Taking Charge of Your Personal Finances

More number than ever are reeling under debt. Things can go out of control even though you are cautious with your personal finances. Here are some options you can consider during personal financial crisis.

by Chris Cooper

No matter how careful you are with your day-to-day finances, things can get rough. No matter how prepared you are, unforeseen situations like major illnesses, economy crash, bad decisions, and unanticipated expenses, can throw us off guard and make us wonder what went wrong.

When you are neck deep in debt, none of the options available to you look particularly attractive. However, to overcome adversity, one must face it with courage and take a cautious approach. Here are some options to consider during personal financial crisis:

Sell Unwanted Possessions

If you have old artworks, antiques, jewelry, that you could live without, you can sell them for some good money. Things that have been lying in your basement can sometimes fetch good deal of money on auction sites like eBay. Just brainstorm and you will easily come out with a list of things that you could live without. For example, your old motorbike, RV or lawn mover? Try forgoing some of luxuries like traveling by car or eating in restaurants till the crisis passes.

If the problems you are facing is because of meeting the mortgage payments, try selling off your home. The amount you get out of the sale can be used to pay off debts and move to smaller or rented house.

Earn More Income

I ran up a lot of debt when I first began practicing law. Even though both my wife and I had jobs, things routinely used to get out of control.

I then took an adult paper route. I used to get up at 4.00 in the morning, all the seven days in the week and used to cover several hundred homes by car. It was very exhausting but things went one and I made enough to manage everything in eight months.

There are endless ways to make part-time money. For example, you could get signed with a network marketing business, start a home-based business, sell goods on eBay, build websites and earn affiliate income, sell crafts, give coaching to kids. If you have a marketable hobby, you can also turn it into a business. You can also consider working part-time at your nearby super-market or fast food restaurant. The possibilities are endless. You can also claim deductions on your taxes if you run a business from home.

See if you can add extra skills to your inventory. It can help you make more money and increase your job security. Look around newspapers and your locality to see if there are any courses you can take that will make you more indispensable to your boss.

You can also consider moving to a different locality or city if there aren't enough growth opportunities in your area.

Consider Refinancing Your Debt

If there's equity in your home, you can consider refinancing your mortgage or get a second mortgage. However, these are just temporary solutions and to get everything under control you must take some vital financial decisions.

First and foremost would be curtailing all credit card expenditures. Strangely enough, credit card expenses accounts as one of the major reasons that drive people to debt. Close all your cards and use cash for all your expenses.

All your proceeds must go towards paying of your debts and the interest you save must go toward new savings and investment strategy.

Most people who refinance their debts fail to manage their lifestyle and end up in a worse situation than before. You home may get repossessed if you are not careful.

Unsecured debt consolidation loan is another option but you won't be saving much with high interest rates of these loans.

If you have invested in 401-K plan, you can consider borrowing against it. But many experts go against this option as if your employer lays you off, you are forced to repay the money borrowed or face lawsuit.

If you are pretty sure about your job and you can afford to make usual contribution to 401-K, as you repay the loan, this might be a worth considering.

Change Your Way of Life

Changing your way of life is the only way to a debt free future. Make a list of things that you could live without. For example, your second car? Track down all expenses and make a list of it. After going through it and analyzing it, see where you can cut down. It may appear trivial but little expenses can add up considerably over a period of time.

By cutting down frivolous spending, forgoing some luxuries like eating out, traveling by car, costly vacations, dropping cable TV and broadband connection and switching to dial-up account, you can free up hundreds of dollars every month that can utilized to pay off your bills.

To illustrate how simple and small changes can make large difference to your personal finance, here are some calculators you can use:

Lunch calculator
Gas Guzzling Comparison Calculator
Branded vs Generic products

Seriously, nobody would like to go through the above options. Like said earlier, the best way to financial freedom is to live below ones means and changing our way of life. Small and early changes you make to your lifestyle, especially when you are not deep in trouble, will ensure you never get to see troubled times.

About the Author:

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