This is a frightening time for many people in terms of money and financial stability. The pandemic has pushed many of us to our limits. However, now more than ever, it’s important that you try to stay logical and take practical steps toward stopping the hemorrhaging and keeping you and your family safe. The following are three basic but effective steps that can make you more financially responsible and set you up for a stable future.
Assess and manage your insurance rates
First off, do you have all the insurance you need? Some insurance forms are unnecessary unless you have certain assets, but other kinds of insurance plans are critically important.
The most common insurance plans cover your health, home, and vehicle. Sometimes you can bundle these together, but usually, they are separate. Like all businesses, private insurance companies are trying to turn a profit, which means rates will vary. It’s your responsibility to be vigilant and hands-on when assessing your insurance quotes.
Signing up for online auto insurance quotes allows you to easily compare different quotes across multiple providers so that you can get the right kind of coverage for your situation.
You should print out all the paperwork and know the details of your insurance plans. Make sure you’re not getting charged for extraneous coverage that you don’t need.
Pay off credit card debt but don’t close your accounts
Most people know that credit card debt is one of the worst kinds of debt. The reason is that interest rates are usually very high. The end result of this often becomes the cardholder getting stuck in a debt cycle where their monthly payments only pay off the interest and not even make a dent in the actual debt. This can go on for years and is wasted money you are paying to a bank.
Of course, the way out of this is to find a way to pay off the bulk of the debt. If there is one debt you want to pay off, it is credit card debt, as opposed to, say, student loan debt, which usually has an incredibly low-interest rate and a long window of payback (not to mention the fact that student loan debts may soon be canceled!).
However, when you pay off your credit card – or at least the major bulk of it – don’t completely close your account. Why? Because responsibly maintaining a credit card account is extremely good for your credit score. However, you want to make sure you don’t repeat your previous mistakes by building up more debt again.
Remember, credit cards are not free money; they’re borrowed money. One of the most common mistakes in money management involves the haphazard use of credit cards. Use them responsibly and strictly to pay your monthly bills so that you can build your credit score.
Don’t look for shortcuts or get-rich-quick schemes
There are all kinds of ways to invest or launch ideas that may earn you a quick and handsome financial profit. But the vast majority of these plans contain more peril than a promise. Unless you are careful, you are far more likely to lose money on shortsighted investment schemes than get rich.
The most common ideas involve investing in the stock market. Maybe you heard a tip on a company that makes you think its stock is about to surge. Perhaps a friend came to you with an “iron-clad” business plan that could help you quadruple your investment in only a year. There are millions of such scenarios.
You’ve undoubtedly heard some of the success stories from such scenarios—the earliest Google investors, the earliest Bitcoin investors, prolific property flippers, etc. Remember that there are just as many horror stories: people who lost all their money investing in a company or idea that went belly-up because they were not financially responsible.
This is not to say that you should never invest or pursue lucrative financial opportunities, but rather to make sure that you are careful and do your due diligence before forking over your hard-earned money.
The main question you must ask yourself is this: can you afford to lose this money? All of it. If the answer is no, then you absolutely should not be investing.
If you can afford to lose it, the next step is researching a plan so meticulously that you know the financial details and logistical prospects inside and out. The point is, don’t look for shortcuts. Don’t think you’re suddenly going to get rich with passive income from one hour’s worth of exciting conversation. Passive income is a thing, but it takes due diligence and careful planning to establish and maintain your finances to be financially responsible.
Featured Image by Markus Steidle from Pixabay