In life, there are certain rules that you should never violate under any circumstances. For example, bringing uninvited guests to a wedding or not picking up your dog’s droppings in the park. The same goes for putting fruit on pizza or crossing streams if you’ve ever dreamed of becoming a Ghostbuster.
There are rules to keep in case of a file personal finances. But, sometimes, the rules have to be broken, especially during a financial crisis. So, with that in mind, here are six personal rules that you can ignore when you need to.
1. Borrow money from friends or family.
When you’re in a precarious financial situation, the first place you’ll likely turn to is friends and family. But, as the saying goes, “Before borrowing money from a friend, decide which one you really need.”
There are actually several reasons for this feeling. For starters, it’s embarrassing. While Acknowledging that you are in a difficult financial situation Is the first step in correcting the problem, you may not want to let others know how serious your situation is.
In addition, this may apply for a loan immediately. In other words, they may feel pressure to lend you money because they are close or close friends. It may also lead to financial hardship.
As if this is not enough, there may be a misunderstanding. For example, since there may be an informal agreement, you may be very comfortable when it comes to paying it off. And in some cases, that person may put this over your head and have a “you owe me” attitude.
However, if you need the money to cover necessary expenses like groceries or rent, this may be your quickest and most affordable option. Just make sure that you have a strong relationship with the lender and that you don’t put financial stress on them either. To avoid any inconsistencies, you must have a loan contract.
2. Save 10% of your income.
The general rule has been to save 10 percent of your income when it comes to retirement savings. Not only is this less likely today, but it’s also not a priority when dealing with a financial crisis.
Michael Troxell, USAA’s Senior Wealth Manager, told Huffington Post. “This number will not be enough for 90 percent of individuals, especially with life expectancy and rising healthcare costs.”
The big problem, he says, is that the 10 percent rule doesn’t take expenses into account. “It is the expenses that ultimately hurt retirements, not the savings rates during the working years,” Troxell said.
Instead of using a set percentage as a goal, Troxell suggests eliminating unnecessary expenses and saving whatever amount you can.
3. Do not withdraw from your retirement accounts.
Even if you’re not in your presence, I can see your jaw. To secure your financial future, you should never touch your retirement savings. If you do, you will have to put off retirement or get a part-time job during your golden years.
But, you may not have other options when faced with major financial hardship. Of course, this should only be after you have exhausted other options, such as exhausting emergency funds or borrowing from friends or family.
You should also consider other resources before Withdrawing from your retirement accounts such as a 401 (k .)) or an IRA or annuity. For example, if you are having trouble providing medication, see if there is an assistance program available for you. Or look at a line of credit to buy a home.
Be aware, however, that you must pay regular taxes on the money you receive if this is a last resort. In addition, you may also be subject to tax penalties if you are under the age of 59 – which often happens with annuities. But, depending on the situation, such as a disability that prevents you from working longer, this penalty can be waived.
4. Always pay your bills.
When your income goes down and you can’t cut your expenses, you may reach a point where you can’t pay your bills. Missed bill payments usually come with late fees and significant credit damage.
However, this is not the case all the time. If you are unable to pay your bills, you are highly advised to defer your payments. The practice of delaying payments is becoming more common during the pandemic.
“Currently, some mortgages, auto loans, credit cards, private student loans, or personal loans are deferred payments,” He says Jane Hemphill, certified financial advisor, author and host of the “Her Dinero Matters” podcast. “There may be no penalty in terms of late fees for non-payment and credit damage, but you should have a good understanding of how the individual company handles the interest portion and how it will affect you financially.”
Even after the pandemic, if you’re struggling to The meeting is overHemphill recommends contacting each company you use and negotiating a payment plan with them.
5. Avoid plastic, also known as credit cards.
It is highly recommended that you have enough money earmarked to cover at least three to six months of living expenses. If you lose your income and your bills start piling up, having an emergency fund will keep you afloat. In fact, Less than 4 in 10 Americans can handle unexpected expenses.
Despite this, experts warn that you should not use your credit cards to cover financial emergencies. But, “The whole point of having credit is that you can tap into it when you need it, and practicing good credit habits in the good times means you have resilience when disaster strikes,” write Gregory Karp and Kimberly Palmer NerdWallet. “Credit cards are not a substitute for income, but in an emergency, you can use them to withstand the disruption of your income. This means giving yourself permission to break some ‘rules’ until the crisis passes.”
Here are seven credit “rules” you can break in an emergency.
- Don’t carry credit from month to month. The cost of credit card debt can be high. But it may be worth it if the alternative is to go without essentials, or if you need to save money for items not available on credit.
- Pay more than the minimum amount due. “Paying the minimum keeps your account in good standing when access to credit is critical,” adds Karp and Palmer. “It won’t do much to reduce your debt, but it can help you stay afloat.”
- Keep your credit usage below 30%. Then, using too much of your credit won’t permanently damage your credit score.
- Redeem rewards for maximum value. Even if you have to monetize bonuses to pay for basic expenses, it doesn’t make sense to be content with hundreds of dollars in bonuses when you have to make ends meet.
- Credit cards are not an emergency fund. It’s not always easy to store money in an emergency fund, and when disaster strikes, it’s often too late to start. In this case, credit may be your only option.
- Don’t just put off 0% debt – pay it off. With an introductory 0% APR, you can transfer a high-interest balance to a credit card that gives you time to pay off the balance. Of course, you will eventually have to pay off the debt, but you can wait until you are back on your feet again.
- Your credit score doesn’t hurt. If you are able to build good credit, you can use it when needed.
6. Get a second job.
If you’re cash-strapped, it can be tempting to get a second job. But, does the extra income justify the extra time and expenses associated with it?
For example, if you are a single parent, you may need to factor in childcare costs. So, let’s say you bring in an extra $600 a month, but babysitting takes up half of that. Is it really worth the time and expense?
Unless you can’t. Work from homeYou also take into account modes of transportation such as gas or public transit fare. As if that weren’t enough, a second job can interfere with your day job and cause new opportunities to be missed. And the extra income can put you in a higher tax bracket.
This does not mean that you should write off this entirely. But for some people, getting a second job isn’t always viable.