The COVID-19 pandemic has demonstrated the importance of financial freedom like never before. With massive job losses and an unstable economy, many low-income earners are struggling to make ends meet and keep their loved ones safe.
However, people who see this crisis as an opportunity to improve their finances are more likely to achieve their goals. So far, we’ve seen many Americans getting creative. Some are turning to side gigs, while others are converting their hobbies into income-generating activities.
You can also use these tough times to improve your financial situation. If you don't know where to start, here are five steps you can take:
Audit Your Financial Situation
Even if you had no intention of auditing your finances, the number of days spent in lockdown has probably forced you to do so. And that is a great step.
Analyzing your financial situation offers many benefits, but many people neglect it. They prefer to bury their heads in the sand. The COVID-19 pandemic has pushed many people to take control of their finances to be adequately prepared in the future.
If you haven't looked at your finances yet, it is wise to do so now. You may be shocked at how much more you're aware of your financial obligations, or how your spending habits have changed.
Share Costs Where Possible
During the lockdown, many families have reported saving a fortune on car expenses especially on wear and tear and fuel. The pandemic has also shown many that they don't need to use their cars every day.
Some families even resorted to buying groceries together, sharing their homes, and carpooling. All these choices have increased their savings. So, why not retain these strategies beyond the pandemic?
Curb Your Spending Brutally
As mentioned earlier, our spending habits have radically changed thanks to COVID-19. For example, many people have cut back on coffee from expensive cafés. Although the amount saved may be little, it can quickly add up.
To keep track of your new spending habits, write down everything you buy. Assess the items you have eliminated and don't buy them even after the pandemic. That way, you will get money to save or repay any debts.
Don't Put All Your Eggs In One Basket
With little or no savings, it can be tempting to dip into money set aside for essential bills. And this is why financial experts advise people to separate their money.
It is prudent to have a separate account with no debit card attached for paying regular bills. Alternatively, you can go the old-fashioned way of tucking separate amounts in tins or jars when you get paid. Put money for groceries, rent, and energy bills in different jars. That way, you reduce the chances of spending the money on something else.
Watch Your Bills
Many people are now working from home. As a result, some bills may increase. For instance, many people are saying that their water, energy, and internet costs have gone up.
Unless you're keeping an eye on such bills, you may not notice that you're spending more than before. Develop a habit to check your bills regularly, but don't stop there: investigate whether your current plan is right for your new level of usage. If not, can you switch to another provider? While you’re at it, take note of when the terms end so that you're not automatically moved onto “deals” that actually cost more.
The COVID-19 lockdown has tested our financial situation in many ways. But it has also taught us that it's wise to save for a rainy day as if it will happen tomorrow. As you begin your journey towards financial freedom, we hope you will remember and practice these timeless money lessons.