You may be experiencing financial hardship if you are having trouble paying your bills on a monthly basis.
What exactly is financial hardship?
The precise definition is determined by a number of criteria, including the sort of debt and your circumstances.
Financial hardship usually refers to a situation in which a person is unable to keep up with debt payments and obligations, or if the amount you need to pay each month is greater than the amount you earn, as a result of circumstances beyond your control.
Signs of Financial Distress
If you can identify the main cause of your financial problems early on, you can get a good start on solving them.
- High or maxed-out credit card balances
- Relying on credit to pay for day-to-day necessities
- Constantly paying late and/or overdraft fees
- Poor credit scores due to late payments and a high debt-to-income ratio
- Turning to high-interest debt like payday loans or cash advances
- No emergency savings or sinking funds
- Not being able to meet your minimum payment obligations
One of the first stages toward creating a financial strategy to turn things around is recognizing these warning signs.
Causes of Financial Hardship
A change in your financial situation is frequently the cause of financial hardship.
The following are some of the most common causes of hardship:
- Job loss
- Illness or accident in the workplace
- Divorce or death of a spouse
- Significant reduction in hours or salary
Effects of Financial Hardship
Individuals and families can be devastated by financial hardship.
It’s fairly common for people to lose their jobs, automobiles, homes, personal items, retirement accounts, and money when they’re in a bad financial condition.
Financial stress and dread, as well as the ensuing loss, can have an emotional as well as a physical impact.
Financial hardship common responses include:
- Marriage difficulties
- Increased anxiety or sadness
- Under or over eating
- Insomnia or difficulties sleeping
- Drug abuse
- Physical symptoms such as digestive problems, nausea, upset stomach, or headaches
How to Save Money when Facing Financial Hardship
1. Make a Budget and Stick to it
Consider your monthly budget to be a spending plan for the things you truly desire in life.
With that perspective, you may start using a budget to cut spending in areas where you don’t care about it while setting limitations in places where spending is required.
The fact that budgets require you to track spending and create fair expectations for how much you’ll spend in discretionary areas like food and entertainment is the major reason budgeting is so effective when it comes to decreasing expenses.
When you start utilizing a budget, you may quickly realize that you’re spending more than you intended on food and entertainment, and that cutting back (even little) on your spending can help you save a lot of money without sacrificing your quality of life.
Budgeting doesn’t have to be difficult.
All you have to do is write down your bank statements, bills, and paycheck numbers, and then figure out how much money you bring in vs how much money you spend each month.
Create a budget that includes predictable spending on bills like rent or mortgage payments and auto payments, as well as estimates for spending in variable categories.
You should hopefully find a significant gap between how much you spend and how much you earn, in which case you may immediately begin putting more money into savings.
2. Shop Around for Homeowners and Auto Insurance
While certain costs are “fixed,” in the sense that they don’t change much from month to month, this doesn’t necessarily indicate you’re receiving the greatest price.
And, when it comes to other insurance products like auto insurance and homes insurance, shopping around and comparing insurance from different providers can help you save money.
Aside from looking around, remember that policies with a higher deductible usually result in lower monthly premiums.
You can also save money on insurance by combining multiple policies with a single insurer or enrolling in autopay or electronic bills.
There are other more vehicle insurance discounts to be aware of, so check to see if you qualify for any.
It is a very good approach during a financial hardship.
3. Mortgage Refinancing
Many people consider their house to be their most significant asset.
Because of the historically low interest rates, now is an opportune time to consider refinancing your mortgage.
You might be able to save money by refinancing your mortgage to achieve a lower APR and monthly payment.
Refinancing allows homeowners to switch from an adjustable-rate to a fixed-rate mortgage or change the term of their mortgage.
If you’re thinking about refinancing your mortgage but aren’t sure how much lower your rate can go, compare rates from many lenders.
4. Online Shopping should be Limited
Online shopping can be inconvenient, especially if you’re stuck at home and trying to save money.
It’s simple to throw goods you want but don’t need into an online cart and have them delivered to your door, but the financial consequences of even minor purchases may add up quickly.
So, what can you do to ensure that you spend less time online?
To make things easier, start by deleting any apps on your phone that you normally use to spend money, such as Amazon.
Remove your credit card details from any websites where you shop frequently. That way, every time you have to buy something, you’ll be forced to manually enter your information, and you will end up thinking about it in the process.
Additionally, wait at least 24 hours before making any purchases.
Sleeping on a purchasing decision can cause you to forget about it or realize you never truly needed it in the first place.
5. Switching Cellular Service Providers
How much does your cell phone bill cost you?
If you were willing to switch providers, there’s a strong chance you might save money.
Mint Mobile, for example, has fantastic cell phone rates starting at $15 per month, while Ting is a cutting-edge carrier that only charges you for the internet, text, and call you really use in any given month.
T-Mobile provides international plans for $50 a month per line, or even less with a family plan, that include data and text in more than 200 countries around the world.
In either case, make important to examine which providers give adequate coverage in your location and then shop around until you discover the ideal match.
6. Plan a Few ‘no-spend’ Days Each Week
It’s simple to accumulate a large number of modest purchases, but what if you decide to go days without purchasing anything?
Planning a few “no spend” days or weeks each week, or a couple of weeks each month, can easily bring nonessential spending to a halt during such periods, forcing you to work with what you have rather than run out and buy more.
If you really want to save money in the long run, make sure you don’t buy anything during certain seasons of the year.
You will save money in the long run if you do it this way.
7. Have Unwanted Subscriptions Cancelled
This is a very favorable way of coping with financial hardship.
Are you paying for many memberships that you don’t use every month?
Maybe you get your dog one of those selected gift boxes, or you get a few razors delivered to your house every six or eight weeks.
Perhaps you pay for a membership to an online fitness video service that you rarely utilize.
In any event, it’s a good idea to review your credit card bills and bank records to discover which memberships you’re paying for that aren’t paying off.
8. Never Give Up
As previously said, financial hardship can occur for a variety of reasons.
The good news is that you can recover and thrive as a result of it. So don’t give up and don’t become disheartened.
It may be challenging in the meanwhile, and you may experience a flood of emotions related to your finances, but you will get through it.
Focus on putting self-judgment aside, refusing to let others criticize you, learning from your mistakes, and moving forward.
You can also set goals for self-development in addition to financial improvement.
Whatever your current condition may be, keep in mind that morning will always arrive, even after the darkest night. Financial hardship is just but a temporary patch. You can do it.