Funding in a Fix

financingEveryone has heard the expressions about saving for a rainy day, or a penny saved is a penny earned.

But then, the reality is that life is unpredictable, and even the best-laid plans may go awry. Unforeseen circumstances may present themselves and wreak havoc on your finances which are likely already stretched to cover living expenses and attempts to save for retirement.

Financial responsibility isn’t easy, but it’s the key to peace of mind. It’s often an ongoing learning process that takes effort. Budgets have to be set and adhered to. Money has to be set aside not only for retirement, but also for the inevitable emergency. People with families have to decide whether saving for their children’s education, or even weddings, is a priority that can be sustained as well.
Individuals who are financially savvy and conservative when it comes to managing day-to-day expenses are still susceptible to major events that can put their lifestyle at risk. Many risk factors can impact even the most prepared people.

Money doesn’t grow on trees

Every generation bemoans the frivolity of those that come after them, chastising youth with common phrases to remind them they will need to work to support themselves and their families. Most parents try to instill a healthy respect for money in their children, as they prepare them to grow into adulthood and eventually make their way in the world. Whether parents assign chores linked to an allowance or encourage teens to look for part-time jobs, these are essential stepping stones toward future money management.

Ideally, parents have set the example by exhibiting budget-conscious behavior themselves that their children can carry forward. Encouraging children to put money aside, and not spend everything they earn, will establish the foundation for responsible budgeting. Allowing children to use their own money for purchases to feel the sting of depleted piggy banks or savings accounts can be a valuable lesson. Also, setting goals for children to save their earnings to put toward a relatively expensive object or activity can give them a sense of accomplishment, or even have them rethink the importance of a particular item.

Reality check

Despite the statistics that paint a bleak picture of more and more children unable or unwilling to leave home once they graduate from high school, most young adults look forward to exercising their independence, and venturing out on their own to put these life lessons into practice. Depending on the path they took after high school to help them secure a job or kick off a career, many might be saddled with college or vocational loans. Right away, many have to account for a significant monthly expense.

It’s essential to be realistic when starting by making an accurate assessment of all financial obligations. Rarely will individuals just starting out enjoy the same quality of life they experienced at home with their parents. Income should exceed outgoing expenses, so there’s an opportunity to create savings, as well as embark on a retirement strategy as soon as possible. Long-term planning is often the hardest concept for young people to grasp, but the earlier they start investing in retirement, the better position they will be in as they get older. Their money will have more time to work for them and help to take away some of the apprehension of having to live on a fixed income one day.

Cash or credit?

Financial decisions made at this early juncture can haunt young adults for years to come. Reckless spending can ultimately end up hurting credit scores, which impacts the ability to buy and borrow at reasonable rates down the road. Credit cards can often lead people astray if they don’t pay attention to spending habits. Nothing is easier than racking up large balances by mindlessly throwing down plastic credits cards, paying online, or holding up a smartphone at a point of sale. There are definitely benefits to credit cards if they are used wisely, especially if the perks translate into cash rebates or airline miles.

When credit card balances can’t be paid in full every month, interest is incurred, and the new balance is carried over to the next month. Any new charges are added on to the next billing statement, and if the updated balance still can’t be paid off, the cycle starts over with additional interest accruing on the new amount. The initial purchase amounts can balloon out of control if payments are added to an already high balance and spread out over the long term. Minimum payments do little to make a dent in reducing the outstanding amount owed to the credit card companies.

Credit cards are convenient payment mechanisms and eliminate the need to carry cash. In the event an emergency purchase can’t be avoided, credit cards can function almost like a temporary loan, but the debt should be addressed as a priority. High-interest rates and carrying balances for an extended period of time can offset any perceived benefits.

In a jam

When catastrophe strikes, the usual financial levers may not always be available. Being forced to change jobs can impact one’s income and create a gap in the ability to cover existing obligations. There are other unavoidable circumstances like car repairs or health care bills that can quickly tap out any savings and max out credit cards. In these instances, it’s easy to find oneself in a financial bind in between paychecks. Without a home that has equity to leverage, an option for many people is payday advances like Snappy Loans. Payday advances are short-term, higher interest loans intended as a temporary solution for people who need a quick infusion of cash that can help them through a transitional period.

Like credit card balances, any high-interest loan should be prioritized to manage the payoff as soon as possible and without incurring an additional penalty. No one should be faulted for experiencing financial woes, but it’s important to be aware of the options that are available and the tools that can help to prevent a personal economic crisis and enhance financial well-being.

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