Achieving the scenario where you no longer have control of your finances is not unique to the economic or financial crisis. In fact, it is quite commonplace regardless of the financial cycle in which economy is found. Failure and financial disruption is often the case in households or individuals who do not have a plan for their finances where protection and sustainability are a priority.
In fact, it can be so easy to happen that even those who believe they are prepared end up experiencing such scenarios whenever the preparation assumes income guaranteed.
Financial preparation is much more than just checking your monthly situation. It is to anticipate possible scenarios of rupture, such as a dismissal or a sharp fall in income if you are a professional on your own. It is to constitute an emergency plan and to have a plan B.
There is much to talk about this preparation, however, the most important recommendation is how you will accept the change in your life, rather, in your attitude to external scenarios you can not control, such as dismissal.
Let’s leave these behavioral concepts for later and focus our efforts on analyzing signals that show that you are losing control of your finances and any solutions you may encounter.
The disposable income is the portion of our revenues that arrives at the end of the month. That is, after all your responsibilities and burdens are satisfied, you know what you have left over for saving or for a motivating and renovating individual or family mime.
The decline in disposable income reveals that its responsibilities and burdens have been increasing. Will this signal be so serious according to the perception of instability in the income that you have in your life, that is, if there were a reduction of income as it would behave my financial life? Was it worrying? Devastating?
The decrease in disposable income is mostly associated with an increase in charges and responsibilities, so the simplest way to solve it and even increase disposable income is to identify the reasons that led to their decrease and to assess their enforceability.
Within this analysis the consideration of the maintenance of the causes is fundamental.
If it is not possible to solve the problem by identifying the causes of the decrease in disposable income, then you should check your entire financial situation and look for creative strategies to reduce your liabilities and charges in order to compensate for the decrease in disposable income.
It is true that the analysis of liabilities and charges with the aim of increasing disposable income is desirable and simpler. However, it is always more motivating and safe to supplement such strategy with new plans on the revenue side, after all or decreases liabilities and charges or increases revenues. Try to discover new opportunities to earn extra money and thus be less dependent on your original sources of revenue.
Let’s define small savings before moving forward.
Small savings means the amount of money you have to pay for emergency situations, in other words, we are talking about your emergency fund .
By removing the financial aspects of the equation, having a financial security that is small is beneficial for personal, professional and family life. To emphasize again the great majority of cases of family conflicts and even depressions are associated with the absence or insufficient presence of financial capacity.
Solving this indicator of financial unrest entails the acceptance of the importance of saving in financial life in the most diverse domains. Starting by forcing your income to savings is the first step, channeling at least 10% of disposable income or spending adjustments to this end.
Already here we address the impact of the minimum payment on credit card and how this financial decision can simply consume tens, hundreds, if not thousands of euros over a certain period of time. In fact more and more banks have been using this form of quick financing to leverage their financial margins. When a customer begins to bear interest on the credit card, even though this decision is made aware, what can be concluded is that there is financial disorganization.
Generally, the use of credit cards occurs naturally, however, the need to amortize the debt in installments or at least happens because it is impossible to pay the totality and thus benefit from the absence of interest. The vast majority of cases where this happens is revealing of financial disorganization.
The simplest way to resolve such a financial decision is to take the credit card with an enemy of your financial stability and render it unusable quickly. Look at the debt contracted with a responsibility and adjust all its financial availability for the quick settlement of the debt, since the short-term gains amount, in most cases, more than 20% per year.
I know of numerous cases of financial disruption due to excess credit, not in amount, but in quantity of operations. Sometimes having 200,000 euros of credit is not as consuming of monthly financial effort than having 4 operations of 25,000 euros. It all depends on the deadlines, the purpose of the credit and your organization.
When credit is used to pay off credit, whether through a new operation or through the contractual modification of an existing one, it means that there is financial control. It is true that there are cases and cases, but even more particular cases with unique characteristics reveal a lack of planning for individual or family credit needs.
The solution in these areas is the total denial of the use of credit to pay off credit. Assuming that any financial need must be addressed using the mechanisms in place in the banks or regulated by the Competent Entities.
The lack of capital, the extension of term, are examples of renegotiations with a view to reducing the burden of debt. When this is not quite possible due to the overflow of the number of credit processes, consolidation is definitely the way to go.
There are still no regulations that oblige financial institutions to consolidate debt as an extrajudicial measure to resolve non-compliance. It may be the next step in protecting the debtor in the event of default, not least because, and again, the vast majority of cases of financial dislocation are due to the number of claims and not the value of claims.