Pandemics and recessions – at this point in time it seems our society has seen it all. And the financial impacts on businesses and families is undeniable.
While our world is currently suffering the detrimental effects of COVID-19, experiencing an economic downfall is not unique to this situation.
This pandemic has certainly been unprecedented but families and individuals should always be prepared for a decline in their income.
If you were not concerned about saving money before the downturn on our economy, you are certainly trying to find ways now.
Luckily, our accountants at Liu & Associates are focused on helping people avoid financial disaster.
Here, we’ve put together ways that you can save money even when your income has temporarily shrunk:
Create a Spending Plan
The first step in creating any sort of saving plan is to take control of how you spend your money.
A spending plan is different from a budget: it’s a tool to help you feel in control of your financial decisions. It will also help you find extra income that you can safely tuck away into a savings.
First, look at your reduced income – pay attention to what is coming in and what has to go out. Expenses such as these include rent/mortgage payments, bills and necessities like groceries and gas.
Next, focus on the things you are spending money on that are necessary. Do these things make your life better? If not, consider getting rid of them (such as monthly subscriptions) or stop buying them.
This may seem difficult at first but, remember, you are creating a habit and that takes time.
Start a Rainy Day Savings
A rainy day savings is money that you put aside “just in case”. This phrase likely originated from the days of agriculture when farmers had to set aside provisions for the rainy days in which they couldn’t work.
It seems like lately our society has hit many rainy days.
For this reason, it seems more important now than ever that you put aside some money in case you run into unforeseen difficulty, trouble or need.
This will help you avoid taking on more debt to handle unforeseen situations.
This form of savings should be your top priority. Ideally, you should have at least 6 months of expenses saved away.
However, for many people this can be impossible. Instead, focus on tucking away whatever free money you can find after creating your spending plan.
Long Term Savings
Even with a shrinking income, if you are able to continue to contribute to your longer term savings and investments, continue to do so.
You may not see the point since fluctuating interest rates are making these savings less rewarding than before, but think about these investments as a long term goal.
If you’re tempted to play around with your portfolio during this economic downswing, it is advisable that you speak with a financial expert.
Recessions Don’t Last Forever
Today’s financial atmosphere may seem hopeless, but history has proven that, despite economical hardship, society always comes out the other side.
One of the defining features of a recession is that they don’t last forever.
The future is always uncertain, as we can all contest to looking back only a few months ago. However, no matter the current global condition of the economy, you should always be prepared to weather the storm.
If you are worried or stressed about your current financial situation, our expert accountants at Liu & Associates are happy to help answer any of your questions.