Financial emergencies can happen to anyone anytime. They can result from the illness of a family member, loss of employment, or urgent repairs to your home. But you are most probably worried about the effect of the current COVID-19 pandemic on your personal finances.
The pandemic is crippling the entire community for nearly a year. When something unexpected happens, you don’t always immediately realize that financial difficulties could arise. Assessing your ability to maintain your current lifestyle over the long term is important. Let’s consider the options and possibilities that will help you overcome money issues and make more realistic and pragmatic financial plans.
The Best Ways To Manage Your Budget During Pandemics
If your income dried up due to the sudden lack of revenue, reduction in working hours, or layoff, you need to make a more realistic financial plan. To do so, you have to take stocks of your expenses, savings, and income resources. If you are bad at budgeting, maybe you should try simple financial planning on paper or, even better, enter your financial transactions into the Google Sheets or Airtable.
Use Budgeting Apps
There are excellent money trackers for the financial transactions that don’t require any bookkeeping knowledge for more tech-savvy people. Just sync your financial accounts with the money program, and you will be able to track and manage your budget clearly and concisely. By going through quick reports, you will control your spendings by comparing them with the budget you have set. Accordingly, you can cat-back your expenses or relocate them to some more realistic financial goals.
50/30/20 Money Management Strategy
Every good personal financing program includes setting the maximum amount of money for each type of expense. There is an excellent money management method called 50/30/20. The method consists of dividing your expenses into three categories. The 50 percent you will spend on necessities such as rent, food, debt, savings, and transportation. Thirty percent goes to variable expenses, which are clothes and hobbies and entertainment stuff. The last 20 percent goes to your emergency account or retirement contribution account.
Ask for Help
In pandemics, everyone is in a situation to have a hard time making ends meet. Keeping in mind that we are all in this, there is no reason not to ask for help, speak to your insurance, credit card issuers, or your landers. Many land lenders offer 60 to 90 days of forbearance so you can get the relief.
With so much uncertainty in everyday lives, many are overwhelmed and confused, and if you are not used to strictly planning, managing personal finances can be quite a challenge.
Financial emergencies create stress. They can also cause significant hardship for you and your family. Money issues usually go hand in hand with psychological issues. Emotional situations can lead to bad financial decisions. In an emergency, make sure you get the psychological help you need to make financial decisions. Take your time to get advice and information from a financial advisor before you act.
Should You Get Into the Debt?
Many people simply cannot avoid getting into debt. If you are one of them, make sure that you are doing it wisely and with precaution. In case you already have a line of credit with a low-interest rate, you can go for it since that’s controlled debt burn. If possible, make an effort to stay away from the credit card debts because, for them, the interest rates are the highest.
How To Save Effectively?
If you choose to save at the end of the month with the amount you have left, you will not only have irregular savings, and on top of that, you will probably have made unnecessary expenses which will decrease the amount of your savings. Put the money on a saving account as soon as the money is in your possession. Other expenses will follow if you have budgeted well.
Finally, when it comes to the amount of your savings, it all depends on your goal. The most important thing is that it is achievable and fits your lifestyle. It is usually recommended to save 10 to 15% of your income. If it’s on your side, try saving more than that 15%. Saving will allow you to embark on more ambitious projects in the long run and will bring you more than just unnecessary and superficial expenses.
Don’t Stop Investing
Even if you are focused on the day to day obligations, you must look at the big picture, always having in mind the goals you set for yourself regarding your budgeting.
It’s a good time for more than five years of objectives, such as buying a home or retirement plans. Put aside at least 15% of the income for these purposes. If your income is modest, it’s always better to continue investing in these plans by reducing the amount than to stopping altogether. The pandemic shouldn’t stop you from investing. The later you start, the less time you have to make your money grow.
Personal loan platforms allow you to invest in personal loans or various projects such as real estate. You help people carry out their project, and in exchange, you receive an advantageous rate of remuneration that can go up to 12% or more.
Also, investing in the stock market gives you better returns than traditional savings products, but the risks are higher.
Adopt Measured Approach to Money
In these times of uncertainties, when things change in a glimpse of an eye, you have to take a really measured approach to the management of your personal finances. If you haven’t kept yourself out of debt, the general advice would be to avoid as much as possible. Every month keep whatever amount of money for emergencies like home repairs, health issues, sudden lay off. Cut your unnecessary expenses down as much as possible, so don’t get into the situation to take off the money from your retirement portfolio. It’s not a bad idea, if you have the possibilities, to get the advice from the financial adviser to revisit your assets mix and analyze your money risk tolerance.
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