As we find ourselves grappling with the COVID-19 pandemic, staying safe and managing your finances effectively has become more critical than ever before. As a result of the pandemic, economies around the world crashed. Millions of small business owners had to shut shop, and millions of salaried professionals lost their jobs. Even those who were lucky enough to keep their jobs had to face pay-cuts. A monthly salary, which was earlier treated as a 'safety cushion', an assured income of sorts, has now become the most uncertain item on the list due to the pandemic. So, it's no surprise that people are now paying more attention to their personal finances and saving more than ever. As the uncertainty of, well, everything looms around us, it can be quite hard to focus and save consciously, especially if you already have debt. But don’t worry – we bring you four tips to better manage your finances. Here goes:
1.Create a Budget and Stick to It
The amount of money you're putting towards clearing your debts affects how much you can save and how much you can put towards your monthly expenses. So, you must create a budget and track all your expenses. This will help you understand where your hard-earned money is going and help you eliminate unnecessary costs. Of course, each budget is different, and you must consider your monthly income and the expenses you must bear. Your future financial goals should dictate how much you should save. Following a budget will help free up funds which you can then put towards clearing your debt. This way, you will pay them off faster.
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2.Use Credit Cards Only for Emergencies
Suppose you already have existing debt like education loan/home loan EMIs. In that case, you should avoid accumulating further debt at all costs. This includes credit cards, which is one of the most expensive forms of credit. Did you know that the average APR on credit cards is a whopping 41%? Some banks divide this interest rate by 12 and show it as a monthly figure, which can be misleading. Availability of quick personal loans online is a better option, as you can get an annual interest rate as low as 11% on them as long as your credit score is good. But if you have to use a credit card, make sure it’s only for an emergency when you’ve no other option left. Also, ensure that you pay your credit card bills on time to avoid late payment penalties later on.
3.Increase Your Loan Tenure if Necessary
Apart from tracking your expenses with the help of a budget, you must also keep a tab on all the different loan EMIs you're paying every month. Paying all your EMIs on time is good, but it shouldn't impact your monthly savings. What if you have to deal with unforeseen expenses next month? The total cash outflow for all your debt/loan EMIs shouldn't be more than 50% of your monthly salary at any cost. If it is, it may seriously hamper your ability to save and manage your monthly expenses. If you're putting more than half your salary just towards debt, increase your loan tenure so that your monthly EMI burden reduces. This will give you a little breathing space and will help you save more as well.
4.Pay Off Large Debts First
The prospect of paying off all your debt can undoubtedly overwhelm you at times and make you feel anxious. When this happens, remind yourself that while it may be challenging, it is not impossible. You can start with your most significant debt first. Put whatever amount you can manage towards it so that you end up paying it faster. Continue servicing your other payments, too, by paying the minimum amount due on all of them. Once you have cleared your most expensive debt, target the next one and follow this same method. Before you know it, you'll have cleared all your debts successfully!
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In case you were wondering how to tackle your debts, the four points mentioned above will surely help you. But sometimes, despite your best efforts, you will still find yourself short of money for necessary/unforeseen expenses. In such a scenario, a small loan is just what you need. If you're looking to get a small loan, KreditBee is an option you can consider. Our entire loan application process is quick and completely online on the KreditBee mobile app, from profile creation to disbursal. You just need to download the app from Google Play, complete your profile, and relax. If you wish to learn more about our small personal loans, please write to us at [email protected]