The coronavirus pandemic has put several aspects of our lives to the test. Many of us are just trying to stay healthy and cope with being stuck at home. Other than the obvious health concerns, it has also posed a financial challenge that many aren’t prepared to face. While devastating, the pandemic has provided many lessons in how we should be handling our personal finances.
Start building an emergency fund ASAP
As a consequence of the economy slowing down millions of people were laid off, furloughed or have had their wages or hours reduced. This has resulted in many households becoming financially unstable, which is not an easy matter to deal with when the bills continue coming in. What’s even worse is that in the US, 25% of the population barely have three months’ worth of expenses in their emergency fund and 30% don’t have any money at all tucked away for a rainy day.
An emergency fund is a savings account which can cover expenses for the next few months when your regular income can’t. Having an emergency fund has never been more important as people are dealing with a sudden loss of income or unexpected medical expenses.
Building an emergency fund should be included in your monthly budget and savings goals. Experts recommend setting aside 10-15% of your combined household income in a rainy day fund, preferably a high-yield savings account. This should be left untouched until you absolutely need to access it. Aim to have between three and six months’ worth of expenses saved; but you can always add extra cushioning once you’ve reached that number. After saving up a sizeable amount, another option is to contribute to your retirement savings and other savings accounts. The point is, your savings goals, including your emergency fund included, should be flexible and constantly evaluated depending on your circumstances.
Additional skills come in handy when things get tough
It goes without saying that lost income, or at least a reduction in income, is tough for anyone to shoulder. However, there’s no reason for it to stop you from achieving your goals. You need to dust yourself off and find creative ways to earn some extra cash. There are a lot of side gigs you can explore. In fact, many people are offering their in-demand skills, which can range from online teaching to social media management. Check different freelancing platforms for one-off jobs that you can do. Pad out your resume with professional experiences – maybe it’s a skill you’ve developed in your career or a hobby that people pay for, like designing or writing. You’ll be surprised by how much you can end up making with a side hustle!
There are plenty of simple ways to cut back
One good thing about being stuck at home is how it’s forced many people to re-evaluate their lifestyles. For example, 78% of adults surveyed saved up $245 in less than a month just by not eating out in restaurants. Buying groceries and cooking your own food is indeed a lot cheaper than getting someone else to do it for you.
Another way you can cut back and adjust your budget to suit your lifestyle now is by traveling less, even if it’s just within the city. More and more businesses are implementing remote work set-ups for their employees which has given a lot of people the opportunity to save on expenses such as fuel or commuting costs. It’s important to consider how not going out has saved you gas money, as well as eating out, take-outs, socializing, entertainment and other expenses. Maybe you’ll realize that you were spending too much on these things in the past and you can continue to reduce these expenditures a little when things are back to normal.