Which Comes First: Emergency Fund or Paying Off Debts?

Which Comes First: Emergency Fund or Paying Off Debts?

Sep 21, 2023 | Book of the Week, Building Emotional Muscle, Building Financial Muscle, Debt, Educational Series, Financial Management 101, Home Loan, Mindset, Mortgage, Saving Money, Self Development

When money is tight, it can be hard to pay down debt and build up an emergency savings fund at the same time. But it is still possible with careful budgeting and good money management. 

Here’s a step-by-step plan on how to do this:

1. ASSESS YOUR FINANCIAL SITUATION

Start by looking carefully at your money. Write down everything you earn and everything you owe, including the balances, interest rates, and minimum monthly payments.

2. MAKE A BARE-BONES BUDGET

Make a simple budget that covers only the most important costs, such as housing, utilities, groceries, transportation, and insurance. Cut back as much as you can on spending you do not have to.

3. PAY OFF HIGH-INTEREST DEBTS

Pay off your debts with the highest interest rates first, as this will save you money in the long run. All debts should have the minimum payment made, but any extra money should be put toward the debt with the highest interest rate.

4. SET REALISTIC GOALS

Find out how much you can afford to put toward debt repayment and savings each month. Be careful and make paying off debt your first priority.

5. BUILD A SMALL EMERGENCY FUND

Even though it is important to pay down debt, having a small emergency fund can help you avoid going deeper into debt if you have to pay for something unexpected. Start with a small goal, like $500 or $1,000, and slowly raise it as time goes on.

Having a small emergency fund can help you avoid going deeper into debt if you have to pay for something unexpected.

6. USE WINDFALLS/UNEXPECTED MONEY WISELY

If you get money you did not expect, like a tax refund or a bonus, put some of it toward paying off debt and some into an emergency fund. This helps you move forward in both areas.

7. SAVE AND PAY OFF DEBTS AUTOMATICALLY

Set up automatic transfers to your emergency fund and to your debt payments whenever you can. This makes sure that you always move closer to both goals.

8. LOOK FOR WAYS TO MAKE MORE MONEY

Look for ways to make more money, like part-time work, freelance gigs, or selling things you do not use. The extra money can be used to pay off debts and save money.

Talk with your creditors about your money situation. In some cases, you may be able to negotiate lower interest rates, lower minimum payments, or a delay in payments to make it easier to handle your debt.<br />

    9. TALK WITH YOUR CREDITORS

    Talk with your creditors about your money situation. In some cases, you may be able to negotiate lower interest rates, lower minimum payments, or a delay in payments to make it easier to handle your debt.

    10. REVIEW AND ADJUST REGULARLY

    Check in on your budget and financial goals every so often. Change how you pay off debt and save money when your income and expenses change.

    11. CELEBRATE MILESTONES

    Celebrate your successes, no matter how small they are. Every dollar you save in an emergency fund or pay off of a debt is a step toward financial stability.

    Remember that building an emergency fund and paying off debt are long-term goals. It’s okay to progress slowly if your income is limited.

     The important thing is to keep working toward both goals, even if progress is slow. Your money situation will get better over time, and you will have a stronger financial base.

    At Financial Management 101 – we are committed to providing YOU with excellent financial education, training and support so that you can live the life you truly desire.  Join our LEARNING HUB today!

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    How To Build An Emergency Savings Fund

    How To Build An Emergency Savings Fund

    Sep 19, 2023 | Building Emotional Muscle, Building Financial Muscle, Debt, Educational Series, Financial Management 101, Mortgage

    Building an emergency savings fund is a crucial step in achieving financial security and peace of mind. 

    Here are some strategies to assist with building an emergency savings fund:

    1. SET CLEAR GOALS

    Determine how much you want to save in your emergency fund. It is often recommended to have at least three to six months’ worth of living expenses, but you can start with a smaller goal and work your way up.

    2. CREATE A BUDGET

    Develop a detailed monthly budget to track your income and expenses. This will help you identify areas where you can cut back and allocate more money to savings.

    3. PAY YOURSELF FIRST

    Think of the money you save for an emergency fund as a must-have expense. Set up transfers from your regular account, where your pay goes, to your savings account when you get paid. This makes sure that you always save.

