, 2022
Spring cleaning is what your house needs periodically, a practice of cleaning every nook and cranny of your house to turf out things you no longer need. Likewise, there is another area that needs your attention – personal finances. Now is the high time you spring-cleaned your finances amid the rising cost of living.
Speculating the impact of current economic policies, it seems that it is going to be even tougher in the coming months to make ends meet. Rising prices of almost all goods and services are forcing people to take on a second job. But that does not seem to be sufficient to keep their heads above water.
Even the tightest budget is failing to stand against the blow of inflation. While you can do nothing about the rising cost of living, you can readjust your financial budget to work for you.
Though many of you still feel that you can take up a second job or take out small payday loans from direct lenders, you will soon realize that these alternatives are collapsing. Now is the time to brace yourself for the worst economic scenario, so get to grips with your finances sooner and faster.
How to Spring Clean your Finances?
Here are the ways to spring clean your finances:
1. Readjust your budget
You must have been making a budget for a long time. Perhaps you would have never thought of adjusting it. But it becomes necessary to restructure your budget when the prices have been going through the roof for a long time.
Look at your current spending to get an idea of how much money goes outside on food, travelling, entertainment, etc. Compare it with your previous bills before the revised prices came into force.
After knowing the difference, you would have a clear picture of a portion of money you must have been withdrawing from your savings. And now you need to readjust the budget according to revised prices. So you are not left with little or no money for a rainy day.
Reduced buying power will push you to trim down your expenses, and the first area is to look at your discretionary expenses. It is likely that you may need to completely scarp them to be able to keep the wolf from the door.
The next step is to ensure that you are able to cover essential expenses. If your monthly expenses are still touching the edges, figure out some ways to bring them down as well.
You may even need to downsize your life. A survey has reported that some people have taken on a second job to offset the impact of the cost crisis on their budget. While you are focusing on living a decent life. You need to think about financial security for the future as well.
2. Review your credit report
A blemished credit report will scrap your chances of borrowing money at affordable interest rates. Since economists suspect that interest rates for mortgages and loans will increase in the coming months. They suggest that people review their credit ratings.
Despite having a sufficient rainy-day emergency cushion. You will likely fall short of cash when you come across an unexpected expense. You may feel a need to get no credit check loans for a direct lender in case you have a bad credit rating.
Since interest rates are already going to be high, you will find these loans more expensive. Improve your credit score so you can take advantage of lower interest rates. The best thing to avoid dinging your credit score is that you stay away from debt to meet your inessential expenses.
Taking out a loan because of yielding to temptation will likely throw you into a debt cycle. Beware of using a credit card to meet your expenses. Their fees will likely go up in the coming months. If you take on a credit card debt, you will not only lose your credit score but also pay very hefty fees and interest on your credit card bills.
3. Take stock of your debts
Do you have some debt to be paid off? If so, you need to evaluate how long it will take to be settled. If it is accruing because of outstanding dues, you should frame a strategy to get it paid. First off, you must know how much balance you have because this will add to fixed expenses.
If you have a small loan to be paid off immediately to avoid interest being accrued, just pay it off once and for all. Make sure you cover all your expenses from what you are left with. There is nothing to give a second thought about it because even making minimum payments will keep accruing the interest rates.
If you have multiple debts to tackle, it is suggested that you consolidate all of them into one large loan to be paid off over time in fixed monthly instalments. If you have a debt yet to be paid off for a fixed period. You should see if you are able to cover all of your monthly expenses.
Because the buying power continues to go down, you should try to ensure you live off a lean budget. Try to earn extra income so you can repay your debt on time. Additional income sources will also help you have an emergency cushion. This will prevent you from borrowing money.
If you are looking to spring clean your finances, you will have to review your budget. Because now prices have gone up and your buying power has reduced, you will have to adjust your budget accordingly. Adjusting and readjusting your budget will continue to happen.
In addition, you will have to take stock of your debt and review your credit report. You do not end up getting a loan at a higher interest rate. If you want to consult a financial consultant, go ahead then.