How to Manage during the Credit Crunch

There are ways to effectively manage your money during a credit crunch. A credit crunch occurs when borrowers experience a reduction in the availability of loans or credit. Consumers use credit to buy all kinds of goods and services. People use these loans to finance homes, cars, and businesses. Market conditions can force banks and other financial institutions to restrict lending. These restrictions normally take place when there is a high number of loan defaults. To manage your money in a credit crunch, you should control your money, increase your income, and save your money.

First, make sure you control your money. Tell your money what to do. Give every dollar a name. For example, put aside money to take care of your food, housing, utilities, and transportation. Next, change your spending habits. Get rid of credit cards and pay cash for things you need or use a debt card. When you use a credit card, the bank charge you interest. Make a plan for spending your money and develop a budget based on your monthly income.Pay off debts and get rid of expenses you do not need (i.e. expensive cell phone plans, cars, homes, etc.) These payments will wipe out your paycheck.

Next, you must find ways to increase your income. If you can find ways to increase your monthly income, you will not need credit. Find a part-time job. You can deliver pizzas or cut grass in your neighborhood. When credit is tight, some individuals become creative and start small businesses that require a very small investment. They write for companies on-line. They sign-up with businesses to sell their products or services. They build websites and bake cakes and cookies at home and sell them. You can take an on-line real estate course and learn how to sell real estate. If you can sell one house for $100,000 and charge 7 percent, you can walk away from the deal with $7,000 in your pocket.

Then, it is extremely important that you save your money. If you do not save your money, you will always be borrowing money. The borrower is a slave to the lender. Save at least six months income for that unexpected house repair, car repair, illness, or job loss. Set aside funds from every pay check you receive and your money will grow. When everyone else is feeling the credit crunch, you will have cash. Cash is king. Learn how to invest your money. Then, maybe one day you might wake up being a millionaire.

Finally, you can control your spending, increase your income, and save your money. These steps will help you manage your money during the credit crunch. The process is not difficult to do. You have to sit down and write a plan for spending your hard earned money.