What is meant by a financial crisis?
You face a financial crisis if your commercial assets such as property or stocks decline in their value, debts are high, and your means of income decrease. It sounds scary, but this is the current reality of many individuals and national economies.
The inflation, stock market blues, and oil price fluctuation always made their presence felt every now and then. But nothing has shaken the world economy like the COVID-19.
This article talks about preparing for personal financial crises that can arise due to bigger issues like pandemic or personal setbacks like losing a job or money in business.
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11 Ways to Prepare for Financial Crisis
Check out the following 11 foolproof ways to not only survive but thrive during a financial crisis.
- Keep Your Emergency Fund Ready Emergency funds help you with uncertainties like a medical emergency. If you have an emergency fund, you won’t need to borrow from others or break your long-term investments. Your fund depends on your income. It is considered ideal to keep funds worth the 6 to 9 months of your monthly expenses aside for unforeseen circumstances.
- Plan a Monthly Budget It’s imperative to prepare a detailed statement of your monthly income and expenses to set the emergency fund aside. This budget will also give you clarity if you are spending on anything non-essential. You can put these kinds of expenditures on hold until you come out of the financial crisis.
- Invest in a Chit Fund A chit fund is a financial instrument through which you can borrow for emergencies and invest money simultaneously. All you need is a group of people ready to put money in a combined fund. It is released periodically through a lucky draw or auction. You can invest in chit funds through apps and websites as well.
- Take Health Insurance Healthcare is getting expensive day by day. You can’t think about going without health insurance in such times. Always choose the best options available on the block. And don’t forget to get COVID-19 covered from the first day in your policy. Term insurance with maximum sum assured is also a way to safeguard your family.
- Come Out of the Debt Trap A massive pile of debt can be the cause of your problems. In that case, seek help and counseling to manage your loans. Shun using the credit card and clear all pending bills in full. Try to avoid borrowing from friends and family. Don’t make the mistake of falling into the debt trap to come out of a personal financial crisis.
- Spend Only if Necessary The first thing you should do while going through a rough patch is to pull the plug on the expenses which aren’t necessary. You need to hoard cash to survive your rainy day. So, that expensive footwear and weekend trips can wait till you are in a better position and out of the financial crisis.
- Pay Your Bills on Time When you receive your monthly income or a pay-out, your first priority should be to clear your monthly utility bills. So before indulging in any other spending, pay off your rent, electricity, EMIs, and see what is left. Spending on other things before taking care of your necessities is the sure way of inviting a financial crisis.
- Get Rid of Needless Memberships & Subscriptions Do you watch all the streaming services you subscribed to? Can you be fit and exercise without paying a hefty gym fee? Can your music/dance/art class wait till you are financially stable? Evaluate all your subscription and memberships. Take it as a personal audit and eliminate what is not helpful or can be done later.
- Watch Your Savings & Investment It would be best to have a widespread portfolio of your savings and investment. Never put all eggs in one basket. Keep looking for alternative investment options. A good mix of short-term and long-term investments will help you in the longer run. But make sure you have enough short-term investments to use during troubling times.
- Find New Means of Earning It’s good to cut down expenses and save as much money as you can during a personal financial crisis. But that alone can’t help you. You also need to focus on how you can earn more money. You can do that by doing part-time jobs. You can use any of your gifts like arts and music. Give part-time coaching sessions and earn some extra bucks. Various online apps provide the opportunity to earn some extra bucks through playing games, coaching, sports prediction, etc.
- Put Your Savings on Automation This doesn’t mean that you don’t trust yourself. But there can be a day when you might think of postponing your savings for something else. With the automated transfer, you ensure that you have only a certain amount left out of your income, as the rest will automatically go into your investment accounts.
Start Saving For Your Emergency Funds Now!
It doesn’t matter how grave your personal financial crisis is . With these 11 tips, you can turn it into merely a temporary setback. And you can also be prepared for any tough times ahead because tough times never last, but tough people do!