The sudden outbreak of the global pandemic of Covid-19 has put everything on a halt. It has its adverse effects on the global economy and is continuously affecting the lives of millions across the world. A plethora of individuals have lost their jobs while many are struggling with a reduction in their income. It has caused financial stress in individuals affecting their overall health and well-being. The unpredicted event has completely changed how people think about money and plan their budgets to cope with daily needs. In such a complex situation, individuals must take some precautionary steps to protect both their health & wealth from the adverse impacts of the pandemic.
In this blog, financial advisor, Mr. Ngulminthang Lhanghal is sharing a few essential & smart money management tips that will help you manage your finances and cope with the financial crisis. Let’s have a look:
1. Make An Adequate Emergency Fund - The first & foremost step towards money management during Covid-19 is to maintain a sufficient emergency fund. It will rescue you when your income gets stressed or when you extremely need money to recover from an unexpected event like a medical emergency. Here “adequate” means you need to make sure that your fund is worth at least 6 months of your expenses.
2. Consider Life and Health Insurance Policies - Many people ignore the importance of policies during a financial crisis but it can be your best move to protect your family in the event of your sudden demise or an accident. Getting a medical insurance plan for yourself & family members will help prevent money-draining in hospital bills. Seeing the rising cases of Covid-19 day-by-day, it is not a good idea to compromise on paying the insurance premium on a term plan and experience a policy lapse.
3. Keep Sailing Existing Investments - Investments help meet your financial goals and project your future in terms of financial stability. But if you are going through a cash crunch, see if you could manage to continue some of your investments that are important for crucial targets. If you can afford to, you can invest in retirement savings and other investment accounts.
4. Ensure Liquidity - One more lesson that the global pandemic has taught us is to keep some cash handier and to ensure its accessibility to other family members also. Keeping cash in hand will help in the event of a financial emergency such as paying for tuition fees or any medical emergencies etc. Make a list of assets that can be liquidated when required such as property, equity, or gold.
5. Use Money Management Apps - You can manage your money easier & hassle-free by installing reliable & popular money management apps on your mobile. Online banking apps can make a big difference in saving & managing money. These apps collect information from your bank accounts, track your spendings, take notes of the stores you visited to check for any vouchers, and help you save.
6. Pay Credit Card Bills on Time - Not paying your credit card bills fully by the end of the month will bring you the stress of interest charge on the value of purchase made on the card. You can also be charged with a higher interest rate if you withdraw cash on a credit card. Even if you pay the minimum amount on credit card repayments, you can still be charged compound interest that can hurt your credit score, eliminating future borrowing chances.
7. Figure Out Direct Expenses - Monitoring & tracking your direct spendings will have a big impact on reducing them when it is necessary. Find out if you are paying for things you are not even attentive to, such as monthly magazines or gym membership, etc. You will get to know that these unnecessary expenses are taking a huge part of your earnings in the bank account. Find & settle them now.
8. Set a New Budget - When you recognize your financial stressors & direct debits such as entertainments or other activities, make a budget accordingly. The global pandemic has brought great uncertainty and ensuring you are capable of covering your expenses should be your topmost priority right now. Find your new & possible sources of income.
9. Opt For a Personal Loan - Applying for a personal loan can be a great move if you have a good credit rating and are in need to pay for some urgent financial emergencies. Many banks & financial institutions offer personal loans at considerable interest rates. Find out their requirements and choose the most suitable one.
10. Reconsider Debt Strategy - Financial advisor, Mr. Ngulminthang Lhanghal has always recommended not to carry debt, especially credit card debts with high rates of interest. In the present scenario, the stock market is unpredictable and interest rates have reduced. It is the right time to refinance loans at lower rates.
These are some money management tips that you can consider to survive in the sudden pandemic of Covid-19. Additionally, spend less, save more & stay positive.
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