MANY SAVE from their discretionary spending in an effort to become more financially stable. But what happens when you realise that you're still having financial problems or, worse, heading towards bankruptcy? You can address this problem by downgrading; more specifically shedding your fixed expenses.
PAYING TOO MUCH
FOR A MORTGAGE
High real estate prices lead to high mortgage payments. At times, you may even fail to make your monthly payments because of the home you choose to live in. Expensive homes come with higher property taxes, larger insurance premiums, bigger utility bills and more maintenance costs. Do not struggle to keep an expensive house. A smarter solution may be to sell it and select a more affordable one.
HAVING TOO MANY KIDS
Money isn't the only consideration in having children. However, kids will drastically change the way you budget and spend.
You need to organise your finances before you plan to have a child and you should save towards this if you see it happening in the near future; this is in an effort to prepare for the unexpected.
If you are barely making by on your income, then it may not be wise to have a child. If you already have one, and are experiencing financial difficulties, it wouldn't be advisable to increase your family's size at this point in time.
It's a harsh reality, but having too many kids can lead you into bankruptcy, especially as a single parent. Increasing your family may require a bigger car, home, more insurance, food, medical costs, just to name a few.
You can minimise your existing child-rearing expenses by opting to move to a less expensive neighbourhood and choosing public schools over private schools. Either way, you need to make room in your budget for them, and ensure they get the best opportunities possible based on what you can afford.
Do not take big risks with your vehicle, which will lead you to unnecessary long-term expenses. Before you purchase a new car, evaluate whether or not you'll end up spending more than it's worth.
Also, if you're still repaying a loan on your car, it isn't wise to trade it in before you pay it off, because if you lose your job and can't make payments, you'll be unable to sell and downsize to a less expensive vehicle. To make it better for yourself in the long run, don't buy a car you can't pay off in four or five years.
GETTING A DIVORCE
Unfortunately many marriages are ending in divorce. Some divorcees are finding it difficult to get by on one income, relative to the two that used to provide for the household. It is even more difficult when children are involved, and one parent ends up supporting them.
Even if one spouse is able to manage on their own, they can be brought down by financial troubles of the other one. For instance, if joint accounts aren't closed and mortgages aren't refinanced, the bankruptcy of one spouse can show up on the credit of another, which may lead to trouble getting credit in the future.
This is not to advocate that one should remain in an unhealthy relationship, however it may benefit both parties to try marital counselling and all other efforts to save their marriage, before opting for a divorce. If divorce is inevitable, it is advised you close all joint accounts to protect your finances.
INADEQUATE EMERGENCY CASH
Preparing for the unexpected plays a vital role in financial security. It isn't wise to live from pay-cheque to pay-cheque. This leaves you extremely vulnerable to major financial setbacks and will cause you to plunge further and further into debt. The money you save from down grading, and spending less than you have to, can be transferred to your emergency fund. This fund may save you from bankruptcy.
There are several financial institutions you can explore to save and invest your money for a rainy day. So shed those expenses, build that emergency fund, and make wise life decisions that can only positively affect your future.
To further discuss investing and the many options we have available, contact DB&G at info@mydbg.com or toll free at 1-888-CALL DBG.
