The past year has taught us many crucial lessons about how we should manage our money. This article will break down the 5 lessons we need to remember when we navigate our finances for the future.
Lesson 1 - An Emergency Fund is Essential
An emergency fund is a reserve amount of income that you put away in order to use in case of emergency so that you would not need a loan. It typically consists of a few months (3-6) of income saved.
During Covid-19, many jobs were lost due to businesses shutting down or staff cuts. This means that your monthly income is decreased, affecting your ability to make ends meet and provide. An emergency fund will help supplement your finances during this time, especially when you need to pay emergency medical bills or household repairs. Covering these expenses will help ease anxieties.
There are short-term and long-term emergency fund strategies that you could use to make sure your bases are covered. Save up a few months of income to keep cash on hand in case of hospital visits or car repairs. Calculate how much income between 3-12 months you and your family would need to survive for the long term on an emergency fund.
Lesson 2 - Live Within Your Means
Take a close look at your finances and assess how and where you are spending your money. Make sure that you are spending within your means of earning so that you avoid the need to borrow money.
Start budgeting so that you can keep an eye on your finances. Try cutting down on unnecessary expenses or fixed bills to be able to put money towards your financial goals. This will help you manage your finances so that you do not need to put a hold on reaching your dreams during times of uncertainty.
Lesson 3 - The Right Insurance Coverage
Insurance protects you, your assets and your income if something unexpected happens. Take out Customer Protection insurance on your credit cards, so that in the event that you are unable to pay monthly instalments, it’s taken care of.
Having Funeral Cover is important to relieve the financial burden of a funeral, and bring a little more peace of mind that finances are sorted. Protecting your car and home with insurance will lessen the worries of having to pay for damages or losses if your income is affected.
Lesson 4 - A Second Source of Income
Try to get a second source of income to supplement your primary income, if you can. This will allow you to navigate an uncertain financial period with ease and minimal worry about losing income.
There are a few ways you can make money during the pandemic;
- Start a business in a sector that is not affected by the pandemic e.g. cleaning services, e-learning, contactless technology, logistics etc.
- Sell unused items for extra money.
- Get a part-time job in the service industry.
- Share your skills as a freelance gig.
- Run errands for others in your free time.
Lesson 5 - Shop Smartly
Avoid panic shopping. Instead, plan your monthly grocery shopping so that you’re ready and prepared for the next month. Bulk-buying is also a great to save in the long run. Buy what you need and use coupons or rewards where you can. Visit our shopping network to get access to a range of shops with RCS.
What Else to Consider
It is also a good time to start thinking about investments and how you can grow your money. During these times of worry, it’s important to have your will written to make the process easier. If you have debt, negotiate with your lender to try and reduce your monthly payments, so you can save more money each month and getting rid of your debt faster.