When it comes to financial security, you cannot be too sure about it. Disaster may strike at any point, and it is a lesson that everyone has learned during the pandemic.
You may land into big trouble due to an unexpected job loss, sudden illness, or a traumatic car accident.
A financial downturn is always stressful, and even the thought of it can give you sleepless nights. It makes sense to have a survival plan for a money crisis because it will equip you to handle the situation better.
Thankfully, being a little smarter with your money can help you keep yourself afloat amid a downturn. Here are some money secrets that you must know.
Build An Emergency Fund
One of the most important steps to future-proof your financial health is to build an emergency fund. No matter how comfortable you are today, saving for a rainy day is essential.
If you have enough to get through a hard time, life will be a lot easier for you and your loved ones.
Create a dedicated savings fund and set aside a few hundred dollars every month for contingencies. It is advisable to have enough money to cover the living expenses for six months.
It will keep you covered even if you have to struggle with unemployment or pay cuts.
You can invest a part of your savings for the long-term but make sure that most of the investments are liquid so that you don’t have trouble cashing them when there is a need.
Never Make Rash Financial Decisions
When things get out of control, it is easy to go into a flight and fight mode and take rash financial decisions. You may consider winding up your business or even foreclosing your home mortgage under stress.
Never make quick decisions, rather sleep on them for at least one night. Discuss the crisis with your partner or a friend you can trust.
If you are running over your budget or struggling to keep your business running, try establishing the root cause and addressing it with the relevant measures. You may find a solution without doing something drastic. It is crucial to think and decide wisely, rather than take a plunge without second thoughts.
Consolidate Your Credibility
If you want to stay afloat in the middle of a downturn, nothing matters more than consolidating your credibility.
Paying attention to your debts and repayments during good times is the key to having a healthy credit score.
Stay ahead of the repayment deadlines and avoid borrowing unless you genuinely need money. A little care and attention to your creditworthiness during good times can save you from a lot of stress if things get out of hand.
Prioritize Bills And Spending
Another money secret that can help you survive through a crisis is to prioritize your bills and spending.
When money is tight, and income fluctuates, it is vital to move to a bare-bones budget.
Prepare a checklist of expenses and stick to the ones you cannot manage without. Anything that sounds frivolous deserves to go, even if it is your favourite TV subscription or the gym membership you have kept for years.
Survival will be a lot easier if you learn to steer clear of temptations and live within your means. It isn’t as hard as it sounds but can make things much easier to handle.
Keep An Eye On Price Gouging
Unless you have a personal financial issue, a downturn often means an overall slump or recession in the market.
It is hard to deal with the situation as it is, and price inflations can make the situation even more challenging. It is important to keep an eye on price gouging during an economic crisis.
Start small by checking your grocery lists and finding opportunities to save and balance your monthly bills.
If you order food often, check the rates and consider cooking at home to save your dollars. Keeping track of prices helps you deal with inflation better and keep your finances afloat even during tightness in the market.
Have A Plan For Handling Income Fluctuations
Good money management is all about the ability to handle income fluctuations, which are a part and parcel of a financial downturn.
You may lose your job or be stuck at home due to an illness or injury.
Fortunately, it is easy to make up for the income fluctuations by supplementing your income with a side hustle. The best part is that you can pick some creative side hustles at home, such as taking a freelance writing project or trying your hand at web designing.
Your partner can do their bit by doing something extra to boost the income for the household. Just a few dollars more can stabilize your finances to a significant extent.
Watch Out For Money Scams
When you are stressed due to money concerns, it is easy to fall for scams.
Moreover, the risk runs a tad higher because scammers are active during downturns. They have ingenious schemes to con people who are already struggling to deal with a crisis. It makes sense to be extra conscious and vigilant about your hard-earned money.
Don’t fall for a personal finance opportunity that sounds too alluring. Research or seek advice from an expert before picking anything you aren’t sure about.
A financial downturn is always challenging to deal with, whether it is just a personal crisis or an overall problem.
Still, you can keep yourself afloat with the right approach and smart money management. Stick to clever moves regarding income, expenses, and savings, and you will be out of trouble sooner than you imagine.
Be wise with every dollar and steer clear of unworthy temptations and offers that sound too good to be true. Staying ahead of the crisis will be a lot easier!
This article is written by Saara Green, all views and opinions expressed are her own.
Thanks for reading, please let me know your thoughts and comments below.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.