Today, we have a special guest Lily, who is passionate about all things finance! Let her sound advice guide you in navigating the perils of the financial world we are facing in these turbulent times.
Over to you, Lily.
A financial crisis can stem from many factors — a medical emergency, losing your job or an extra responsibility you need to take care of.
Managing your money can be hard in times like these, and with the ongoing pandemic, financial uncertainty looms large for everyone.
Here are 7smart ways you can manage a financial crisis in uncertain times:
#1 Make use of your assets
Being prepared for a financial crisis means taking stock of all your financial assets.
Do you have frequent flyer miles that you can use if you need to travel?
Credit card points that you can use to buy groceries from?
Any jewelry or antiques that you can sell?
You can use these tips to keep yourself afloat when you are facing a financial crisis.
You can also keep a 0% interest credit handy if you don’t have enough cash to cover any major expenses that come your way.
A home equity line of credit can also be used if you have available equity in your home.
#2 Keep track of your expenses
You might not be able to cut significant expenses out of your budget, but small steps in the right direction can go a long way in helping you get back on track to financial stability.
You can do this by keeping track of your monthly expenses or using one of the many online tools to track expenses and make a budget.
Examining your monthly patterns and understanding where you slipped can help you understand what sort of spending behavior you can correct.
#3 Look at ways of reducing expenses
After you’ve started noting down your expenses, you’ll know how to cut out unnecessary expenses and make a better monthly budget.
This way, you can have a better idea of what expenses you can cut down on.
You can end any subscriptions that you have, keep debt payments to a minimum and implement a strict monthly budget for variable expenses like eating out and other forms of entertainment.
#4 Keep an emergency fund ready
An emergency fund is a savings account that you build steadily by putting aside a small amount every month.
You can even start with the smallest amount that’s possible for you.
This emergency fund can be a godsend if you are going through a financial crisis. If you know you have some money saved up to handle a financial crisis, then you can navigate it better.
You should have at least three to six months of living expenses set aside and enough money to deal with a medical crisis in your emergency fund.
#5 Look at trustworthy sources of outside help
If you don’t have an emergency fund set aside and are struggling to handle your budget because of unforeseen circumstances, don’t be afraid to get outside help.
If you feel overwhelmed by debt, you can work with a credit counselling service or apply for fast loans from fintech companies that can be approved quickly.
#6 Lower or put a pause on retirement and other contributions
This might seem like a hard pill to swallow, but it is often necessary.
If you contribute to any sort of retirement funds like the 401(k), reduce your contributions or put a temporary pause on them until you get back on stable ground.
Yes, these contributions are necessary for your future, but it is more important to use that extra dough to deal with the financial crisis at hand.
You can always resume contributions when things improve, and they will.
#7 Stay optimistic
The stress that you are facing in a financial crisis may take a toll on your health.
So, no matter how scary the situation looks, try and be optimistic — this will also help you keep a clear head and understand what steps you can take to come out of the financial crisis you are facing.
Sticking to a budget is not very easy, but do the best you can.
You might feel things are out of your control, but by becoming aware of your spending, cutting costs and boosting your savings, you can make wise financial choices to help yourself in the long run.
A financial crisis can be stressful and overwhelming, but make sure you evaluate your situation before making impulsive decisions based on emotions. Tough times don’t last forever, and being smart about how to handle financial challenges can put you in a better money position once the uncertainty passes.
Lily Tran is a content writer, working for MoneyTap Vietnam, who writes about all things Finance. Her passion for credit, debt, loan & investment drives her to help readers get an insight about everyday finance.