There’s been no escaping the far-reaching impact of the COVID-19 pandemic. If you’ve not been infected with the virus, you’ve been affected by it. We all wish we saw this coming. Nobody likes uncertainties, even though they’re guaranteed in life. No matter how stable your income is, there’s no guarantee that it’ll be there tomorrow. The wise thing to do is to prepare for these uncertainties by handling your finances prudently before they hit. That way, whether a pandemic affects your job or you find yourself having to foot medical bills to treat its infection, you’re better prepared for the dent it’ll put in your finances.
Here are five steps to guide you in preparing for financially uncertain times like the COVID-19 pandemic:
Plug The Leaks First
The first thing you’d think to do is to save up some money for the uncertain times, right? Well, not so fast. It’s like taking a bath. Before you fill the tub with water, you have to plug up the drain first. If not, you’d end up wasting water and never reaching your goal. Same thing with your finances. If you don’t plug up those areas where money fritters away, you’d end up always wasting money and never reaching your goal of saving up.
Look around for old subscriptions you never use but continue to pay for, insurance policies that don’t make sense, beauty regimens fit for queens, grocery items you can live without, outside food you can cook at home, and stop them at once. Those, and others I’m sure you can think of, are the leaks in your finances. Sew up the holes in your pocket first before keeping your coins in there.
Don’t Just Budget, Track!
Now that you’ve stopped your money from sneaking away from you, it’s time to tell it where to go and watch it go there. Budgeting is the foundation of financial planning. It’s how you tell your money where to go. Tracking your expenses is the next step. It’s how to make sure your money obeys you. It’s easy to budget. The hard part is sticking to it. The trick is not to stop at budgeting, but to record your expenses beside each budget category, summing them up against the budget numbers, so that you can see how close you are to overspending your budget.
Your budget should cover every penny you have. You must tell every naira where it should go. Don’t leave any amount to uncertainty or it’ll go where you’ve not sent it – to your leakages. If you can’t use a spreadsheet for budgeting and tracking, you may want to download apps, like Mint for example, to help you keep a close watch on your money and stay within budget. When you bring order to your finances by budgeting and tracking your expenses, you’re better able to enjoy your money with some peace of mind, even in uncertain times.
Live Below, Not Even Within, Your Means
The next step is to make sure that you stay under budget. Try as much as possible not to spend up to the amount you’ve allocated to each category in your budget. Tracking will help you here. When you find that you’re coming close to your grocery budget, for example, then it’s time to get creative with cooking. Make a dish using that item that’s been sitting in your fridge instead of going grocery shopping again.
The deal here is to train yourself to become more than content with what you already have. You’ll find that a lot of the items we classify as needs in our lives are actually wants, and we can indeed live without them. Living without them then frees up more money for us to save. You’ll notice we haven’t talked about saving yet. Turns out there’s a lot to organize in your life and finances first before you’re in the headspace to think about saving money. Living below, rather than within or above, your means is a good way to build the mental toughness needed to put money away without the temptation to spend it.
Build Up An Emergency Fund
Now that you’re within that headspace, it’s time to start saving. Remember we’re preparing for uncertain times, like the current pandemic, so we need to put aside enough money to absorb such shocks.
From budgeting and tracking your expenses, you’ll have a fair idea of how much you spend on each category every month. Some of these categories are essential; you can’t do without them whether you have an income or not. Categories such as food, rent, and utilities are areas you have to keep spending money on, no matter what happens. So plan for an emergency. Multiply how much you typically spend in those categories by 3 to 6, add them up. That will give you emergency fund for anywhere from three to six months in case life goes wrong.
The COVID-19 pandemic has now held the world’s economy hostage since March. It sure would’ve been nice to have had a financial cushion during these months, wouldn’t it? Build an emergency fund for uncertain times. There’s no telling what enemy might march on your finances!
Enjoy The Peace of Mind!
Once you have all these in place, the next step is to enjoy some peace of mind. You’ve brought some order to an otherwise chaotic financial situation, where money seeped out without you being able to tell where it went. Where you had no idea how much you spent on what per month. Where you lived well above your means and felt both guilty and helpless about it every day. Where you knew that anything could happen any day and you were by no means the least prepared for whatever it might be.
But now, you have your finances under control and that if anything rocked your boat and left you out at sea, you have a good life-jacket that could help you stay afloat, treading water for up to six months, if need be, until your next saving grace comes along.
You’re now better prepared, financially, for uncertainties such as the one we’re facing now with the pandemic and its far-reaching impact on everything in our lives. While there’s no telling the exact level of preparedness required to absorb any financial shock, it’s far better to be safe at any given time, than to be sorry.