We reside in a highly uncertain world where there is a possibility of things going south at any time. The recent Coronavirus outbreak is an excellent example of such a scenario. Several businesses had to shut down, many people lost their jobs, and went into a terrible, unprecedented crisis.
Financial crisis doesn’t only come during Pandemics. Instead, uncertainty can strike at any time due to a sudden loss of income, job insecurity, or local events. What is essential is always to remain fully prepared. It would be best to start making healthy, cautious, and positive money choices to reduce further losses and deficits.
Uncertain times are difficult but livable. Effective financial planning can help you turn uncertainties into opportunities. Below, we have discussed a few tips on effective planning for your life during uncertain times.
Review Budget and Make Necessary Cuts
If you already have a budget, review it and make necessary changes. Alter your spending limits and cut back as much as you can. One way of reducing your spending is to cut back all your expenses except the essential elements. Then start adding back additional costs which you may deem necessary.
You should also temporarily pause all your contributions, like a health savings account and even retirement plans. However, if you are retiring in a few years only and have a strong urge to continue with your retirement plan, then look for the most cost-effective options. If you live in Australia, you are in luck. Australia is the single country most famously known for its age pensions and government benefits. However, doing your research is also essential. You can find detailed guides about retirement planning Australia online and be at ease.
Additionally, it might sound out of context, but meal planning can also help reduce your spending to a certain extent. The first step towards meal planning is to check the stock you have in your pantry. See what items you can manage to cook with your current inventory. Visit YouTube recipe for guidance. Next, decide on easy-to-cook meals to consume most of the days. Something that won’t lead to wastage of food.
Having a budget is crucial irrespective of whether you are in a crisis or not. A budget helps manage your money most effectively. Maintaining a budget also ensures you have enough savings for unprecedented times.
Steady Investments
The first mistake most people make as soon as a financial crisis hits is to pause all their investments. Whereas in reality, investment doesn’t change anything unless you are close to retirement. The best option is to remain steady with your assets. Keep a check on your portfolio, stocks, or bonds. Stock prices most likely decrease during an uncertain global or national crisis, presenting excellent opportunities to invest.
If you have enough cash savings and can increase your investments, do it. If your stock prices are getting out of balance, look into re-building your portfolio. Whatever the case may be, do not stop investing. Panicking and timing the market yourself will bring no good.
Make use of Your Emergency Fund
Having an emergency fund is crucial, especially during times of financial instability and uncertainty. Emergency funds can help cover for things you didn’t include in your budget. It helps prevent adding more to your debt by securing money that you can pay during unexpected circumstances. Having an emergency fund becomes even more vital when you only have a single source of income. It helps you get through unexpected job losses and similar concerns.
Usually, three to six months of cash savings as emergency funds suffices. However, your definition of ‘savings’ also plays a critical role here. For instance, if your savings are mostly bloated budget, you can still save a little more by cutting back.
Emergency funds don’t only assist with the financial crisis but also help you in achieving a goal. It restricts you from taking money out of your savings and encourages you to spend less. An emergency fund can be beneficial during a medical crisis. Treatments are expensive, and your emergency fund can help cover your medical costs.
If you face job losses without an emergency fund, it is best to lay out all your options. Look for fund relief and payment reduction options online. Several companies offer assistance to people undergoing a financial crunch.
Emergency and Estate Plan
People often undervalue the significance of having an excellent and effective emergency plan until they see others suffering due to ill planning. Having an emergency and estate plan becomes even more vital if you have kids. It ensures a secure and stable future for your kids in unforeseen circumstances like the health crisis we are currently going through.
Some effective emergency and estate plans include excellent and decent life insurance. Ideal life insurance should be at least 20 times your annual income. It would help if you looked into policies for burial costs, childcare, and education cost for your children.
Keeping your Will updated is also essential. A Will is necessary for distributing your assets to your children or whoever you want after your passing. Having disability insurance is a good idea as well. Disability insurance can cover your lost income for any period. It will also continue paying you a certain percentage of your salary in case you become completely disabled.
Ask for Help
No one is an expert in uncertain planning. It is best always to seek professional help to get adjustment recommendations. Doing things on your own without adequate knowledge might lead you into more trouble. Therefore, visit expert financial advisers and money managers to acquire complete and clear guidance about your future financial planning.
Seeking help isn’t restricted to financial advisors. To make effective changes, you need to be in a suitable mental space as well. People often overlook their health out of constant stress and tension because of such a crisis. Hence, if necessary, don’t hesitate to visit a therapist to restore a clear mindset and relieve stress. When you are in a tranquil mental space, you are more likely to make informed decisions.
Conclusion
Often families overreact to uncertainties and put many of their valuables and savings at stake when it’s not even that bad. It will help if you control your urge to lean over whatever opportunity comes your way. Incautious and irresponsible behavior can make things worse.
You should explore all available options and get creative when sorting out your financial life during uncertain times. However, it would help if you plan your finances after gaining adequate information and advice to avoid making rash decisions.