    4. REDUCE UNNECESSARY COSTS

    Review how you spend your money and see if there are any expenses you can temporarily cut back on or stop. Put the money you save into your emergency fund.

    Reviewing your monthly subscriptions is a wise financial habit that can help you save money over time.

    5. INCREASE YOUR INCOME

    Look for opportunities to boost your income, such as taking on a part-time job, freelancing, or selling items you no longer need around your home. All and any extra income can then be put into your emergency fund.

    6. USE BONUSES AND UNEXPECTED MONEY/WINDFALLS

    Any unexpected windfalls, such as tax refunds, work bonuses, or cash gifts, can be a great way to jumpstart your emergency fund. Instead of spending this money, save it.

    Remember that building an emergency savings fund takes time, and it is fine to start small. The key is to develop a consistent savings habit and stick to your plan over time.<br />

    7. OPEN A SEPARATE SAVINGS ACCOUNT

    Consider opening a separate savings account specifically for your emergency fund. Look for a savings account that offers a better interest rate than a regular savings account, allowing your money to grow faster.

    8. BUILD GRADUALLY

    Do not feel like you have to hit your savings goal right away. It takes time to build up an emergency fund. Celebrate small steps along the way to stay motivated.

    9. AVOID USING THE FUND FOR NON-EMERGENCIES

    Define what you think of as an emergency and promise to only use your emergency fund for real emergencies, like medical bills, car repairs you did not plan for, or losing your job.

    10. REVIEW AND ADJUST

    Check in on your budget and savings progress. Change your savings goals and how much you put in as your finances change.

    11. CONSIDER THE WINDFALL STRATEGY

    If you get a big bonus, like an inheritance or money from a legal settlement, you might want to put some of it in your emergency fund to save money faster.

    12. SEEK PROFESSIONAL ADVICE AND HELP

    If you’re struggling to save or need some help, consider consulting a financial advisor or financial educator who can help you create a savings plan tailored to your specific situation.

    Check in on your budget and savings progress. Change your savings goals and how much you put in as your finances change.

    Remember that building an emergency savings fund takes time, and it is fine to start small. The key is to develop a consistent savings habit and stick to your plan over time. 

    Having an emergency fund can give you peace of mind and financial security when unplanned expenses come up.

    Interested to learn more?  Then head over to the LEARNING HUB and take the 5 Day Challenge or the 21 Day Kick Start program to help you get on your way. 

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    What are 5 ways to Deal with the Top 5 Money Stresses?

    What are 5 ways to Deal with the Top 5 Money Stresses?

    Sep 15, 2023 | Book of the Week, Building Emotional Muscle, Building Financial Muscle, Debt, Educational Series, Financial Management 101, Saving Money, Self Development

    To deal with the top five money worries, you need to learn about money, plan ahead, and use practical solutions.

    Here are five ways to help yourself or someone you know who is under a lot of financial stress:

    1. DEBT MANAGEMENT

       ◼️   Debt Consolidation: Look into your options for turning high-interest debts into loans or credit cards with lower rates.

       ◼️   Budgeting: If you know how to budget well, you can put money toward paying off debt in a planned way. If you do not know how to budget well, you can get help from experts who can teach you how to do it.

       ◼️   Financial Counseling: Talk to a financial counselor or advisor who can help you come up with a plan to deal with your debts.

    2. EMERGENCY FUND BUILDING

       ◼️  Automated Savings: Set up automatic transfers to a separate savings account where you can build up an emergency fund.

       ◼️  Changes to your Budget: Look for places in your budget where you can cut back on spending you do not have in order to save money.

       ◼️  Side Income: Look into part-time jobs, freelancing, and the “gig economy” as ways to earn extra money to add to your emergency fund.

    3. SAVING FOR FUTURE GOALS

       ◼️  Goal Setting: Set specific financial goals, like saving for retirement, buying a home, or paying for your child’s education.

       ◼️  Financial Literacy: Learning about the various investment vehicles available and the advantages of investing over the long term to build wealth.

       ◼️  Automated Savings: Consider setting up recurring payments to your retirement account or other investment fund to ensure regular savings.

