As a parent and a provider, you need to understand that things won’t always go well in the economy. There will be disruptive periods that signal a major change in your lifestyle and the way you handle your finances. While it’s impossible to control these sudden shifts, financial stability is still guaranteed so long as you use the right approaches.
Uncertainty can set your finances back and you may need more in your savings to make ends meet when the prices of goods begin to reach record highs. What’s more important is that you will be able to navigate around today’s economic challenges and provide for your family’s needs during an uncertain time. Here’s a guide to help you secure your finances in the face of today’s economic challenges:
1. Monitor your financial health
The first thing you will need to do is assess your family’s earning capacity. By knowing your actual financial situation, it will be easier for you to identify and sustain cost-saving strategies. This would require doing an inventory of all of your income sources and the debts you still owe. Consider the earnings you make with your spouse combined and deduct monthly expenses on essentials such as electricity, food, gas, and home maintenance.
It’s also important to find out your credit score and calculate the total amount of interest you still owe on student loans and your mortgage. Taxes should also be factored in, so consider how much you’re paying in local and national taxes on certain assets. Getting a clear picture of your financial situation will help you make better decisions and find ways to maximise your income.
2. Come up with an emergency fund
During uncertain times, you will need a steady reserve of money to use during major household scenarios. Accidents may happen and getting laid off is always possible, so you will have to set aside funds for these unexpected circumstances.
As a general rule, aim to save at least 10% of your combined income to build your emergency fund which should be good for three to six months. If you have extra to spare, add the amount to maximise your fund. Add more money for emergencies regularly so you can build enough savings to help you recover.
3. Opt for payday loans
Some emergencies are too costly to be covered by your savings, to begin with. This is often the case when you’re facing a major medical situation where the bills alone could exhaust your reserved funds down to the last penny.
If you’re worried that you might not have enough left for other scenarios, consider applying for a loan with favourable terms. Payday loans would be the best option if you want a source of funds other than your emergency savings. Those in Ontario, Canada know that if an accident renders you disabled, you can opt for ODSP payday loans with a favourable interest rate, but there are similar options worldwide as well.
4. Tap into your home equity
If you’re worried about rising prices, you can use your home equity to cushion the impact on your finances. Especially if you’ve made regular mortgage payments and you’ve already paid off more than half of the total mortgage value, you can borrow money against the value of your home through a product known as a home equity line of credit. This type of loan is ideal if you don’t want to use all of your emergency savings.
You can use the borrowed amount for major purchases and projects, including emergency home repairs and even college fees for your children. You can also use the amount to refinance your home and reduce the amount of interest you owe each month. In case you need an extra source of income to overcome the financial uncertainties of today, then a home equity line of credit might be the best solution.
Endnote
There’s no telling when and how the economy will boom or bust. It’s only important for families to make adjustments and look for the best ways to stay financially afloat no matter where the economy is going.
