Financial problems are one of the biggest causes of stress in life and we all have to deal with them at some point. Often, money problems hit out of nowhere and there isn’t much that you can do to avoid them. If you don’t handle those situations properly, you’ll probably end up having to borrow money. Once you’re in a lot of debt, it’s incredibly hard to get out of it and you’ll be dealing with it for a long time. But if you prepare yourself properly before that happens, you can reduce the impact of those financial curveballs and manage your money a lot better.
If you’re going to prepare yourself for financial difficulty, you need to know where it’s likely to come from. With that in mind, these are some of the most common causes of financial difficulty that you’ll have to face in your life.
1. Unexpected Home Repairs
People often assume that owning your own house is far better than renting and, in a lot of ways, it is. But the one big downside of owning your own place is that you need to cover all of the house repairs yourself. If you rent, your landlord is liable to cover those costs so a lot of people don’t realize just how much it can cost until they buy their first house, which means they’re often unprepared when something does go wrong. If you’ve only got small repairs to make, it’s not going to put a big financial burden on you. But if you get a hole in the roof or a broken down boiler, that’s going to cost you thousands to sort out. They’re also problems that you can’t really leave because the house will be unfit to live in until they are fixed. So, you can’t wait a few months until you’ve saved up the money and that means you’ll probably end up borrowing money.
There are a couple of ways around this. First off, you need to make sure that you’re on top of all of the basic maintenance around the home because most serious damage can be avoided if you fix problems when they’re small. You also need to make sure that you’re paying a bit of money into an emergency fund each month so if you do need to make repairs on the house, you don’t have to borrow the money to do it.
2. Job Loss
Regardless of how well you’re budgeting your money, you’ll be in big trouble if you lose your job. Losing your source of income overnight puts you in a really tricky situation, but there are ways around it. First off, you can use that same emergency fund that you’ve built for home repairs to help you cover living expenses while you find another job. It’s also important that you claim any money that you’re entitled to. If you’ve been made redundant, you need to make sure that you’re getting the redundancy package that you’re entitled to and you can also claim some unemployment benefits to keep your head above water until you can find work again.
Once you’ve claimed any money that you can get, you need to start rethinking your budget. You’ve only got a finite amount of money to cover your living expenses until you find a new job and you need to make it last as long as possible. If you carry on spending money at the same rate that you were while you were earning, you’re going to spend all of it very quickly. Write yourself a new budget and only include your essential living costs, you can’t afford to spend loads of money on luxuries at the moment so you need to learn how to live frugally for a while.
This one is tied to job loss because often, people are left unable to work after an injury. However, you’ve also got to consider the medical costs involved with injury as well, which can leave you in financial ruin if you’re not prepared for them. If you were injured at work as a result of bad health and safety practice, you can probably make a compensation claim against your employer. Having that extra money can be such a huge help in this situation so find yourself a good personal injury lawyer and head down to their office to meet with them. They’ll be able to tell you whether you have a case or not and if you do, help you with the process.
If you’re going to avoid getting into a lot of debt through medical bills, you need to make sure that you have a good insurance policy. It’s a fairly big expense and a lot of people think that it’s a good idea to save on monthly costs by reducing the coverage, but in the long run, it can land you in a lot of trouble.
4. Having Children
It’s no secret that kids are expensive, but a lot of people aren’t prepared for just how much extra money that they’re going to need. Once your child is born, you’re going to have to cover all of those costs whether you can afford it or not, and that often means having to resort to borrowing. That’s why it’s so important that you think carefully about whether you’re in a strong enough financial position to have children before you do. You need to look at your income and outgoings and then re-adjust to account for all of the extra expenses that parenthood brings. Don’t forget to consider any loss of earnings from taking time off work to look after your new baby either, and overestimate because people often end up returning to work later than they had planned.
If the numbers don’t add up, it’s best to wait a while before having a child. You can spend that time saving up extra money so when the time does come to start a family, you’ve got a bit of a financial buffer to help you out.
These financial difficulties will hit us all at some point and if you don’t deal with them properly, you’re going to really struggle. But if you’re ready to deal with these challenges when they arise, you can get through them without getting into a bad financial position.
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