With coronavirus disrupting our daily lives, many people are worried about the effects on their budgets. Being told to sit on your hands and wait while uncertainty swirls around you can just add to your stress levels. Taking some practical steps to manage your money can give you a better handle on your finances right now.
Unfortunately, there is no silver bullet for surviving a financial crisis. Preparing for a financial crisis should happen when the going is good. It is very akin to what the armed forces do, i.e. always prepare and be ready for war during peace times, like ensuring soldiers do mock war drills, exercises and are combat-ready!
When in the mid of the crisis like we are today, there are some strategies to take to ensure you stay afloat and do not sink with the financial storm.
Here are six ways to secure your finance during a global financial crisis as we are witnessing today because of the coronavirus:
1. Do not Overspend
Prioritizing your expenses is very important to avoid unwarranted expenditures. An emergency budget is different than emergency savings. While it’s too late to save for this emergency that has befallen the world, it is not too late to create an emergency budget based on your reduced level of income.
It’s in your best interest to be mindful of the difference between “needs” and “wants,” so you can make better spending choices. Needs are things you have to have to survive. Conversely, wants are things you would like to have but don’t require for survival. There’s a very big difference between wants and needs. For instance, housing, medical costs, and reasonable and customary amounts for food and transportation can be critical to everyday life. But forms of entertainment, including internet and streaming services, expensive data plans, restaurants, clothing, beauty treatments, and other personal indulgences, may be optional. The first thing you want to do is make a list. Address what’s most important, then decide what you need to eliminate, reduce or find creative solutions to other optional expenses, says Lauren Weatherford, West Virginia University.
With the economy changing rapidly, keeping a budget and tracking expenses can help you maintain better control and give you peace of mind. If you haven’t examined your budget closely in a while, now’s a good time to look for any waste and opportunities to save money. Look for monthly bills you could reduce—like a better internet package, cell phone plan or cable subscription. Also consider things like spending less on eating outside, entertainment and hobbies.
2. Avoid the Temptation to Borrow
Borrowing during a financial crisis can add to your financial stress especially where it is not certain when the crisis will end.
While it’s true that some interest rates may reach near historic lows, avoid the temptation of borrowing during a time of huge transition. Things might not just work the way you envisage immediately after the global lockdown and you may have to miss the deadline.
Instead of committing to payments, set the money that you would have been using to make those payments aside in a saving account until you know how you’ve weathered this storm. There is every chance that interest rates will stay low until well after the coronavirus has passed to help the economy recover more quickly, says Scott Hannah of Credit Counselling Society.
You should only borrow when it is your last resort.
3. Do not fall for Scammers
Whenever there is a large-scale financial crisis, the scammers flock to “help.” Falling prey to scammers can take a huge sum off your already draining funds and leave you with fewer notes to fend for yourself during a financial crisis.
Just like with any personal finance opportunity, if it sounds too good to be true, then it probably is. When in doubt, ask a trusted friend to review the information with you.
Also, avoid clicking unverified links with a promise of monetary rewards or compensation. Most are preying on you waiting to take hold of your sensitive information to their advantage.
4. Grow Other Income Sources
Everyone has something they can do to earn extra money, whether it’s selling possessions you no longer use (either online or in a garage sa