The truth is that most people will not make changes in the way they handle money until they are forced to. The habits you establish when you first start handling money are the ones that you will stick with until you manage to create a situation that is difficult to deal with. Sometimes the situation is thrust upon you such as a job loss or as result of a choice you’ve made, such as having a child. The current economic situation and the last several years have changed the way that people think about and handle their money.
One thing the crisis has stressed has been the importance of having a solid emergency fund to cover unemployment. Depending on your job stability you should have between six months and a year’s worth of income set aside to cover times of unemployment. The emergency fund needs to be in a savings account that you do not touch unless it is a true emergency. The emergency fund will take the stress out of losing your job, and allow you time to find a new one, while keeping your home and protecting your credit. It can prevent you from using your credit cards during this difficult time.
Another thing that has been stressed is the importance of limiting the amount you borrow. At the beginning of the housing crisis, people realized that they had stretched themselves too much and many people took out loans they could not really afford. We can learn from this. Any debt can overextend you, and put you in a position where it is difficult to care for yourself or your family. Credit card debt, car debt, and house debt should be kept as low as possible. You can work on getting out of debt right now.
The importance of sticking to a budget has been proven as well. When you have to reduce the amount you spend due to a job loss or to get out of debt, you may be surprised at how much you can cut back without it drastically affecting your lifestyle and level of happiness. Prioritizing the things that are most important and cutting back on the things that do not matter as much will free up more income to work towards your financial goals.
You can make the choice to make changes now before you forced to make the changes due to a job loss or a change in your situation. You can also take the opportunity to learn from the mistakes of those around you. If you feel that you are trapped in a hopeless situation, you are the one that can begin to change it. The first step is to create a plan or a budget. It may be short term or it may be for the year. After you have a budget you need to create a plan to change your situation. The plan should include increasing your income, getting out of debt and saving for the future. These steps can help reduce your financial stress. You may come to a point where you want to take a job with less stress, but you have not been able to because of your financial situation.
As you take the first steps in your plan, you will begin to create a better future for yourself. Be careful not to overextend yourself as you purchase your home and cars. When you are out of debt you can begin to build wealth through investing. It is important to keep looking for a job that you enjoy and that pays you well. Finding a balance between your job and the rest of your life will help you financially as well. It will reduce the stress of your job, and help you recover if you do lose your job, because your entire identity will not be wrapped up in that position. As the economy recovers you need to handle your finances carefully. Be sure to practices good financial habits in a recovering economy.