How to Corona-Proof Your Finances
Original image by Steve Buissinne from Pixabay.
The economic impact of the pandemic and ensuing shutdown is difficult to predict long term—but you should use the time now to prepare yourself for what may come next. (Note: These tips work for any sort of economic downturn, and are good for establishing financial sustainability.)
1. Make a list of your monthly expenses, especially recurring ones.
Now is the perfect time to ask yourself what you really need to spend your money on, and to work hard to eliminate waste. Look through your bank accounts and credit card statements for reference. You may find a few recurring charges you didn’t realize were happening. If they are not essential, cancel those immediately.
2. Cancel or freeze any subscriptions you do not actively use.
Gym memberships, streaming service subscriptions you no longer watch, spas and other monthly memberships can be easily frozen or cancelled.
3. Contact your credit cards, mortgage holders, and loan providers to request reduced interest or loan forbearance.
A significant number of your loan providers are likely to give you at least some sort of temporary relief during any difficult time, but especially now during the shutdown and pandemic. Ask for delayed payments, reduced interest rates—whatever help they can provide. They may also help you consolidate debt. And make sure to ask for them to delay payments and defer them until the end of your loan—you don’t want to have to pay a lump sum after months of payment delays if you can avoid it.
4. Reassess your living situation.
Although it may be a tough time to sell a home, if your monthly budget is too tight (meaning, if your housing cost amounts to more than 30% of your take home pay, including utilities) you may want to consider moving to a less expensive home or apartment. This will take at least a few months to execute, but consider your options.
5. Set up an emergency fund.
Ideally, you should have three to six months of savings set aside in an account that is meant for emergencies. Start that account now, if you haven’t done so already, and don’t touch it unless you really need it.
6. Reduce, reuse, recycle.
Be conscious of what you buy, and of what you throw away. Reduce your waste and consumption by reusing and recycling wherever possible. Use the time to sort through your possessions and get rid of what you don’t need anymore by selling or trading it for goods or services you do need, on platforms like Facebook and Craigslist. You might find a way to create some extra income for your emergency fund.
7. Set up a side gig.
Assess your skills and talents and offer your services to others. Ask yourself what hobbies and pastimes you enjoy, as well as what work skills you have that might be needed. You would be surprised what others will pay for, in goods, services, or actual money. And who knows—maybe it will become your main gig!