Ever since the world was plunged into the Covid-19 pandemic, our lives have taken a different route financially. Everything about making money, including our very own thought process, approach, and the whole world economy, changed drastically. As if that wasn’t enough, we were plunged into a further financial crisis by the Russian invasion of Ukraine, which disrupted energy markets, supply chain and grain supply.
Many of the world’s economic powerhouses are still feeling the pinch of this financial crisis — for instance, the British pound recently fell to its lowest ever against the dollar, while Germany is expected to enter its worst recession in 2023.
The Covid-19 crisis forced many businesses to close down, and this left ordinary folks feeling the brunt, with many losing their sources of income. Only very few businesses have flourished since the outbreak of the pandemic, including the top online casinos, telehealth, streaming services and e-commerce such as Amazon, eBay, and Shopify. Unfortunately, the same cannot be said for everyone.
What the Covid-19 and the war in Ukraine has taught us is that we are in a state of flux, and as a result, it has never been more important to prepare yourself for a financial crisis. To help you navigate difficult financial times following any crisis, we have compiled a list of the top 8 tips to overcome a financial crisis.
Manage your bills closely
During a pending financial crisis, it helps to be extra studious with family bills. You’ll need to be organized and avoid late payments, as this will save you from financial penalties.
To help you manage your bills more effectively, set a date to review all your accounts. Doing so twice a month is recommended. It is also advisable to schedule your payments to arrive some days before the due date to be on the safe side in case of delays.
Not all of us have a good memory, but you shouldn’t allow that to prevent you from keeping track of your bills. Even better, if your bills are too many, compile a list to ensure you’re always on top of your accounts.
Develop the habit of keeping reserve corpus
In a time of financial distress, toning down on some lifestyles can help you stay afloat. Keeping a simple traditional lifestyle that is not extravagant should be your focus.
Primarily, this change of lifestyle should be aimed at ensuring you have a financial reserve. After clearing your bills, it is imperative to save as much of your remaining earnings as possible.
Make smart investment decisions in flourishing stocks
The world has previously been plunged into several periods of financial crisis, which have taught us important lessons. Making smart investment decisions starts with choosing equities or stocks that are less likely to crumble during a crisis. An example is investing in stocks of companies involved in medical research and vaccine manufacturing or IT companies.
Another option would be to invest in fixed deposits or mutual funds to prepare for any future financial risks and difficulties.
Maximize your liquid savings
During a financial crisis, you can count on your cash accounts to keep you in good financial standing. This includes liquid savings such as money market accounts, savings, short-term government investments, and certificates of deposit. You can easily turn to these resources because of their stable value in fluctuating market conditions.
Unlike index funds, stocks or exchange traded funds, liquid savings will retain your purchasing power because their value doesn’t fluctuate. Additionally, all the other forms of liquid savings do not incur withdrawal or tax penalties except for CDs.
Prepare to minimize your monthly bills
Simply keeping a closer eye on your monthly bills may not be enough during a financial crisis unless you follow it up by minimizing these bills. Cutting out on unnecessary bills seems rather extreme, but it might be the ideal solution during a prolonged financial crisis. Doing so enables you to pay your remaining bills even when money is in short supply.
This is also the time to start looking for cheaper insurance services and seek to remodel your mortgage payment plan.
Pay down your debit and credit card
Anytime the world is plunged into a recession, those with bank loans suffer the most, as the loan interest rates skyrocket to offset high inflation rates. Similarly, if you’re using a credit or debit card, you’ll discover that monthly interest charges are taking up whatever little you’re planning to save.
To mitigate this, focus on paying down your credit card debt to reduce your monthly bills and get yourself a richer savings portion of your income. Eliminating interest payments frees up your finances, thus enabling you to finance only the crucial things.
Look for a side hustle
It is an unwritten rule that everyone should always have multiple sources of income if they’re to gain financial stability. Finding something to earn you extra cash off your main hustle doesn’t have to be that complicated. It could be as simple as auctioning assets you no longer need, freelancing, babysitting, tuition classes or any other side hustle.
These endeavors may earn you small money that adds up to your monthly budget.
Preparing yourself to survive a financial apocalypse will ensure you maintain a high sense of financial discipline. In the best-case scenario, you’ll find that you’re actually flourishing and not simply surviving when an economic recession hits us all.
Surviving a financial crisis doesn’t have to be that sophisticated but simply requires good organization and planning. Simple acts such as having a budget, close management of your bills, reducing your monthly expenditure, having a reserve, smart investment decisions and maximizing your liquid assets can go a long way in securing your finances during a crisis.