Though effective financial management’s role in our lives should hardly ever be overlooked, it becomes incredibly crucial in times of crisis and adversity. Previously, financial crises were associated with unemployment, injury/illness, or loss of property assets. Then came the year 2020 and with it the global pandemic that forever changed this generation’s definition of a crisis. Unfortunate as it may be, nobody escapes life without at least facing one financial pitfall at some point. And besides testing your patience and mental endurance, times like these will also put your money-management skills to the test. But don’t worry just yet; this article is here to help you overcome the challenges associated with the ongoing financial crisis. Below are seven tips to help manage personal finances and maintain financial stability:
Track your spending and plan ahead
Nothing deserves more emphasis than this point. People must develop a fool-proof budget for better tracking and adjustment of income and expenses. Several online tools and budgeting software may come in handy in this regard. With a budgeting tool or spreadsheet’s assistance, one can acquire a basic spending framework and be mindful of irregular expenses, like hospital visits. Knowing the ins and outs of your income will help you make the necessary cuts. And once you start cutting back, you can begin to create cash reserves for an emergency fund.
And no, size doesn’t matter when it comes to emergency funds. Whether it’s a small $200 fund or thousands of dollars, any money you set aside will be fruitful in the long term. Even a seemingly negligible amount may be what eventually helps one avoid missing bill payments and keeping bread on the table. Once in place, one can gradually increase the fund per need to cope with future pitfalls.
What’s more, pursuing an MBA with accounting concentration can provide the skills required to quickly review one’s spending for locating saving opportunities and identifying spending patterns. Nowadays getting an online degree and enhancing your know-how is a piece of cake.
Keep a tab on shopping and entertainment
Humans have a natural tendency to seek comfort during trying times, e.g., a global pandemic. And sometimes that entails making unnecessary online purchases and indulging in hours’ worth of entertainment without a second thought. Avoid going down the online shopping rabbit hole and spending outside your financial constraint. And try to keep only the essential subscriptions and get rid of the ones you don’t need/use. Plus, a crisis is a perfect time to benefit from free music and streaming platforms.
Look for additional sources of income
Due to the recent rise in unemployment, most individuals fear job insecurity and lower wages. In such cases, maintaining a part-time side hustle can be a game-changer. So during a financial setback, your additional income can be a cushion to fall back onto.
Some examples of extra-income sources include selling old appliances and gadgets, selling baked goods, trading pre-loved clothes, providing tuition, freelancing, and participating in paid surveys. Again the amount doesn’t have to substantial; it just has to be there.
Beware of scams
Scammers are to crises what frogs are to the rainy season; they come out as soon as people let their guard down. So watch out for scammers and avoid flushing your hard-earned money down the drain. When living hand-to-mouth, it might be tempting to jump at any opportunity that promises substantial financial gains. Yet, like most investment opportunities, if it sounds like fool’s gold, it probably is. Consider seeking friendly advice and a careful review of all details before deciding to invest in or buy something.
Prioritize your bill payments
Luckily, one can easily access assistance programs to cut back on monthly bills. These programs help reduce or suspend one’s bill payments. However, it’s best to create a strategy for paying utilities and prioritize what matters the most.
Focus on what gets you by. Expenses like utilities, food, and shelter are essential for survival, so prioritize these. Next come the work-related expenses like transportation, daycare, broadband, and phone charges. Individual finances may vary, but most people can do anything not falling into the above categories.
Negotiate rent and mortgage
It might be a good idea to contact your lender and negotiate the monthly payment terms if you’re going to miss the deadline. By doing so, you’ll open yourself up to payment alternatives like taking out a payment holiday. Depending on the lender, one may be able to reduce their repayments for the time being. The only downside to a mortgage payment holiday is that it will later show up on one’s credit report. Consequently, it can lower one’s creditworthiness, making it difficult to acquire credit in the future, including loans and credit cards.
Similarly, individuals living on a rent basis must immediately contact their landlords for the same purpose. Most times, landlords are willing to negotiate agreements, such as reducing the rent or extending the payment deadline in the face of adversity.
Don’t hold back from seeking help
Opening up about one’s financial struggles might be one of the hardest things in the world. But, sharing your concerns with friends and family can make you feel less alone and open up opportunities to receive financial help. When the going gets tough, it’s one’s loved ones that are there for help. Seek help in any form you need, be it money, food, or emotional support. Additionally, seeking professional advice like a mental health counselor might be beneficial too.
The bottom line
Whether you’re coping with a personal financial crisis or just bearing the consequences of the ongoing pandemic, remaining calm and rational thinking are essential. For that purpose, this article discussed some tips to make it through such situations. These comprise tracking spending, negotiating payments, and finding additional income sources. Whatever your dilemma, try your best to get through the day without losing yourself in the crisis’s confusion instead of focusing on future financial goals.