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Our recovery was slow but as we try to regain what we lost, it is important for us to consider the root cause of our problems. It is true that our personal financial crisis was magnified by the economic conditions of the country but despite that, we also have to own up to some of them. We made a lot of bad financial decisions and these led to the aggravation of our problems.
When the bad economic situation turned for the worse, it increased the chances of our bad choices. According to an article published on Kiplinger.com, we are biologically programmed to be poor decision makers when we are under stress. The article quoted Psychiatrist Richard Peterson in saying that stress hormones make us prone to be impulsive and short-term thinkers. That is not the right way to make financial decisions because the latter usually require long term solutions.
Given the improving economy, you may think that we are in a better position to make decisions now and thus more unlikely to put ourselves in danger of a financial crisis. While the economic situation may be better, that does not mean we have reason to put our guards down. It is also possible for you to make bad financial choices even when you are experiencing good financial standing – especially when you have a problem with saying no.
Saying No could keep you from financial problems
There is an article on MoneyNing.com that mentioned how one word can put you in danger of overspending. That is the word “YES.”
The article said that some people’s quickness to say yes is the cause of them spending beyond what is necessary. When we say yes to every request of our kids and every time we agree to lend money to someone, that is causing us to overspend. Even our inability to say no to our own requests – that can keep us from staying within the limits of our budget.
The article gave a very important advice. If you want to keep yourself from a financial crisis caused by spending beyond what you can afford, you have to learn how to say no.
Of course, saying no is easier said than done. It is tough to do especially when you have a very compassionate nature and if the one requesting something from you is someone very important. But you should know that your failure to say no may have bigger consequences than hurting your ego or that of the person requesting something from you.
MoneyNing gave two tips to help you say no.
- Know what is important to you. If you the request is something that you know is not aligned or important to your financial goals, then you should know that it is okay to say no to that. Your own plans should govern your financial decisions – otherwise, you will not be successful in meeting your goals. If you think that it does not matter to you and the future of your family, you will realize that it is easier for you to say no – even to yourself.
- Be realistic. Another mindset that will help you get into the habit of saying no is to be realistic. If you know that you cannot afford something because your income is not sufficient, then it should be easy to say no. To have this information, you should monitor your finances constantly. By knowing your current financial standing, you will be able to see the amount that you can afford to spend. Not only that, you can also see if you are nearing a financial crisis. You can immediately do something to rectify the situation.
In most cases, parents have a hard time saying to their children because they do not share their financial situation with them. It is natural for any parent to shield their kids from worries. But despite their youth, they are smarter than you give them credit for. Do not be afraid to tell your kids about your finances because they can handle it - maybe even better than you can.
4 financial decisions you should say no to avoid financial disasters
Now that you know how saying no can keep you from a financial crisis, here are 4 financial requests that you should really learn how to refuse.Family loans
In an article published on UMass.edu, it is mentioned that loaning money to people close to you will only lead into trouble. In fact, the beginning of the article quoted Shakespeare in saying “For loan oft loses both itself and friend.” When you loan money to a family or close friend, you are not only endangering your finances, but also your relationship with the person. Although you may want to help out your loved ones and friends, make sure that you make a wise decision.Co-signing loans
Any financial expert that you will encounter will tell you that co-signing loans is never a good idea. It is just like family loans. You will be endangering your relationship with the person you will co-sign with. Not only that, you are signing to be fully accountable for a loan that in most cases, you will not benefit from. If the person runs off without paying the loan and did not tell you that they are not paying, your credit score will suffer for it. And worse, the lender will expect you to pay for it. So when someone comes to you to ask you to co-sign a loan, do not go through it.New and pre-approved credit cards
These are the cards that usually come in the mail. Some banks, after looking at your credit records and find you to be creditworthy, will send you a pre-approved credit card for your use. Just say no to them because believe it or not, you do not need more than one credit card. They may come with low-interest rates but if you read the fine print, these are just introductory rates. You will be imposed with a higher rate sooner or later. The multiple cards can be a big temptation to spend and that will also lead you to a financial crisis.Store cards
You know those credit cards that are offered to you when you go to the checkout counter? These are usually merchant cards or store cards. They act as credit cards but they are specific to the store. They usually come with a membership package that offer rewards or point system programs that will give you freebies or points for every purchase. You may want to say no to these as well. At least, say no to the ones that you know you will not buy regularly from. But if there are department stores or grocery stores that you regularly go to, then you can avail of their store cards. Just make sure you know how to pay them off properly to avoid accumulating too much debt.