“Crises are part of life. Everybody has to face them, and it doesn’t make any difference what the crisis is.”Jack Nicklaus.
COVID-19 continues to wreak havoc across the world and the resulting economic fallout is becoming clear each passing day. These are tough and unprecedented times. In times like these, people often worry about their health and their personal finances.
Health experts have already told us what we need to do to safeguard our health. Wash your hands with soap and water for at least 20 seconds, or sanitize your hands with an alcohol-based hand sanitizer. Practice social distancing. Wear a mask if you have to go out.
What then should you do to ensure your finances are in good health during and after this period? Let’s explore the options.
- Reduce Your Expenses
Whether your income has been affected or not, you need to cut back on non-essential expenses. This will ease the pressure on your income and help you ride out the storm. Work with actual data on your spending by going through your expenses for the last 2 or 3 months. See what you can cut back on and then write it down. Then, make a budget.
As you cut back your expenses, set aside a small amount of money for discretionary spending, if you can. This is for your own sanity and well-being. If you are locked indoors with just basics it can feel overwhelming, lonely, and hopeless. Using your discretionary amount on something that can lift up your moods while at home is good for your overall well-being.
2. If You Have a Surplus, Save
For so many people, their income will take a hit during this period. For those who continue to receive their income, they might witness an increase in their disposable income. This is because the limitation of movement and closure of some businesses means that even those with an income cannot spend it as usual.
If you are among the lucky individuals who still have an income, save it. You will not only be helping yourself but also those in need right now. How? When you save in a financial institution, the money is used to lend to the government, or to individuals and businesses who need cashflow. That way, you play a huge role in propping up the economy and indirectly helping those in need.
3. Reduce Loan Repayment Where Possible
If you already have a loan and your finances are tight, figure out how to reduce your financial obligation without defaulting. This can be done by paying the minimum repayment amount required.
Your loan provider might also have some incentives to help you navigate this period. This can be in the form of a moratorium (allowing you to pay the debt later) or the ability to roll over debt. Contact them and ask about any measures that they might have in place and take advantage of them to cushion yourself.
If you can, do not default on your loan. Paying your debt in such times gives these institutions the capital to loan others who might be in dire need of the funds.
4. Take a Loan as a Last Resort
You should endeavor to avoid loans at all times. Explore all options of financing your personal needs before considering a loan. But in times like these, that may not be an option to some. If you find yourself in that situation, choose a loan that offers a lower rate of interest and a longer repayment period.
Taking up debt with a high-interest rate and requiring you to repay in less than a month, for example, will cause bigger problems down the road. If things will not have returned to normalcy after that period, you will be forced to take up another loan to repay the first and then another one to cover your needs. You might end up being trapped in this cycle for a while.
5. Invest in Yourself
Since you are staying at home more often these days, use this time to invest in yourself and your close relationships. Learn a new skill, it can be cooking, coding, investing, or anything you have always wanted to learn. Read more. Perfect your trade. Connect with your family and partner. Check up on your friends and relatives via phone or social media. This will help you on the other side of the crisis an improved person.
6. Help If You Can
If you have the means to help those in need, please do it. You can help in big ways or small. It doesn’t matter. Just help if you can.
7. Save For Emergencies When This Is Over
This is why people save for emergencies. Individuals who have been saving for emergencies over the months or years will be cushioned if their income is affected. They can withdraw their emergency funds if the need arises, or supplement their income by converting their fund to a Zimele Income Plan, which pays out income on a monthly basis.
Every crisis is a learning opportunity. When this is over, and it will be over, start an Emergency Fund as soon as your finances stabilize.
This is a tough time for everyone in the world. Governments, businesses, and individuals are all re-evaluating their finances in light of the effects of the virus. But we will get through this together, and grow stronger.
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