COVID-19 pandemic and the nationwide lockdown destroyed economies and businesses across the globe. Mass termination by companies has dented household incomes. Amid uncertainty on how the pandemic might affect the incomes, having financial foresight is vital for all households. Drafting a household budget is the first step, as it will define your necessary and luxury expenses.
Curbing every petty expense is not the course of action, instead adapting a conservative lifestyle might help. The concentration of people should be more towards doing savings.
Here are 5 tips to improve your personal financing:
Budget needs a makeover: Able to cover essential expenses should be your top financial priority. Revisit your budget to find new ways to conserve cash. As work from home is on, money spend on travel and eating from outside could be used to create a financial cushion. This cushion will take your load in the upcoming weeks or months.
Increase your emergency savings: One should have enough emergency savings at his/her disposal. It is often recommended to save three to six months’ worth of expenses in an emergency fund. But considering the pandemic and nationwide lockdown the country has experienced, a year worth of emergency funds would be essential. The extra or unnecessary expenses should be diverted into the building of an emergency fund.
Invest more: People should consider investing in various forms and contribute more to their retirement savings. Even if the stock market experiences volatility, history knows it, it will always rebound.
Debt strategy: Interest rates have dipped amid the stock market volatility, therefore, you can refinance at a lower rate. One can opt for a balance transfer credit card to get a credit or debit card with low interest rates. Carrying high-interest credit card debt is never suggested.
Refinance mortgage: If you have a mortgage, then the Federal Reserve’s step of cutting down interest rates could turn out to be good news. Interest rates are at an all-time low therefore refinancing is a good option. A minor drop of 0.5% drop in your rate can save you thousands of bucks on your mortgage. Shortening the term of your loan is a wise decision to make.