Right now, we’re living through a cost of living crisis and many of us are feeling the pinch. The price of essentials is on the rise – from energy to fuel, food, accommodation and so much more – while most of our wages are remaining stagnant.
Now, more than ever, it’s absolutely essential to make sure that you’re in a good place financially in order to avoid sinking into debt, which will be harder than ever to get out of due to rising interest rates. But where should you start? Here are a few suggestions that should help you along the way!
First, you need to make sure that you have a budget that you’re living to. Many of us have an existing budget, but if you haven’t updated this since prices have risen, you need to take time to create a new one. Start by calculating your take home income.
This is the amount you take home after tax and other mandatory deductions have been taken from your gross pay. Next, total up your bills. These are your essential outgoings, such as rent or mortgage payments, food, energy, water, fuel and more.
The amount you’re left with is your disposable income. You need to make sure that you never exceed this amount, as this is where you can begin to struggle with debt.
Clear Existing Debts as Quickly as Possible
If you have any existing debt, it’s important that you take time to figure out how you can clear this as quickly and effectively as possible. If you have credit card balances outstanding, make sure to check if you are being offered any interest free balance transfers.
This interest free window could give you time to chip away at your balance rather than spending significant amounts of money on interest. If you find you have a lot of debts, you could consolidate everything with one consolidation loan with a low interest rate.
Recoup Outstanding Costs
Many of us have outstanding costs or money that we never get around to reclaiming. It really is important that you do this. If family or friends owe you money, come up with an agreement where they can repay you as soon as they are able to.
If you have clients or others who owe you money, send payment reminders. If you could claim compensation for something that’s happened to you, discuss your case with a personal injury lawyer who can help.
Generate Extra Income
If you’re finding that you’re struggling to get by with your disposable income, or if your bills are eating up most of your income, you may need to find extra means of income. This could be overtime, freelance work or setting up your own business. Just make sure that you are registered as self-employed if you opt for the second or third option here.
Hopefully, some of the information above should help you to sort your financial situation out as best as possible in spite of the cost of living crisis.