Broadway star and famous humorist Will Rogers once said, “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”
No amount of preparation can counter the unpredictability of life. Hardships never come alone—they are accompanied by several other debilitating factors such as anxiety, fear, and loss of control. Because of the current pandemic situation, we are forced to review our financial habits and learn some lessons that will deeply influence our money mindset.
Let’s skim through the 5 most important takeaways about money that we realised during the COVID-19 timeline.
1. Invest In Liquid Savings
Cash accounts and other liquid savings accounts are the biggest saviours during such debilitating times. The reason being, unlike stocks and capital markets, their value does not fluctuate with market conditions. And you can withdraw the funds as and when required without incurring a penalty or loss.
If you have been wondering about the best investment plans for engaging surplus cash, short-term liquid funds are the answer to all your queries. They offer better returns in lesser time and can provide daily, weekly or monthly dividends at 0 inconveniences. It is advisable not to vouch for high-risk long term investments unless you have a sturdy cash savings option to rely on.
2. Careful Planning And Budgeting
A basic yet highly underrated aspect of money management, budgeting is the backbone of maintaining healthy personal finance. Keep a tab on your income and expenditures and do a self-assessment of your lifestyle. The idea is to create a conscious demarcation between your needs and wants, and the former should always be a notch higher in the priority list.
Maintaining a monthly budget keeps the expenses on track and also lets you build up a rainy day reserve. Cutting down on unrequited expenditures, such as too many online subscriptions or a landline phone you seldom use, might be a great way to kick-start your budgeting. It is okay to splurge once in a while, but your lifestyle should always be consistent with your earnings.
The biggest problem with the success of budgeting is that we never turn to it when things are normal. Don’t wait for a crisis to take control of your money and make budgeting a way of life. Regularly check on your bills and expenses and avoid anything that seems to be overindulgent.
3. Build Your Credit Score
A credit score is like a report card of your financial health. If you’re trying to amp up your savings, it is important to be extra vigilant about your credit rating, especially during turbulent times when your finances are likely to go haywire. Run a check credit score uk to get an idea about your creditworthiness and the fate of your future loan applications.
Certain tips and tricks that may help in building a decent credit score are listed below:
Register To Vote
Register yourself on the electoral roll to keep your credit rating up. It is perfectly doable while staying in a rented apartment or shared accommodation.
Get A Line Of Credit
If you are new to the country or just started working, there is a high possibility of feeble credits. This is not a very desirable trait in the books of moneylenders. And as confusing as it may sound, a zero track record of borrowing is classified as a poor credit rating.
So, start managing your bank accounts sensibly, opt for a credit card or avail a small form of credit. Even managing your utility accounts and paying dues on time can lead to a substantial boost in the credit score.
Pay On Time
While you are trying every bit to rehabilitate your credit score, it is equally important to track your monthly dues and avoid late fines. Setting up direct debit payments ensures that all bills are paid on time, and there are no penalties whatsoever.
Go Easy On The Applications
A red flag for many financiers is multiple credit applications in a short period, which can prove to be hazardous for your credit score. Spacing out the credit applications and under-utilising the credit capacity can show remarkable improvements.
4. Maintain An Emergency Fund
As we gradually transition through the stages of denial, bargaining, acceptance, and gradual recovery, the future still looks bleak. So, when the going gets tough, the tough get going. The only way to face a phenomenon so overpowering is to be prepared for it.
Even if you made some stark mistakes during the previous hardships, the lessons you learned from them should help you build a safety cushion. Slash the travel, entertainment, and dining out costs and rather invest them in building a liquid emergency fund to keep you hunkered down during stormy days.
An emergency fund should consist of liquid cash that provides you and your family for at least 6 months without income. To understand your scope of savings, seek out credit score providers that offer a free credit check uk and analyse your current financial status.
5. Find Multiple Sources Of Income
While it’s good to focus on one’s core competencies, its time we unleash the “jack of all trades” instinct in us. Find avenues that ensure some extra income apart from the routine work you do. A freelance job or a hobby that you never thought of encashing might seem insignificant at a glance, but they do contribute to something substantial over time.
Loyalty points are also a great way to make some extra cash. A good percentage of credit card users claim that most of their flight tickets are sponsored by accrued reward points.
The financial hardships that COVID-19 has inflicted upon the human race will have a profound impact on the way we manage money going forward. But some due diligence and financial planning can save you from a lot of stress and let downs.
Once you let the stagnancy run its course and things start converging back to normal, do plan your future goals and start working towards them. It is never too late!