The impact of the coronavirus pandemic has been felt in all sectors of society. The medical field is taking a significant brunt of the damage.
Even educational institutions are reshaping their strategies to keep up with the demands for online learning.
Overall, the economy has been greatly affected by COVID-19. Physical shops have had to close, temporarily or permanently, to limit the movement of the virus. You may be one of the many workers whose futures have become uncertain due to this disease.
During this economic crisis, you should be more aware of your finances. You can enlist the help of wealth management firms to provide support. Nonetheless, you should still do your research and figure out ways to maximize your income so that you’ll be prepared for future contingencies.
Here are some financial planning advice that may help tide you through this COVID-19 pandemic:
Review Your Finances
The first thing you should do is to check your financial status. Look through your bank account and credit card statements. It might be a bit depressing to be reminded of your debts and expenses, but it’s good to be aware of where you stand, money-wise.
Consider consulting with a company that provides financial planning service, especially if you don’t have an idea yet on what areas and numbers to check. You should particularly inspect your debts.
For instance, if you have a pending balance on your credit card, think of how you can pay it off as soon as possible. You may need to find additional income streams to increase your monthly earnings, which you can direct toward repaying your debt.
Fortunately, some credit card companies have lowered their interest rates, which means that now would be a good time to complete paying off your debts. The government has also suspended payments for federal student loans for temporary debt relief.
Add To Your Emergency Funds
If you haven’t started an emergency savings fund, you better start now. The market is expected to continue being volatile, which may lead to adverse effects on your company. One never truly knows when you need extra cash for repairs or as a down payment for the hospital, so it’s wise to set aside money for this purpose.
There’s an age-old rule that you should save up to six months’ worth of your salary. This sum may take some time to achieve, but, if you can, try to surpass this goal. Make it a habit to direct money each payday into your emergency savings so that you won’t have to worry about finances in the future.
These are the steps to start your own emergency fund:
- Determine Your Monthly Income And Expenses – First, you have to know precisely how much you earn in a month and the expenses that you have to pay. With this information, you can set your target savings goal.
- Set A Doable Target Savings Each Month – The keyword here is “doable”. Think of an amount that you can save each payday successfully. Don’t worry if it seems small at first since it’s better than zero savings.
- Make Sure Your Funds Are Liquid – Liquidity is an essential factor for your emergency savings because it wouldn’t make sense if you can’t access and use them during urgent situations. A savings account is the best option. It has the benefit of being out of reach, but still being liquid since having extra cash lying around the house may be too much of a temptation.
- Stick To Your Monthly Savings Target – The hardest part about saving money isn’t planning how much you should take out from your income, but it’s actually channeling the amount into your emergency fund. That’s why you should start with a realistic goal and develop the habit of saving first. You can aim higher once you’ve adjusted your monthly spending.
Check Your Needs And Wants
If you’ve been working from home these days, you may have noticed that you have fewer expenses. You can save money by cooking your own meals, plus you no longer have to commute and spend on fares anymore. You’ll also reduce clothing costs since you don’t need new outfits for going to the office every day.
Evaluate your expenses and see where your money is going. Take a step back and look at the things that you’re spending on, and assess objectively if they’re a need or want. Introspection can help you manage your finances better.
Overhaul Your Budget
After checking your expenses and determining whether the costs come from a need or want, you should change your budgeting process and prioritize the expenditures that are crucial, as well as your savings. You have to make sure that your income can get you through this economic crisis. With this, you may also see opportunities for conserving cash and funnel the sum into your emergency savings fund.
Refinance Your Mortgage
Similar to student loans, the Federal Reserve has also cut interest rates. This is the best time to refinance your mortgage and get a better monthly repayment, as well as shorten your loan term. Doing this now may help you end up saving thousands of dollars on your mortgage and complete the payment within a shorter period.
For instance, you may still have 18 years left to pay for your home. You can refinance it into 15 years and pay off the mortgage faster. This way, you save on paying hefty interest.
Keep Your Investments
If you invested in stocks and other assets, looking at the market these days can be scary. It can be tempting to think that you’re better off selling your investments right now. However, you might want to hold off on that urge and even contribute more to your retirement nest egg if you can afford it. The market has always found a way to bounce back, and you may end up getting a good deal in the future.
Conclusion
COVID-19 has affected the global economy. You may have already felt its impact on your personal finances, especially if you’ve lost your job because your company closed during the pandemic. Follow these tips to help you manage your money better so that you can tide through this economic crisis without worries.
