Money Management Tips to Help You Sail Through Crises

It is understood that the COVID 19 pandemic is sure to have severe ramifications across all sectors of the economy. With stock markets down and share prices plummeting, many of us might see our portfolios nosedive.  These are tough times for investors. However, not all hope is lost.

Here are some tips to manage your funds during these challenging times:

1. Maintain a contingency fund  

You should always keep some funds aside for emergency situations. The pandemic has limited our ability to spend money and forced us to stay inside. With no weekend dine-outs, no visits to multiplexes, or shopping trips to malls, it presents a great opportunity for us to save money. So, spend only on essential items, avoid unnecessary hoarding, and keep the rest of the money aside as reserves. We don’t know how long the situation will last. Therefore, it is advisable to start building contingency reserves to sail through the tough times ahead. Your aim should be to have enough funds to cover at least 6 months of expenses.

2. Plan your finances

Elizabeth Warren’s 50-30-20 rule for budgeting is a great tool to help you plan your monthly expenses and savings. The rule says that 50% of your monthly income should be spent on essentials like rent, education, and food, 30% should be reserved for things you want to enjoy, like movies, eating out, shopping, etc., and the remaining 20% should be kept for investments. Since the countrywide lockdown has limited our wants, you can keep that 30% aside for contingencies, as mentioned before.

3. Familiarize yourself with online banking – With most bank branches closed or operational for limited hours, it’s time for you to shift to online banking or use mobile apps for transactions like checking your investments, managing your loans, checking your monthly SIP, etc. This way, you do not have to run to the bank every time you need some information.

4. Sort out your expenses – Use your time at home to conduct a complete audit of all your direct debits like EMI payments, online subscriptions, gym memberships, etc. Cancel all unnecessary subscription you no longer use, like gym or club memberships. This will further help you to reduce unnecessary expenditure.

5. Be thrifty – Develop a frugal mindset. It doesn’t need to be emphasised that difficult times are right around the corner. So, buy things you need, but do not hoard. Avoid wastage as well. Every Sunday, sit down and take stock of all items you have and plan your weekend around it. Plan meals accordingly to use up all the food items you have. Buy more only if you have to. Similarly, save on electricity bills whenever you can. Use cost-effective LED bulbs at home, avoid keeping your laptops, etc. on standby mode, and don’t charge them for long periods. Use lights only when necessary. These little savings will add up and pay off significantly in the long run.

6. Postpone Investments – The future is uncertain as we don’t know when this pandemic situation will be resolved. So, avoid investing in share markets or mutual funds, because you don’t know what turn the market will take. Save whatever you can, and wherever you can, so as to have enough cash in case the situation gets worse.

Though COVID 19 has drastically changed the way we live our lives, it is important to stay calm and avoid making simple financial mistakes. So, spend wisely and use these simple tips to manage your finances better. This will help you overcome any adversity.