    Saving Money for Future Goals<br /> Set specific financial goals, like saving for retirement, buying a home, or paying for your child's education.

    4. JOB SECURITY AND INCOME STABILITY

       ◼️  Skills Development: Look for ways to improve your skills and keep learning to make yourself more employable.

       ◼️  Networking: Build and keep up a professional network, which can be helpful for getting job referrals and opportunities.

       ◼️  Backup Plan: Have a backup way to make additional income, like freelance work or a side business, as a way to supplement your current income, or, just in case you lose your job.

    5. MANAGING LIVING EXPENSES

       ◼️  Expense Tracking: There are budgeting apps and tools that can assist with tracking your daily expenses and help identify areas where you may need to look at cutting costs.

        ◼️  Shop Around: Look around for the best deals on things you need, like groceries, insurance, and utilities.

       ◼️  Housing Options: Consider downsizing, renting a room, or getting a lower interest rate on your home loan, are all viable options for lowering monthly housing costs.

    There are budgeting apps and tools that can assist with tracking your daily expenses and help identify areas where you may need to look at cutting costs.

    Remember that financial stress relief often requires time and persistence.

    Seek professional financial advice as needed, and look for ongoing support and accountability to assist you in effectively implementing these strategies.

    Also, learning about money can give you the power to make smart financial decisions and reduce money-related stress over time, that’s where the LEARNING HUB helps you gain more financial knowledge, while providing you with the support and help you need.

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    What are the Top 5 Money Stresses?

    What are the Top 5 Money Stresses?

    Sep 15, 2023 | Building Financial Muscle, Educational Series, Financial Health, Financial Management 101, Mindset, Self Development

    Money stress is a common problem for many people, and it can come from a variety of sources.

    Here are five of the most common money worries that people face:

    1. DEBT

    Having a lot of debt, like from credit cards, student loans, mortgages, or personal loans, can put a lot of financial stress on you. Keeping up with monthly payments and interest on debt can be hard for many people and families.

    2. EMERGENCY EXPENSES

    Worrying about medical bills, car repairs, or home repairs that come up out of the blue can cause a lot of stress. Many people worry about how they would pay for these costs if they came up suddenly.

    3. INSUFFICIENT SAVINGS

    Not having enough savings for emergencies, retirement, or future goals can be a major source of stress. People may be concerned about their financial security and whether they will be able to meet their long-term financial goals.

    4. JOB SECURITY

    Concerns about job security and the fear of losing a job can cause financial stress. People may worry about how they will pay their bills if they lose their job or have their income go down.

    It is important to prepare for retirement.

    5. LIVING EXPENSES

    The rising cost of living, including housing, healthcare, education, and utilities, can put pressure on people’s finances. Meeting everyday expenses can be challenging, and this can lead to financial stress.

    People often have to deal with more than one of these money worries at the same time.

    Creating a budget, paying down debt, building an emergency fund, and getting financial advice when needed are common ways to deal with stress related to money.

    It is important to deal with these worries ahead of time to improve your financial health and reduce stress.

    At Financial Management 101 – we are committed to providing YOU with excellent financial education, training and support so that you can live the life you truly desire.  Join our LEARNING HUB today!

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    5 Reasons Why You May Want to Get a Personal Loan

    5 Reasons Why You May Want to Get a Personal Loan

    Aug 18, 2023 | Building Financial Muscle, Debt, Educational Series, Financial Health, Financial Management 101, Mindset, Mortgage

    1. CONSOLIDATING HIGH-INTEREST DEBT 

    If you have multiple high-interest debts, such as credit card balances or payday loans, you may choose to get a personal loan to consolidate them. By doing so, you can simplify your finances and potentially secure a lower interest rate, reducing your overall debt burden.

    2. FINANCING A LARGE PURCHASE

    A personal loan can provide the funds you need to make a large purchase, such as buying a car, renovating your home, or paying for a wedding. Rather than depleting your savings or relying on high-interest credit cards, a personal loan provides a structured repayment plan and a potentially lower interest rate.

    3. COVERING UNEXPECTED EXPENSES

    Life is unpredictable, and unexpected expenses can arise, such as medical bills, home repairs, or emergency travel. In such situations, a personal loan can provide immediate funds to cover these unexpected costs without disrupting your financial stability.

