Talking with a friend over the week on how to be a good manager of resources and how to stay out of financial crisis enlightened me more on how i can be an overcomer on any financial crisis i happen to face now or in future.Do you know you can solve some part of the financial crisis that may surface in your journey in life? If not all, at least 50% of it. This is why good financial management is the choice an individual should adopt and work towards.
The crisis is unpredictable that is, it comes unannounced then how do you fight against such if you aren't adequately prepared? Knowing the big difference between want and need puts one on the right path to avoiding financial crises. These two words might look the same to many people but it's not, the difference between them can't be overlooked.
Knowing your needs per time and planning your income according to it saves you from unnecessary crises and risks. Overburdening your income with your wants can lead you into a crisis. Needs are essential things needed to live a good and comfortable life while wants are what you desired or wished for.
Someone having a corolla sport 2010 model car that still serves him or her tight and which his or her source of income helps maintained very well felt the desire to upgrade his or her desire because at that time changing a car is his or her want not a need. Opt for a bank loan or cooperative loan to buy a new car which his or her source of income can neither maintain nor pay back the amount used in buying the car with a snap of the finger.
At the end of the day, such individuals will run into a loss and financial crisis because the car would not be well maintained and might later be sold at a price lower than the cost price when he or she bought it and also running shelter skelter to pay back the loan before the due date.
Considering problems that might arise in the future is why an individual should be a good manager of his or her income and the only way to do this is by setting up an emergency fund. An emergency fund is a cash reserve that's specifically set aside for unplanned or unexpected expenses or financial emergencies.
An emergency funds serves as a savior in times of crisis, this is different from an investment. An investment is money you put out of your income to work for you and yield interest, an emergency fund doesn't yield interest except if it's kept in a high-yield savings account.An emergency fund must be kept where you will have easy access to it because it might be needed at any point in time. This funds helps to reduce the rate of the financial crisis.
Following in the footsteps of my father, I've learned to plan for whatever financial crisis might want to arise. I remembered my father started saving for my higher institution fees before I got admission, when I resumed I was part of the first ten to pay all the supposed fees. That makes me ask him one day how sure was he that I will gain admission that year. Then he smiled and answered "He wasn't 100% sure but he planned for unforeseen circumstances that if possible I gained admission, he doesn't want to start running around and working extra hard just to pay my fees".
Therefore he has been saving part of his earnings even before I put in for the entrance examination. An emergency fund isn't for education alone, it can be kept safe for any case that may request its usage. Your financial freedom and management aren't complete without emergency funds. It is like saving for a rainy day, a day when you will have to fall back on your savings but what happened if you don't have any?.
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