As you prepare yourself to buy a home, learning about your finances will be a top priority. Lenders need to be able to see that you’re able to borrow money and pay it back. They need to trust that the money they lend will be coming back to them. Learning about how you work with your finances will help guide you as you make your way to this step in your life. We have been blessed to team up with Valentina Wilson from bestdebtconsolidation.org to learn more about financial vulnerability.
10 Ways to Check Your Financial Vulnerability
Financial stability increases the quality of life, whereas financial vulnerability decreases it. You have food to satisfy your hunger, a secure place to live, and clothes to keep decency. They are not enough to assess your financial stability, but there is something more. That something includes strong savings, being prepared to handle different financial misfortunes, and overall living a stress-free life.
So, let’s check out the top 10 ways to determine whether or not you are financially vulnerable and also find out some remedies to counteract this fragile state:
1. Breaking the Budget to Meet Needs
You are trying hard to stick to your budget but you’re failing repeatedly as you have to break it to meet your needs. There may have been some mistakes in your budgeting that lead you to do so.
Let’s find out those hidden reasons:
Your budgeting strategy is not realistic at all
You are not following 50/30/20 budgeting rule
You have very little idea about your monthly expenses
You can’t figure out the differences between your needs and wants
These confusions may lead you to create an improper budget. So, acquire proper knowledge about the above facts before planning a budget.
2. Having a Low and Inconsistent Income
If there is any inconsistency in your income, you are surely financially vulnerable. In case, you are not permanent in your employment and it changes like the weather, you have a probability to experience financial instability in the near future.
Moreover, a constant low income or fluctuation in income, from higher level to lower, can incur vulnerability in your financial life.
Look for a steady income source that will also help you earn enough to stay on the right financial track.
3. Having an Insufficient Amount in the Emergency Fund
You built an emergency fund for the sake of saving money. How much is left there? If it’s an insignificant amount, then you are on the way of financial vulnerability. It has to be because people generally set up emergency funds to put aside some money for the future so that they can use them if an emergency occurs. But you’ve already withdrawn some bucks from it. Then what is left for the future? Nothing!
So, consider earning a few dollars more or spending less and depositing that amount to increase your emergency fund.
4. Skipping Basic Medical Care Due to Money
Basic medical care is equally important just like consuming good food and having enough sleep. If you skip visiting doctor regularly or fail to buy medicines as prescribed, you are surely going through the phase of financial stress.
It may seem that you are physically fit and healthy, yet, you should go for a regular check-up just to be more assured about your health.
Just put aside some money as a compulsory medical expense. It’ll help you to see the doctor regularly.
5. Not Being Able to Spend Freely on Special Occasions
Almost all of us spend a significant amount at some point in life.
This extra spending generally doesn’t harm our financial health. If you don’t feel free to spend a few dollars on special occasions like birthday, anniversary, or other special events, it may be the signal of your poor financial health.
To avoid this situation, you can plan to set aside some money for a successful celebration of such special occasions.
6. Having No Adequate Insurance Coverage
Having proper insurance coverage is like living a peaceful life that covers a lot of risks, whether it’s home insurance, car insurance or health insurance. If, somehow, you cannot manage to have proper insurance policy coverage, you are then gradually stepping into a financially vulnerable stage.
Contact a renowned insurance agent to get adequate insurance coverage to beat financial fragility.
7. Having Little Financial Knowledge
If you lack basic financial literacy, there is a higher chance for you to be involved in various financial problems, like falling into unexpected debts and handling them. Moreover, little financial knowledge can lead you to be financially weak as well.
Basic financial knowledge includes the strategies for effective budgeting, knowing how much to have in an emergency fund, having an idea about the interest rate on savings, knowing how to handle debts tactfully, having an idea about mortgage interest rates, and so on.
Acquire some basic financial knowledge to avoid financial fragility in the future.
8. No Financial Support From the Close Ones
You borrowed some money from your friends or relatives but you couldn’t repay them. You’ve again asked for money from them and it is quite normal for them not to give you another chance because they’re very well aware of your financial situation. It may be called a financial crisis that invites financial vulnerability.
If you don’t want to fall into such a circumstance, keep a healthy financial relationship with your close ones and practice living a balanced life.
9. Having a Poor Credit Score
Your expenses have reached its summit and you have no idea how to control it. In the meantime, you become more puzzled about how to repay debt and deal with your bad credit score. Your bad credit score is certainly a pure sign of financial fragility. In such a situation, you can go for one of the best debt consolidation options to pay your debts and improve your credit score.
10. Struggling to Get Out of Debt
Incurring debts is not a bad thing but not being able to get rid of it is a sure sign of financial instability. If you’re incurring debts to repay others, then it’s really a bad sign of your financial state and you should seriously think about it. To get recovery from debt stress, you can consider a debt consolidation program to repay your multiple unsecured debts with ease.
Surviving should not be the only aim to live the life but building strong finance for attaining financial stability for the future should be an ultimate focus. So, acquire basic financial knowledge to handle financial vulnerability and give it a form of a strong financial base.
“Don’t lose hope; when the sun goes down, the stars come out!”