Let me reproduce the statement of International Monetary Fund (IMF) Chief Kristalina Georgieva who describes the Covid-19 induced global economic crisis in nutshell. As the Covid-19 pandemic has pushed entire nations into lockdowns, crushed value chains, and stressed household finances, she says: “This is a crisis like no other. We have witnessed the world economy coming to a standstill. We are now in recession. It is way worse than the global financial crisis of 2008-2009.”
This health emergency has knocked millions of people out of jobs to unprecedented levels globally. Besides, it has exposed the hidden fact that personal finances are hardly immune to the crisis of this magnitude.
There is no denying the fact that Covid-19 has hugely impacted almost every area of our lives: from economy to health services. The crisis which the virus unlocked has brought those aspects of life to the forefront that we previously may have taken for granted. Now, the geography of economic landscape of individuals as well as businesses in the pre-coronavirus pandemic scenario stands almost irrelevant in the current scenario. The virus-induced crisis is still in sweeping mode triggering massive changes to alter the existing ways and means of living and doing businesses.
Notably, it has created economic emergency across the globe where myriad investments across sectors now stand pushed into in uncertain terrain. Adding to everyday woes is the fact that many companies have and are still considering layoffs and delayed salaries. Precisely, the virus is nibbling savings, leaving people clueless about future as deep financial crisis has knocked their doors.
The virus-induced lockdown has left millions of people without money in the country and have become victim of financial-induced stress affecting their mental health and well-being.
In other words, the present is not rosy at the moment on financial front and demands smart money management to survive through this turbulent period. At the same time, there are certain financial lessons which this crisis presents to streamline and chisel money management skills in future to navigate such crisis with minimum turbulence. The current situation calls for calm-headed decisions that help you fortify your household finances and help you come out of the crisis unharmed.
Basically, now is the ideal situation to get motivated to live on a budget. It may sound complicated to create and maintain a household budget, but it’s easy once you know how and is a very good habit to have. A budget forces you to consider your finances, rather than just living hand-to-mouth or panicking if an unexpected expense comes up. It also tells you if you have any spare cash for luxury items, holidays or just money to go out for an occasional treat.
If you have a high amount of debt, a budget will be especially helpful as it will help you plan out how to pay off your debts and manage the money you have left over. The same applies if you’re on a lower income; you have less money to spend so you need to know that you don’t waste a single cent. This means knowing each month how much you have, what you have spent your money on, what your goals are, and where you stand in terms of reaching those goals. To do this, you have to take the time each month to balance your accounts. When you don’t, you just continue to spend money, you avoid thinking about it, and then you feel awful about yourself when reality sets in.
You should just ask yourself a few questions. Am I living beyond my means? Am I earning well but still don’t seem to be saving enough? Have I ever thought of how to save most of the money I earn?
These are the most crucial questions which one needs to answer. Your answers will definitely lead you to live on a budget, avoid expensive habits and force you to save. Adopt the saving habits and you’ll be laughing all the way to the bank in no time. It is not cumbersome. Just do a simple thing. Record your daily expenses, add them up and if you find that the total exceeds the amount of your income, then that it’s time to cut down on your spending. Once you have come up with a realistic budget, avoid the temptation to overdo when you are out for shopping, especially online shopping. Cutting back on your day-to-day expenses and resisting temptation makes it much easier for you to save.
Most of us fall prey to the lure of this kind of money. The convenience of credit cards is hard to resist but if you want to save, pay cash whenever possible. You need to watch out while using your credit cards, especially the fees associated with owning a card. However, if you can’t do without a credit card, find a card that does not charge high annual fees and comes with cash saving benefits.
We know monthly fuel expense; mobile bills and other such expenses burn a hole in our pocket. When we talk of curtailing the expenses, these items need careful handling. You should always look for fuel saving options and always check your phone tariffs to ensure that your plan suits your needs. Clip your bills accordingly.
Meanwhile, it is also important that one builds a bigger rainy day fund and for this saving habit is a must. Because more often than not, you will get the picture wrong as it is simply impossible to anticipate the course various change agents would take and how they will shape the financial landscape.
Managing money is not a big deal. But what is required is the development of habits of saving money. There are two things that may have kept many of us at bay for developing money saving skills. Either we were never really taught how to manage money, or maybe we simply avoid thinking about it because the situation is so dire.
In succinct, the emphasis has to be on saving the right amount and any time is good time to save. While saving, one has to draw a balance between present and future needs. Setting more aside and spending less on the non-essentials is the most crucial base of saving money. The point of good preparedness is to start doing it before you are forced to.
And don’t forget to build an emergency fund. Put some money aside, always and do not touch it; an emergency fund could be very crucial if things don’t go well and pad up your fund for the future.
A message for the young birds. When it comes to savings, the early birds have an advantage. They manage to save a decent pile for all their requirements with much lesser fuss. They can make their money grow so well that they secure their future without depriving themselves today.
You may have saved a lot and yet be forced to be miserly when you need money. This slip between cup and the lip can happen if you don’t invest your savings in an appropriate manner. So, save in such a way and invest your savings in instruments, which not only ensure appropriate growth of your money but also makes your money available anytime and anywhere.
Last, but not the least; diversify your income in the given pandemic situation if it is preventing you from working. Build your skills, consolidate your knowledge and think about how you can leverage those skills to start a side hustle. Precisely, monetize your expertise and diversify your income sources to stay financially afloat in the crisis. Notably, the definition of normal is all set to change. So, utilize the crisis time to ensure that you remain financially fit for what the new norm in the post-pandemic will be.
(The views are of the author & not that of the institution he works for)