The last two years have forced millions of people around the world to make tough financial decisions. We experienced the most hard-hitting global health crisis that has ever taken place. The economic recovery is now showing positive signs. So, how should you save the money you have earned to meet the challenges that global crises gave birth to?
No matter where you belong on the spectrum — the ones who have got better salaries or continuing in your job with your old salaries, or without a job — you can still manage your money and take care of your finances.
Figure out where you are at
Regularly analysing and checking your finances is extremely important and even more so during a pandemic-like crisis. So much of our 'normal life' has changed and surely it has affected both, how we save and spend our money. Take time to go through your expenditure and saving accounts and note what and how much you have been able to save, how your spending pattern has altered, and what debts have piled up since the pandemic.
According to financial advisers, analysing your spending is the wisest move right now, as it shows if funds can be allocated toward savings, or whether there’s a need to realign spending on things like entertainment and groceries. You should be able to make adjustments to your expenses if there’s a major change happening in and around you. If you are someone who relies on technology for spending and managing your accounts, the whole process becomes easier.
Think long-term
When it comes to social security benefits, the first step remains to always look for ways to free-up cash. Typically, the biggest impact comes from big-ticket items like transportation or housing. At the same time, small fixes such as cooking at home or making coffee for yourself can also help over time. We have all witnessed since childhood how our mothers stash away even a tiny amount into a rainy day fund for unanticipated medical expenses or other bills.
Another proven hack to get money back in your purse is to cancel monthly subscriptions like meal boxes, streaming services, or iCloud storage. If you glance through the recurring charges of a 28-year-old with an affinity towards entertainment platforms like YouTube Premium, Amazon Prime, Spotify and Netflix as compared to a 40-year-old with interests inclining towards outdoor activities, the former can be found spending triple of what the latter does.
Experts suggest you don’t have to get rid of all the sources of entertainment, but rather than paying for three different streaming platforms, go for one that is most used. Eliminating such expenses doesn’t have to be permanent, but can free up some much-needed cash during times of need.
Keep a check on your debts
It is recommended to avoid new debt, regardless of how well you can earn and save. To cite an instance: A 33-year-old IT professional with stable employment at one of the top-ranking multinationals was tempted to take advantage of low-interest rates to buy a luxury four-wheeler a mere four months into the pandemic. What seemed like a great deal at first backfired in no time after the individual lost his job two months later. With savings that would suffice for not more than half the year and heavy liabilities including EMI for a vehicle loan along with household expenses, medical bills, and a family to look after, he was left with no option but to sell his car to survive the pandemic. What was worse was the unemployment phase lasted for over a year.
Debt is a liability, no matter even if it’s zero per cent interest debt. You still have to pay it back. There are different ways to take benefit of low-interest rates that can help you get a better hold on your debt in the long run.
Refinance your home
Refinancing your mortgage at a lesser rate can help you save interest charges over time. If you opt to go for a shorter loan term, say 15 years, you can consider reducing your interest rate all the more. However, be conscious of the fees and avoid extending your loan term — in this scenario, refinancing can cost you more.
Contact your credit card companies
If you are doing well in terms of your credit card history, you may think of getting in touch with your credit card companies to check if they can lower your interests. The other option is a balance transfer card, wherein you roll your balance over to another card that has an extremely low or zero interest rate promotional period. Importantly, if you want to save money with a balance transfer card, take note of the fees and map out a plan to clear the balance off before the completion of the promotional period.
Continue making investments
If you can manage to save and invest, do it. Don’t pay attention to what’s happening in the stock market and look for the bigger picture. If the stock market is down, investing during such times means your money can go farther. Stay focused on your long-term strategy; the market, sooner or later, is bound to recover and you’ll notice your portfolio bouncing back.
Final word
The uncertainty caused by the pandemic has been hard on everyone. But at the same time, it’s important to reflect upon the positive changes that have occurred in the last year. What’s crucial is to be grateful for all the positive transformations, even if your finances have gotten hit. And as the popular saying goes, “Money is necessary, but it’s not everything!”
(The writer is the Founder of Money Mantra — a personal solutions firm)