    Emergency Expenses can arise and a personal loan can provide immediate funds to cover these unexpected costs without disrupting your financial stability.<br />

    4. FUNDING EDUCATIONAL EXPENSES

    If you’re considering furthering your education or pursuing a degree, a personal loan can be a viable option for covering tuition fees, purchasing textbooks, or paying for other education-related expenses. Personal loans can offer more favourable terms compared to student loans, especially for non-traditional students or those attending part-time.

    5. IMPROVING CREDIT SCORE

    If you have a limited credit history or a low credit score, managing a personal loan responsibly can help you improve your credit profile. Making consistent, on-time payments demonstrates creditworthiness, which may improve your credit score over time. A higher credit score can help you get better interest rates on future loans.

    Remember that the decision to take out a personal loan should be based on careful consideration of your financial situation, repayment ability, and the terms offered by lenders. It’s important to compare loan options, understand the associated costs and fees, and ensure that borrowing fits within your overall financial plan.

    Consider your financial situation, repayment ability, and the terms offered by lenders before getting a personal loan

    At Financial Management 101 – we are committed to providing YOU with excellent financial education, training and support so that you can live the life you truly desire.  Join our LEARNING HUB today!

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    How to Avoid a Tax Debt at the End of the Financial Year

    How to Avoid a Tax Debt at the End of the Financial Year

    Aug 17, 2023 | Building Emotional Muscle, Building Financial Muscle, Debt, Educational Series, Financial Health, Financial Management 101

    What business owners must do to ensure they don’t have a tax debt at the end of the financial year.

    As a business owner, there are several steps you can take to manage your money effectively and minimise the risk of having a tax debt at the end of the financial year. 

    Here are some tips on how to do this:

    1. MAINTAIN ACCURATE FINANCIAL RECORDS

    Keep detailed records of all your business transactions, including sales, expenses, invoices, receipts, and bank statements. Accurate record-keeping is crucial for preparing your tax returns correctly and minimising errors.

    2. SEPARATE PERSONAL AND BUSINESS FINANCES

    Establish separate bank accounts for your personal and business finances. This separation will help you track your business income and expenses more effectively, making it easier to calculate your tax obligations accurately.

    3. TRACK AND CATEGORISE EXPENSES

    Categorise your business expenses properly to ensure you claim all eligible deductions. Common expense categories include office supplies, rent, utilities, travel, marketing, and employee salaries. Consider using accounting software or tools to streamline expense tracking and categorisation.

    4. PLAN FOR ESTIMATED TAX PAYMENTS

    Depending on your jurisdiction, you may be required to make estimated tax payments throughout the year. Estimate your tax liability and make timely payments to avoid penalties and interest charges. Consult with a tax professional or accountant to determine the appropriate amount to set aside for estimated taxes.

    5. UNDERSTAND DEDUCTIBLE EXPENSES

    Familiarise yourself with the tax deductions and credits available to your business. Deductible expenses can include equipment purchases, professional services fees, training costs, and business-related travel expenses. Keep receipts and documentation to support your deductions.

    avoid a tax debt

    6. SEEK PROFESSIONAL ADVICE

    Consult with a tax professional or accountant who specialises in small business taxation. They can help you understand the tax laws specific to your industry and provide guidance on maximising deductions while staying compliant.

    7. USE TAX PLANNING STRATEGIES

    Explore tax planning strategies that can help you minimise your tax liability. For example, you may consider deferring income or accelerating expenses into the current financial year, where appropriate. Again, it’s essential to work with a tax professional to ensure you’re utilising these strategies correctly and legally.

    8. BUDGET AND SAVE FOR TAXES

    Create a budget that includes setting aside funds specifically for taxes. By saving for taxes throughout the year, you’ll have the necessary funds available when it’s time to make payments, reducing the risk of a tax debt.

    Business Woman

    Remember, while these steps can help you manage your money and minimise tax debt, it’s crucial to consult with a qualified tax professional who can provide personalised advice based on your specific circumstances and the tax laws applicable to your jurisdiction.

    At Financial Management 101 – we are committed to providing YOU with excellent financial education, training and support so that you can live the life you truly desire.  Join our LEARNING HUB today!

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