Why you should be proactive with your money, not reactive

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  • Acting reactive rather than being proactive with your finances can cost you money.
  • It’s natural to have money worries, but making quick decisions will do more harm than good.
  • Get a jump on starting an emergency fund and earn extra income by having a financial plan.

I’ve been a personal financial journalist for eight years, and I think the number one mistake people make when dealing with money is overreacting.

Acting financially can cost you real money. It’s easy to hit the panic button whenever the topic of money comes up. The solution: be proactive. Start before you have to. It’s never too late to take control of how you handle your money and make it work for you for the rest of your life.

During a period of economic or financial uncertainty, it is natural to worry about what you should do with your money now to ensure financial stability, but the steps you take after you realize there may be cause for concern about your financial situation are crucial.

Here are some signs that you are reacting when dealing with your money:

1. There is a disconnect between your spending habits and your bank account

Every dollar you earn should get you closer to your financial goals. rescue It is the basis of any financial plan.

However, there may be times when your spending can leave your savings goals in the dust. When this happens, it can be easy to make a quick decision to cut out all spending. Thinking that you will cut all spending for the next six months in order to make ends meet can set you up for failure. Usually, this level of restriction does not last and can lead to overspending in the end.

Hint: You can’t make up for lost time saving. The best thing to do is to start where you are now and create — and stick to — a reasonable savings plan. This is more sustainable and will give you the desired results over time.

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2. You don’t have a safety net

More and more consumers live from paycheck to paycheck. When you don’t have a file emergency fundOne job loss or medical problem can completely turn your life around. And an unexpected financial obstacle will not only negatively affect you, but also your loved ones.

The wrong reaction here is to think there’s nothing you can do, or that if you don’t have $10,000 right now to fund your emergency account, nothing else will help.

Hint: Start building your emergency fund now. Continuous saving will get you to your six-month goal of living expenses. This will take time and effort to get done, but the peace of mind and confidence that an emergency fund gives you will be worth it.

3. You neglect home and physical maintenance needs to “save money”

Health checks, maintaining and updating home appliances, and keeping everything in good shape are all part of the maintenance tasks that must be done to avoid costly financial repercussions. However, when faced with financial challenges, maintenance tasks are usually one of the first items people cut from their budgets.

This can often lead to disaster when something breaks down and needs a complete replacement, which can result in spending money you’re not prepared to spend. You can output a file High interest loan Or putting the purchase on a credit card, both of which are debts that must be paid now.

Hint: Instead of avoiding maintenance costs entirely, try to take on as many of these tasks yourself as possible, within reason, to save money, or look for less expensive services.

For example, dental schools often offer free dental cleanings, there are ways to get free health checkups, and staying ahead of car maintenance and essential appliances will give you time to shop around for the best price for a replacement or repair.

4. You have one source of income

With continued uncertainty in the economy and more layoffs, there is a growing interest in developing multiple streams of income, and for many it has become a necessity to have Side hustle. The worst thing you can do is wait until you need the extra money or suffer a job loss, and then consider building multiple streams of income. Waiting to consider finding other sources of income after you lose your job is reactive, and will put you in a situation where time is not on your side.

Hint: Being proactive creates another stream of income now – even if it’s small. You will be more financially secure and prepared to respond effectively to any financial situation that comes your way.

When handling your money and thinking about the future, being proactive rather than reactive can save you money and help you be more financially secure.

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