Don’t know how to start? Here are 3 adjustments you can make as you face these challenging times:
1 Re-evaluate your cash flow and compute your expenses.
Whether in a pandemic or not, regular assessment of your savings vis-à-vis your spending is a wise practice. If you’re suffering a pay cut, you might want to reevaluate your current expenses and determine where you can cut costs. Base your expenses on your new income bracket. For example, if your salary is down by 20 percent, consider cutting your costs by at least 20 percent.
Go through your essential expenses one by one. Limit nice-to-have items such as restaurant meals and gym memberships. Take this time to learn new recipes and try out different workout regimens online. When buying groceries, revise your usual list and opt for an affordable version.
2 Have your emergency fund ready.
Because of its purpose, your fund should be in cash or liquid assets and must be accessible and available anytime you need it. An emergency fund is different from non-liquid assets such as life insurance plans that mature after some years, or real estate that cannot be sold or converted into cash right away. It should only be used in unforeseen, sudden events like accidents, a retrenchment, or home repairs.
How much should you set aside for your emergency fund? A helpful rule of thumb is that it should cover six months’ worth of spending, including payment for rent or mortgage, utilities, and other monthly payables such as food, planned medical expenses, and insurance premiums.
3 Create a crisis plan.
Once you’ve figured out your cash sources for an emergency, identify all possible financial options during a crisis, particularly the ongoing pandemic. Your crisis plan may include steps such as getting the best value out of smaller non-cash assets like membership reward points and gift cards, determining which luxury purchases to let go, and exploring government-supported aid. These measures could boost your cash inflow and/or decrease your costs, helping you get through this time.
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