Making the Most of Your Money During a Financial Crisis
Tuesday, June 30, 2020, 6:00 AM | Leave Comment
From the 2008 housing crash to the current COVID-19 pandemic impacting the financial industry, money-related challenges seem to, unfortunately, be a prevalent part of life.
This can be especially challenging for those directly impacted by these situations and learning how to navigate this new normal.
However, with the right amount of preparation and financial savviness, there are many ways to make the most of your money on a tight budget.
Read on for ways that you can prepare for and survive a financial crisis.
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Create an Emergency Savings Account
While this step should technically occur before a financial crisis even begins, it plays a vital role in a variety of situations. Many financial experts agree that an individual should have at least 3-6 months’ worth of expenses put aside to serve as a source of financial support during instances such as unemployment, or a medical emergency.
You can start building an emergency fund by putting aside a small percentage of each paycheck into a separate account, such as a digital savings account with no fees. This will allow you to quickly build up a steady amount of money on a month-to-month basis. Keeping it in a savings account can prevent you from spending it unless absolutely necessary, as it cannot be withdrawn with a debit card.
When a financial crisis does occur, you can then weigh your options and see if it would be the best time to withdraw from this emergency fund. Always remember to weigh your options carefully, as withdrawing before it is absolutely necessary, may leave you with less money when a real emergency arises.
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Stick to a Tight Budget
A budget is a roadmap and guide that will help you avoid overspending and keep you on track for paying all your bills in a timely manner. Without one, many financial challenges can be more difficult than originally anticipated. If you create a budget for your daily life, this can be translated into a budget outline to use for a financial crisis.
To get started, begin by writing out your monthly expenses categorically in order of importance. For example, Housing, Food, and Transportation should be listed out as a priority. You can follow this with less necessary expenses such as entertainment and spending associated with socialization. Visualizing your priorities can be helpful when creating a budget as it can help you find areas where you might need to cut back on spending.
Next, compare and contrast this with your monthly income. This will allow you to get a picture of if you’re overspending every month, or if you have extra money available to put aside into savings.
If you find you are overspending, find ways to reallocate funds from entertainment to priorities, and if you have anything left over, put that towards paying off any debts you might have. In emergency situations where your money is tight, a budget will give you the freedom to reallocate funds to priority expenses.
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Create Different Sources of Income
Having one full-time job can be a steady source of income, lasting an indefinite amount of time and giving you the ability to grow in a career. For this reason, it is the most common form of work for the everyday person. Unfortunately, financial crises can leave many looking for work, when businesses begin closing or laying off workers.
This is where having a few different sources of income can play a huge role in financial success, and can provide a vital safety net as they can allow you to not only save more money when there isn’t a crisis, but also gives you something to fall back on when times are hard.
A side gig job is just one example of a secondary source of income to utilize. Working a part-time or gig job on the weekend such as ridesharing or food delivery can act as a safety net for an unfortunate situation.
Services like Uber, Lyft, or DoorDash all allow you to choose which hours you want to work, so don’t be afraid to take on a job like this while working a full-time job, you’ll have more than enough flexibility to do both.
You can also create secondary sources of income through investing. Certain stocks produce dividends, which are payments made on a monthly or quarterly basis. While often small, having a lot invested into them can add up quickly, leading to having a good amount of extra cash coming in on a regular basis. However, one thing to be aware of is the risk with them, like with any other investment.
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Connect with Community Support
When all else fails, money does become extremely tight, and budgets and bill payments may not be met, it’s time to look towards the support of your community. Look into different government programs for unemployment, which can provide you with a much-needed source of income during times of crisis. There is no shame in finding help when times get tough, and it’s important to put your financial and physical needs first during difficult times.
Financial crises are unfortunately a part of life for many, but they don’t need to be something to panic about. With the right amount of preparation and strategizing, you will be able to safely navigate them and stay afloat.
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