Managing financial unrest has been and will continue to be a major problem for most households as well as single people. Most people find it highly difficult to manage their finances daily, leave alone during a crisis.
An unfortunate accident, a sudden illness, losing a job, or any such incident, may trigger the need to take out your savings or ask for debt during such extreme circumstances.
All in all, the situation has been worsened by the ongoing Covid-19 pandemic, becoming a specimen of an unfortunate reality has brought about the fear of a rather doubtful future.
With most companies, either sacking people from their jobs or offering reduced salaries, the need of the hour is to learn how to manage your finances during a crisis situation.
Through this article, we are going to share with you 5 tips on managing your finances during a crisis:
5 Tips on Managing Your Finances during Crisis
- Make a budget and stick to it- The advantages of making a budget and following it diligently cannot be stressed enough. In order to manage your finances, the first thing that you need to keep in mind is to be aware of earnings and spending throughout the month. This way you will know how much money you need to keep aside in case of emergencies.
It is very important to assess whether your expenditure is surpassing your means or not. A budget helps a lot if you follow it sincerely, without diverting from it frequently. It makes you aware of your financial abilities and your needs honestly so that you can prioritize your expenditures.
- Increase your emergency fund- The current period of uncertainty is unlikely to get over soon. Therefore, if you do not already have an emergency fund ready then start preparing one and if you have one prepared, then increase your savings.
Once you have taken care of your immediate expenses, like food, rent, bills, etc., you need to deposit the extra money is a savings account immediately which you can have access to easily in cases of emergency.
If you have at least some amount of emergency fund ready with you, then there is a small hope that in cases of the acute financial crisis, you will not have to ask for help from outside sources. It is highly suggested that you save yourself at least three months’ worth of household and other expenditures.
- Start increasing your liquid savings- Keeping your money in various cash accounts will allow you to withdraw money immediately if you meet with a crisis. Unlike stocks, trade funds, etc., the value of money in these accounts does not fluctuate, hence, saving you the risk of losing your money or incurring a financial loss.
It is advisable to avoid investing in stocks or other such risky investments unless you have a few month’s worths of expenditure handy.
- Use your credit wisely- The urge to spend more if you can afford credit is a very unhealthy habit. Once you make your expenditures using your credit card or any other source, it is advisable to be aware of your means as well as the amount of balance that you can afford.
You can make a list of your immediate sources of credit, your current balances, and the limits up to which you can spend. If you are using credit cards, you need to avoid spending and maxing out your expenditures from one card only.
You can also use more than one card and spend it accordingly. You can use cards that demand the lowest annual percentage rates. The urge to spend might be strong, but you need to be careful so as not to be drowning in debts.
- Do not delay payments- At times of crisis, the aim is to reduce unnecessary expenditures as much as possible. Undue delay in clearing bills or debts may result in extra charges, which is completely futile and can be avoided easily.
Also, keep up with your maintenance responsibilities so as to avoid paying huge amounts of money once the conditions of those things deteriorate. Once you start managing your payments and maintenance costs regularly, you will realize that the rate of expenditure is much lower as compared to the huge one-time payments that need to be made in cases of extreme disruption.