Unfortunately, the economy isn’t always what we’d like it to be. Unforeseen circumstances, like a job loss or having work hours cut back, can bring on immediate panic. Financial stress is something nearly everyone faces at some point in their life. Thankfully, there are ways to cope. Budget tightening, cost cutting, and downsizing are obvious tactics. However, to truly get a handle on financial fortitude, there are options that deserve immediate consideration: build emergency savings, avoid hidden costs, and be proactive.
Costly circumstances, like accidents, flat tires and plumbing fiascos, are impossible to predict and tend to occur at the worst times financially. For that reason, you should always have a separate savings account for emergencies. To start, open up an emergency savings fund of between $500 and $1,000, and add to it whenever possible. If you’re forced to dip into the emergency fund, replenish it as quickly as possible, avoiding potential purse-string peril.
An emergency savings account brings piece-of-mind knowing you’re financially covered. Also, an emergency savings plan means you won’t have to worry about depleting other sources of savings, like retirement accounts, which could inadvertently set you back in the long run because tapping those funds can mean larger annual tax bills. The whole idea behind emergency savings is to create less stress, so you can rest easy knowing that no matter what comes your way, you can handle it financially. Don’t miss out on an employer’s offer to match your 401(k) contribution. Under certain circumstances you can make a hardship withdrawal.
The Hidden Cost of Maintenance
Typically, when we make a big purchase, we’re focused on the sticker price. But when we don’t stop to consider recurring maintenance costs, we can find ourselves facing a much larger financial commitment than we anticipated. For example, when it comes to buying a car, the down payment and monthly payments are just the tip of the iceberg. There’s also the cost of gas, insurance, tires, and maintenance to consider — each of which can poke holes in your bank account and drain monthly cash flow. It’s best to ask yourself, “Can I really afford this today, as well as over the next few years?”
Play Offense, Not Defense
It’s always best to be proactive rather than reactive when it comes to finances, and it can make your life less stressful. Budgeting, coupon-clipping and discount shopping are all examples of defensive strategies intended to preserve your financial status quo. However, once you’ve mastered the maintenance aspects of finance, it’s time to gain the offensive, and determine what it will take to ultimately create more income. Look into career opportunities. Is there a promotion at work you could pursue? What do you need to do to be ready to take that next step in your career? If you’re an entrepreneur at heart, take advantage of local networking opportunities. By learning, developing your skill sets, and joining community groups, you’ll be creating value in yourself and broadening your abilities.