Wealth Wise in the Times of Crisis
I know these are stressful times for the world at large. We are living in extraordinary and unsettling times; our daily routines, activities, relationships, rituals and finances have been dramatically affected by Covid-19.
There is much about work from home and managing health — I wanted to reach out to you with some thoughts on how you can take care of your financial wellbeing as well.
Here are my 3 points to consider:
Track your past pattern.
With the world literally locked-down, naturally, our spending patterns have drastically changed. To spear of these challenging times, we must first look at our spending before the crisis started to find opportunities for savings. I hope you keep track of your monthly expenses!
If your answer is no — that’s naïve. Do it from today. Get an app to do it.
If your answer is yes, identify:
- Non-Essentials: This simply includes all those items that you are currently living without. It includes your spending across entertainment, nightlife, shopping, sports, vacation travel, general travel, etc.
- Essentials: How much you were spending across groceries, rent, education, utilities, bills, and others that will remain constant during this crisis period.
This gives you the baseline — where you can expect to save on non-essentials and how to smartly plan the essentials.
Budgeting is for Smart People. Stupid can do without it.
Budgeting is not about being misers or pessimists. Budgeting is for smart people.
- Budget your spending
Over the next few weeks and months, a lot of your leisure spending, such as dining out, groceries, and entertainment, are likely to move online. The seamless nature of paying online will make it hard to keep a mental account of where your money’s going. Set a budget across categories so you can track your spending in real-time over the next few weeks or months. You’ll need to adjust your spending to this new circumstance and any expense that can be stopped should be. Knowing how much you need and where to cut back will help prevent you from panicking and survive this period with confidence.
- Increase your savings
Depending on your present circumstances, this could be a great opportunity for you to increase your savings. If you are not a victim of downsizing and salary cuts, you will naturally save more — at least the amount tied to social events and gathering. Put this into a savings account. You never know how long a tough period can last. As they say, plan for the worst while hope for the best.
- Mitigate loss of income
Dealing with the sudden loss of income can be devastating. If you’re facing lost or reduced income, contact your creditors and billers immediately. They are aware of how the virus is affecting people and will likely cooperate with you. Communicate more. Many governments are already taking measures and asking creditors to be considerate so if you’re finding that they’re being difficult, seek out a legal help — ideally provided by government.
Back to Normal.
- Resist the Temptation
Once the crisis is over, hopefully, you might have the temptation to spend like there is no tomorrow. I think that will be a super-blunder. First of all, doing that will prevent you from rebuilding your savings. Who knows what’s next in the store for the world? When the crisis passes, take the time to re-assess which non-essential expenses you can easily live without. Nothing in this world is predictable — but the rule of thumb is to have at least 3 months and ideally 6 months of your survival cost in savings to cope up with any such crisis.
These are unprecedented times but staying sorted and thoughtful, we’ll make it through. I really hope we all come out of it, healthy, wealthy and happy.
Stay home. Stay Safe. Stay blessed.
