I know it can seem impossible to think about the good that came out of 2020 and the pandemic. However, we can defiantly take away some key learning points, especially when it comes to finances. Here are some helpful tips that the pandemic can teach you about money.
Expect the Unexpected
Unfortunately, part of having a job is knowing you can lose it at any time. Your company may have budget cuts, merge with another organization or get bought out, causing you to get laid off. These are just a few of the common reasons lay offs occur, but who could have anticipated a global pandemic to case millions of jobs to be lost? Hopefully we never have to experience a pandemic again, but take this opportunity to learn that anything can happen and have a plan in place if you ever find yourself unemployed. Maybe this means having a second stream of income or money put away in savings to help get you by.
Have an Emergency Fund
One of the biggest things that a pandemic can teach you about money is that an emergency fund in key. Dave Ramsey explains the definition and importance of an emergency fund perfectly. But, to sum it up, an emergency fund is money you have set aside for the unexpected and is for EMERGENCIES ONLY. Emergencies meaning, paying for the roof over your head, a trip to the ER, car brake replacements, etc. To be clear your emergency fund is not for things like a summer vacation, super bowl tickets, etc. Are we on the same page? Good.
Dave Ramsey also recommends having a $1,000 put away in your emergency fund if you’re in debt). Then once you’re debt free (beside your mortgage), build your emergency fund up to three-six months of expenses. This leaves a good cushion to cover your costs of living if you were ever to lose your job unexpectedly.
Know Where Your Money is Going
Knowing where ever dollar you spend is going ahead of time will help you to cutback if the time to really tighten up your spending ever comes. During the pandemic, there was a lot of unknowns for a lot of people, so it’s nice to be confident and secure in your spending. Having an idea of what you spend on things like groceries, gas and your phone bill every month helps you understand where exactly your hard earned money is going so it doesn’t feel like you’re throwing it all away. Knowing where ever dollar is going also gives you peace of mind so you know how much money is left over once all necessities have been paid for. By simply knowing how much you’re spending on what, you know exactly what to cut back to help tighten up your budget during uncertain times.
Live Within (or Below) Your Means
It can be hard to want to spend more once you make more. However, living within your means will only help you if things even go south. Say you or your spouse ever do lose your job and your income changes drastically. Already living within your means will mean you won’t have to stress as much about crazy expenses you can no longer afford. Simply put, just spend less than you make and avoid lifestyle creep. Keeping of with the Jones’ is just a losing game you want no part in.
Ask for Help
We can’t all be money expects and that’s okay. Luckily there are plenty of people out there who are. Check in with a financial advisor for professional guidance on your finances and get advice on how to improve savings and your budget so you can worry a little less about your money.
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