The Coronavirus pandemic is still raging through the globe. Companies are still struggling, people are losing jobs, and there’s no telling when the recovery period will start. There’s a need for people to spend wisely, now more than ever. Even if you still have your job, there’s no telling how long you can keep it.
Personal Finance Survival During Tough Economic Times
Creating a budget
A budget has become a necessity when it comes to managing personal finances. If you don’t have it, it’s about time you create one.
If you are starting to create a budget, create a spreadsheet with all your monthly expenses. In general, the sheet must capture the basic expenses like rent, power, food, transport and fuel expenses. After this, gather any receipts you have for the previous year or so. Use these to capture any irregular payments like taxes, vet expenses, subscriptions, gifts and school shopping.
The goal is to have an idea of how much you need monthly, quarterly and annually to meet your expenses.
Track Your Expenses
The good thing about having a budget, whether on a spreadsheet or using an App, is the ease of identifying where your money goes. You can tell how much you spend every month on takeout, grocery shopping, fuel, cable, phone bills, among others. With this, you can gauge on where you need to reduce the spending.
During tough economic times, you only need to spend on the necessities. If there is an expense you can live without, let it go and save that money instead. Where possible, lower your cable and phone bills, cook at home more and rely less on eating take out.
Planning Your Meals
Yes, eating homemade food will save you money and even help you eat healthier food. But, without a meal plan, you’ll end up wasting money and food.
Here’s an example; you head to the supermarket on Sunday and buy some groceries or meat with the assumption you will use it before the end of the week. By the end of that week, you cook anything you crave or think of without using what you bought over the weekend.
A meal plan is just that; a plan for your meals for the week or even month. With this, you know what you need for that coming period and how much of it you will require. It also helps reduce impulse buying when you get to the supermarket.
Find a Side Hustle
Paycheck alone makes few people millionaires if any at all. Multiple streams of income not only give you more money to spend but also ensure you have an extra source of income in case one does not work out.
While the economy might be struggling, there are ways to make money besides your day job. You can make money from many online sites available as a freelancer or monetize your hobbies. Believe it or not, these unusual ways might also give you some extra income. If you are a professional, you can offer your services as a consultant to individuals and small businesses in your locality.
Start Building an Emergency Fund
Financial advisors always recommend an emergency fund that caters for 3 to 6 months of one’s monthly expenses.
An emergency fund is a savings account where you keep the money to use in case of emergencies like losing your job or major medical expenses. Consider it as your safety net; to cushion you from getting into debt traps during the harsh economic times.
With a budget in place, reduced spending, meal planning, and extra income, building an emergency fund will be easier. Any money that you save from that, it can go towards building an emergency fund.
Diversifying Your Investments
Tough economic times lead to the collapse of some companies and industries. The onset of the Coronavirus led to a drop in the performance of stocks and other investment assets. Imagine if you had all your money in the stocks of a particular company which performance dropped during the pandemic.
The last thing you need during an economic downturn is to have all your eggs in one basket. So, diversify your investments across different investment vehicles and industries. If one does not perform and the other one does, you will at least not lose 100% of your investments.
Personal finance survival during tough economic times is difficult. Keep in mind that it’s not just for your financial health but your overall health. Depression kicks in fast when you have no money or job, and expenses and debts need to be paid. Start by creating a budget and follow and track and trim your expenses when possible. Also, get a side hustle, so you have extra income at your disposal.