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5 Financial Planning Tips To Help Avoid Financial Crisis

Follow these tips to avoid a financial crisis. Photographed By: cohdra

In light of the financial crisis that has affected everyone in the country, every penny counts. Unless you take the necessary steps to manage your finances well, you will find yourself drowning in debt and maybe even without a home. As such, you need complete financial planning in order to stay afloat. Here are a few tips on how you can secure your finances and avoid having to find yourself in a crisis.

1. Stop Overspending

When you plan your finances, you need to avoid overspending. This means that if you own anything that can still be used efficiently, avoid replacing it. Remember that you still have mortgage payments to make and unnecessary expenses can ruin your budget. This also means that you should only use your credit card during an emergency or when you really have to.

2. Watch Your Credit Score

Improving your credit score is crucial for financial planning. You may not need cash today, but you can never tell what the future will bring. If you do not have a credit card, open a store credit account and simply keep it in good shape as it will reflect on your credit history. When you have a bad credit report, chances of taking a loan for a new home will be very slim. In order to keep a healthy credit score, avoid these four mistakes –

Applying for credit – Never apply for credit when you do not really need it as every inquiry into your credit report is recorded. Multiple inquiries can affect your score, so before you actually apply for a credit card or loan, check your credit report first to see if you qualify.

Skipping payments – Make sure that you can make all your payments on time before you start buying more things. If you think you are going to miss a payment, inform your lender so arrangements can be made to avoid affecting your credit rating.

Having too much debt – Regardless of whether you can pay your bills, having too much debt can affect your credit score. In the event you need more credit, simply have your limit raised instead of applying for a new card.

Filing for bankruptcy – When you are in too deep in debt, filing for bankruptcy is the best option. However, try to avoid it if possible as it can destroy your credit score and stay on your report for ten years.

3. Prepare For Retirement

You need to prepare yourself for retirement years before you retire wile you are earning plenty. You never for how long you will live and unless you prepare for a comfortable old age, you will only be asking for problems.

4. Keep An Eye On Changing Mortgage Rates

Mortgage rates can change regularly and this can result in significant changes over time. You would be surprised how a small percentage can make a big difference when the money at stake is high. So always refinance when you are able to reduce your mortgage by 1%. You will be able to save enough to reduce mortgage terms without increasing monthly payments. Learn more on how you can save while paying if you are living in a new home.

5. Save On Your Car Insurance

Educating yourself about your insurance is necessary and when you save up on car insurance, you will be able to spend more on home essentials. All you need to do is look for discounts offered by your insurance company, compare rates and raise your deductibles in order to lower your premium. You must also need to change your driving habits and avoiding risky driving behavior. Remember that accidents and tickets can increase insurance premium.

Valerie Peters is a DIY home improvement enthusiast and freelance writer specializing in interior designing and home management.

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