7 Ways To Help Your Finances Now
These are uncertain times, as businesses have closed their doors, people have been laid off, and every business has to adapt to the current situation. People and business alike are struggling to make ends meet without further negative financial impacts. Even though things look grim, it is not a bad time to review your finances and make some positive improvements. Here are seven things you can do today to help improve your financial situation.
Pay down debt
Paying down your debt, and most importantly your high interest debt such as credit cards, can help provide some breathing room in your budget. Even if you are currently tight on money, paying down this type of debt will enable you to focus on saving more for the future. Having these burdens off of your back will help alleviate stress and allow you to free up cash that you can put towards emergency savings. Set deadlines by when you wish to pay each credit card off and don’t just assume that paying the minimum amount is enough.
This is a pool of cash that is specifically reserved for financial hardships, such as being able to afford the necessities of life or large expenses. Even when focusing on paying down debt, it is important to still focus on savings. If you are focusing solely on paying down debt and an emergency arises, you will have no choice but to take out additional loans or use credit cards. Emergency funds should be stored within a high-interest savings account, where the money is safe and still maintains some growth to keep up with inflation but is easily accessible without penalty if you need to dip into it.
Cut back and live within your means
By looking at your monthly expenses, you can identify where your money is going, as well as which items or services are an absolute necessity and which are ones are really a ‘want,’ meaning you do not need them to survive. Your spending money should account for no more than 30 percent of your net income. A monthly budget can help identify how much you are currently spending. Items, such as rent or mortgage, utilities, car insurance and groceries are necessities of life; items such as new furniture, electronics, subscriptions, or cable are not. Take a look at your spending month to month, for example, February’s spending in comparison to March, and the numbers might shock you. Use that money now to pay down debt or funnel it into your emergency fund.
Time is your friend
Do not make changes to your portfolio due to a negative impact in the market. Market timing, or trying to pull money out at the peak and invest at the valley, never works out. Missing out just on a few days in the market can decrease your average rate of return by half or more. Having a financial plan that is suited to your needs and investing regularly, especially during a downturn, is crucial for financial success. Do not jeopardize your long term financial security based on short term events.
With the downturn in the market, this is an advantageous time to review your risk tolerance, or how much risk you can withstand. This market downturn has highlighted how much risk or loss you are personally willing to handle without concerns. Working with a financial advisor, you can gain a better understanding of your real risk tolerance. Your time horizon and your personal feelings will determine if you should be looking at GIC and bonds, or stocks and equities.
Education and build skills
You are currently at home with a large amount of free time; this would be the best time to further your education or build a new skill that will help further your career and can have huge financial benefits for yourself. Not only are you improving, but you are giving yourself a leg up on the competition for promotions or new job offers. Set yourself apart from your competition with a few new skills to add to your resume or current abilities.
Re-evaluate your priorities.
When times are tough, it is a great time to re-assess what your goals and priorities are. When faced with difficult decisions, you will have a true understanding of what is important to you and what you want to achieve. Use this time to focus on what you have been doing, whether or not it has been working for you, and what you could be doing better to achieve the goals that are important to you.
There is no crystal ball that says when a market downturn is going to happen or when an emergency will occur; neither can we use past data to predict what the future will hold. We have not seen markets react like this since the market crash in 2008, and we are in unprecedented times with how long this downturn will last. It is never a bad time to review your finances and ensure you are on track. If you feel nervous or uncertain about things, seek guidance and help from professionals.