“What we call a financial crisis is really at its core is a crisis of management and not just a crisis of management but also a crisis of management culture”.
The above quote is from Canadian experts Henry Mintzberg and 2020 who don’t know the reality of a financial crisis. Countless people delt with new financial situations a year after the Covid-19 lockdown notifications. While the previous year might not have been evenly hard for everyone, it has undoubtedly prompted every one of us to reconsider our financial priorities. With cases resurfacing in several places and immunizations still in their infancy, the Covid-19 epidemic is far from gone.
The trick is to determine how quickly and successfully we can react to new financial circumstances while remaining vigilant. The following are some helpful hints in this regard:
Savings For Financial Catastrophes
Managing day-to-day expenses in the face of severe cash flow problems has historically been rather simple for individuals with an appropriate emergency reserve. There are some other sources you can utilize in financial emergencies including a 529 plan; consider utilizing it to fund your children’s private K-12 education or college tuition. Take into account your Health Savings Account (HSA) for any medical bills.
As such, everyone’s first objective should be to develop a contingency fund large enough to cover all expenses (including essentials and debt commitments) for at least six to nine months. If you depleted your emergency fund last year and your income streams have stabilized, it’s important to prioritize rebuilding your fund as soon as possible.
Numerous borrowers failed to pay back their loans over the last year. Although the RBI outlined numerous initiatives to alleviate borrowers’ debt-related stress, the fact that loans must still be repaid at a later date with additional interest in several circumstances remains. The pandemic has shown us that loans must be managed disciplined to be effective tools for achieving our life goals.
Maintaining enough emergency reserve for debt payback even when income channels become blocked, minimizing unneeded loans, and preventing borrowing as much as your repayment capability are all steps you may take. Solidify high-interest loans or switch to a lower-interest lending facility after doing due diligence, prevent reckless credit card use, and maintain a credit score of at least 750-800 by making on-time debt repayments to qualify for the best loan arrangements in the future.
Prioritize Your Expenditures
If you’re worried about losing income or incurring unexpected expenses (i.e., additional child care or food) and lack emergency funds, you might need to prioritize which expenses to cover first. Examine your budget and determine what are your essentials. Shelter (rent/mortgage) and food may be at the top of your priority list. Internet access is also crucial, particularly if you work from home. Don’t forget to include independent costs like child care if you work with school-aged children.
State and local governments, and even some utility companies, may offer financial assistance to persons harmed financially by COVID-19. You can research unemployment statistics for Oregon or Washington or contact your energy company for assistance with or postponement of short-term payments.
Avoid Frauds And Virtual Threats
Scammers may become even more active in times of uncertainty. To safeguard yourself as well as your family, be aware of common frauds. Exercise extreme caution and vigilance when responding to emails, messages, phone calls, and social media postings that promise financial assistance or advertise the sale of miracle cures or limited-time promotional deals. If you are curious about being presented to you by a familiar business or service provider, you can contact them directly through their website or by contacting the customer service number you previously had for them or that displays on your billing statement. You can review the Federal Trade Commission’s instructions on what to search for and how to proceed if you believe you’ve been a victim of a scam.
Your investing strategy should be tailored to your stage of retirement planning, which for some may entail shifting to lower-risk investments as you approach or enter retirement. This can help safeguard you against market volatility. Depending on your circumstances and how near you are to retirement, monitoring your investment balances might be stressful. If retirement is still some time away, it’s probably best to adopt a long-term view of financial planning and avoid becoming fixated on the daily assessments of your 401k and other assets. If you have any concerns or want to guarantee that your retirement plan remains on track with your objectives, seek the advice of a Financial Advisor* with a respectable affiliation.
Financial crises are not new to people of the 21st century. Particularly COVID made everyone suffer from such situations so, stop blaming yourself for that. The first step is to stay calm as optimism will lead your way more than anything. The second thing is to stay away from luring get rich quick schemes and exceptionally discounted items landing your emails every day. Because one is susceptible to make huge mistakes in hard financial times which make things more difficult. To navigate this time, you can rely on your emergency fund, you can make changes to your budget, and after landing a constant income stream focus on wise investment as well as emergency security fund establishment. All will be well when you are well mentally and physically so, keep fighting. Keep visiting!