Can you pay debts while you are going through a crisis? You may think that it’s impossible. But the truth is, it might serve you better to be in a crisis while trying to get out of debt.
If you doubt that, take a look at how people are reacting during the pandemic. According to reports, people were saving more money during the pandemic. This means people were more in tune with their finances. They started to be more cautious about how they spent their money. If people can act this way with the right motivation, then it’s not surprising for them to be able to pay debts even in the midst of a crisis.
If you really want it bad enough, you can find a way to pay off your debts no matter what you’re going through. Even if your finances are compromised, you’ll know what to do to continue paying it off. After all, there is a debt solution that fits all types of financial situations. So you can bet that even if you are in a dire financial situation, you can still take care of your debts.
Why is it easier to pay debts during a crisis?
What makes it great to pay debts during a crisis? There are a couple of reasons why this particular timing will make things easier. Before you know it, you’re making your last payment towards your high credit card balance.
So why should you take advantage of a crisis to pay off your debts?
You choose to save more
The first reason involves saving more. When you are in the midst of a crisis, you make a more conscious effort to save more money. Why? Because you feel fear and anxiousness. You don’t know when the crisis will end. What if it takes a long time for things to pick up? What if things get worse? How will you survive?
The best way to do that is to conserve your resources. You will make an extra effort to save more money so you can increase your reserve fund.
But while you are pinching pennies to increase your savings, you’ll also exert an effort to increase your income. To be more specific, you’ll diversify it to make your income more secure. That way, if you lose one, you have another source to rely on.
Anything that you earn on the side can be used to save and pay off your debts. Especially if you already have enough emergency funds. If you can get rid of your debts, you don’t need to earn a lot each month.
You have fewer options to spend
Being in a crisis will also give you fewer options to spend. At least, if you really know what is at stake if you become reckless with your spending.
If you are in a saving mode, you’ll be less likely to think of spending. Even if you get a windfall, you’ll be more inclined to put it aside in hopes that it will help you survive the crisis.
But that’s not all. If your efforts to increase your reserve fund lead you to increase your earnings, you will be too busy to even think about spending. You’ll be working longer hours to boost your funds. If you’re preoccupied with work, you won’t have time to spend. Even in your free time, you’ll be too tired.
If you combine the fact that you’re saving more and spending less, you’ll have more extra money to use to pay debts.
You actively avoid new debt
While this won’t directly affect your ability to increase your debt payments, it will keep you from making it worse. If there’s a crisis, you’ll find yourself getting better at avoiding debt.
You might be thinking – wouldn’t people be more reliant on credit when there’s a crisis? This is true if people lost their jobs – or their income has been compromised in one way or another.
But for those who still have a stable job despite the crisis, they can still avoid debt. Do your best to lower your monthly expenses so you won’t run out of cash. If you do, that’s when you’ll be forced to use your credit cards. It would only make things harder for you to pay debts.
How a crisis can bring about better financial habits
You see, if you have the right attitude, you won’t have to fear going through a crisis. After all, whatever you’re going through at the moment – it won’t be the last. There will be other problems and hurdles to go through in the future. There will be another time when you have to pay debts while you struggle with your finances. If you want to survive all of these, you have to learn how to use every crisis to your advantage.
Because the truth is, the crisis that you’re going through will have an effect on how you spend your money. Take a look at the effects of the coronavirus pandemic on the spending habits of Americans. You’ll find that almost 2 out of 3 Americans admitted that their spending habits changed.
Whether that change will result in the improvement of your financial situation or not, that’s entirely up to you. But can a crisis lead you to be better at managing your finances?
Absolutely. Here are the different ways this can happen.
A better understanding of the value for money
There’s a saying that you’ll never understand the value of something unless it’s gone. This is true for your finances as well. Once you are forced into a situation with limited finances, you’ll realize the real value of money. You’ll know how much it can affect your lifestyle if you suddenly have to live with less cash to spend.
This will give you a better appreciation of how your life will be if you have enough money. That can lead you to be more cautious with how you use it – which is the second reason why a crisis can give you better financial habits.
A shift in spending habits
If you understand how valuable money can be, you will be more careful with how you use it. This will bring a huge shift in how you spend your money. Not to mention the fact that being in a crisis means you don’t have a lot, to begin with. You need to make sure that whatever you have will last for as long as possible. Especially if you’re not sure when the crisis will last.
To improve your spending habits, you have to take an accounting of your finances. How much money comes in every month? What are you currently spending on? If you haven’t done it yet, you might want to look at your budget and find out what expenses you can cut off. Lowering your monthly expenses will give you extra money to save or pay debts.
A more cautious approach towards debt
Just like your spending, you’ll also learn how to be cautious with how you use debt. This will come in handy because when you’re in a crisis, you’ll be more tempted to use credit to make ends meet. But there will be no guarantee that you can pay it off.
In one report, 2 out of 3 Americans with credit card debt admitted that they will have a hard time meeting even the minimum payment. This may be because a lot of Americans lost their jobs during the pandemic.
If you know that your finances are compromised and you can’t afford to pay debts, you’ll be very cautious with how you use credit.