The fall of actual incomes and profits, permanent loans in order to continue to live on a habitual grand scale is a sure way to the debt hole. People start to panic when they realize that they only have money left for bread, but financial literacy can help fix it.
Recently, people have been suffering from financial problems due to the exchange rate, higher prices for everything, loss of stable earnings, etc. In such situations, it is important not to lose hope for a brighter future and to constantly act in order to get the family out of the debt hole. There are several tips, both practical and theoretical, that will help preserve the budget for those, who have not yet faced debts, and return normal lives to people, who do not know how to pay off all the loans that they already have.
Tips to get out of the financial crisis
Perhaps, it is necessary to begin introspection and launching a new plan of actions with calming down and calculating what the worst outcome of events may be. It is this method that will help to recover and soberly assess the situation in the future. In order to get rid of current debts, under no circumstances you should take another loan or a mortgage from friends, hastily sell real estate that you still possess. It is necessary to calculate the debt and approximately understand in what time it can be paid, comfortably and without any stress.
What the person having debt should not do:
- you should not immediately spend all your salary in order to pay off at least part of the debt;
- do not be shy to ask for help from those who know exactly how to achieve their goals easily and not to lose their own money;
- do not forget to just live your own life instead of constantly thinking about how to pay off the debt;
- you should not spend money excessively without an accurate calculation of the amount you have and what the finances should be used for.
In general, you can always find additional sources of income in order to at least minimally improve the financial situation of the family, but there is one good way that everyone, who wants to get out of the debt hole, should know about. It is about calculating the breakeven point for the family.
What is the breakeven point and how to calculate it
The breakeven point in any business is a stable zero – in other words, income and expenses in this case should be equal. The breakeven point is actively used by both commercial organizations and family computing at the household level. This allows you to accurately calculate the action plan to get out of the money pit, to save the family budget, and helps to think about the development of a small business if the family thinks about their own business in the future and does not want to lose all its money.
It is important to note that the breakeven point is an abstract concept. It cannot accurately predict what the financial situation will be like in a year, but it is possible to repel from it. So, in order to calculate the breakeven point of the family at the household level, firstly, you need to collect all the accurate data on the income and expenses of the family. As for costs, specialists, who are involved in calculating the breakeven point at a professional level, divide them into fixed and variable. It is necessary to be able to distinguish between them. For example, fixed costs include fees for housing, utilities, kindergarten or other educational institution fee, if any. Variables include expenses for food, clothing, cosmetics, purchase of necessary things, and such expenses will differ from one another every month.
IT IS IMPORTANT that when calculating the breakeven point, the key fact should be remembered: the higher the family income, the lower the fixed costs should be in percentage terms, and the variables should reasonably rise. If we take the natural expression into account, then, as a result, the process of capitalization (in terms of economics) will take place, which means the growth of wealth.
Breakeven point advantages:
- It makes it clear how reasonable and profitable the family is guiding its finances.
- It allows to avoid financial crisis and falling into a debt hole;
- It helps determine an action plan to save more money on something and pay off debts.
How to calculate the breakeven point
As mentioned earlier, the two essential factors are needed: fixed and variable costs. You can calculate the index in the form of natural materials or money. As for the family, the choice of the second way of calculating the breakeven point is certainly relevant here. To calculate the breakeven point in money, you need to use the following basic formulas:
GM=(CP-VC)/CP
GM – gross margin % (shows how much the selling price of product/service exceeds production expenses);
CP – selling price per unit of product/service;
VC - variable costs per unit of product/service.
As a result, you need to come to a formula that helps calculate the financial breakeven point:
BEP = FC/GM
BEP – breakeven point;
FC – fixed cost;
GM – gross margin %
In order not to fall into the debt hole, you need to count every penny of the family budget and try to stabilize both monthly income and expenses. You should definitely pay close attention to all these points.
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The fall of actual incomes and profits, permanent loans in order to continue to live on a habitual grand scale is a sure way to the debt hole. People start to panic when they realize that they only have money left for bread, but financial literacy can help fix it.
