The pandemic has certainly given people a lot to think about. With so many financial plans disrupted, everyone wants to make sure they are not caught off guard again. After all, keeping your job and finances intact next time may not be as simple. At least, not as simple as a call to the Spectrum customer Service phone number to get an unlimited internet plan that assists remote working or remote learning activities. You need to be prepared! As they say, prevention is better than cure. On that note, here are some prudent tips to start managing your finances today to save yourself unnecessary financial trauma down the road:
Save Before You Spend
Most people save the income they have left (if any) after spending. However, successful entrepreneurs and businessmen like Warren Buffet suggest the opposite: save before you spend. Each month, set aside a significant portion of your income and divert it into a savings account. This helps in 2 key ways:
- Your savings continue to grow and offer a greater cushion in case of emergencies.
- A smaller disposable income (after savings) will make you more careful about spending.
Add More Income Streams
Don’t put all your eggs in one basket. Any business leader will tell you this is one of the most important measures you can take to improve your financial health. In other words, don’t depend on solely a single income stream. You may have a well-paying job now. But so did many other people before the pandemic. Yet, most of them had to face being furloughed or laid off. And all of a sudden, their sizeable income stream dried up. To prevent this from happening, the solution is obvious: develop more income streams.
Whether it’s a side hustle, gig work, consulting, or even a second job, find realistic ways to add regular supplementary income. Of course, this may not always pay as well as your primary job. But it offers a lot of protection in case you lose that job. If nothing else, you will have some income to live off while you search for a new employment opportunity. That way, you can avoid the added stress of unpaid bills, unmet household expenses, and unfulfilled financial obligations like a mortgage.
Track and Prioritize Expenditures
Of course, it is not just your income and savings that you have to pay attention to. You also need to take a long, hard look at your expenditures and spending. Make a note of your most essential expenditures, such as your mortgage, rent, power and heating bills, internet costs, car lease payments, and so forth. These are going to be the most significant expenditures, and are also usually unavoidable. But they can help you realize where you spend most of your income outside of the essentials.
Once you have identified your expenses, it is time to prioritize them. Again, mortgage, rent, and lease payments are more or less unavoidable. But you should still make sure you’re not wasting money unnecessarily on impulse buying. In other words, stop buying things you don’t need! You don’t have to become completely frugal and start living off the grid. But there are usually several ways to curtail your expenses, such as signing up for cable and internet bundles. You can also keep an eye out for promotional offers or limited-time deals. Switch from big grocery brands to generic ones. Make sure the lights are off in rooms when you’re not in them.
The more critically you examine your spending, the more room you’ll find to cut expenses. Remember, you need to spend your income as efficiently as possible. That means every dollar saved is more money in your pocket that you can put to better use.
Make Safer Investments
Finally, it may be time to start investing more wisely. You don’t have to aim for massive growth in your income like the Wolf of Wall Street. But you still need to understand money lying in the bank may not always add to your financial health. Investing some of it in smart ways can add more income as well as additional assets to your name. The key here is to remember the trade-off between risks and rewards.
Generally speaking, an investment that carries very low risk usually comes with very low rewards as well. Keeping your money in a fixed deposit savings account is a great example. Banks are credible and strong institutions. That means you don’t have to worry about losing your money, hence a very low risk. But it also means the income (or interest) you earn on this investment is proportionately low. Of course, if you go chasing every investment opportunity that offers astronomical returns, you should bear in mind that it involves a higher risk of financial losses too.
In practice, it is usually safer to find some middle ground. Assess opportunities to see if the risk is tolerable for you. Find a balance between risk and safe returns on your investments. And again, remember to diversify your investments to further hedge the risk of a massive financial loss or even bankruptcy.