Let’s start this write-up with a simple truth – the more money you have, the easier it will be to survive most crises. If you’re struggling to make ends meet, things will be even more difficult during an economic collapse. Our prime focus here is without a doubt providing tips on improving your financial situation.
If this pandemic has taught us anything, it is the need to be prepared for the unexpected. Despite the plummeting GDP and closing businesses, policymakers did their best to prevent a downward spiral. However, you can’t always be expecting policymakers to do the right thing and pull you out of an economic crash.
In this article, we’ll look at a few tips to improve your finances so that you can be better prepared to cope with an economic crisis. Should you lose your job or things get desperate, with a small nest egg you’ll be able to get by and be able to breathe without getting stressed out.
Savings will buy you time to find your feet when the ground beneath everyone else is falling away. It’s an unfortunate fact that 69% of people in the US barely even have $1000 in savings.
It’s time to remedy that problem and make sure you’re not one of them. Let’s get started with the best financial tips to be followed.
Related Article: Emergency Fund Calculator: How Much Safety Net is Ideal?
1. Plan Your Budget
Budgeting is the most important step to take control of your financial activities. It may seem restrictive to plan your expenses, but in reality, a budget will give you freedom over time. Start off by writing down all your expenses in a month.
A proper budget will help you identify things where you’re spending money on frivolous things. Stop smoking, reduce your consumption of alcohol, cancel your cable subscriptions, stop buying magazines and newspapers, etc.
Do whatever it takes to free up some money. Save whatever you can. The more you practice, the better you’ll get at it. It’ll be difficult initially, but once you see that you’re putting aside money, you’ll be more motivated.
2. Save at Least $5000 in Your Emergency Fund
For some people, saving $5000 may seem like a Herculean task. However, trust us, it’s not. All it takes is some time and discipline. Remember, it doesn’t have to happen overnight. You can slowly save until you hit the $5k mark.
Once you can do this, do not immediately splurge on a new car or something extravagant. This is the nest egg that will tide you over a crisis.
Once you have saved your first $5000, calculate how much 6 to 9 months of your monthly salary is worth. Simply use an emergency fund calculator to do that. Start adding on to your 5k and aim for that amount. The country’s median wage is $3,000 a month. Let’s say you are making exactly that. You should be aiming for about $18K to $27K in your emergency fund.
If you manage to hit that, you’re almost bullet-proof. You will be quite safe and have enough to survive an economic collapse for a few months at least.
Use Our Emergency Fund Calculator to Check How Much Safety Net You Need:
3. Eliminate Debt
The fastest way to increase your savings will be to eliminate debt as quickly as you can. Pay up all your credit card bills first. The interest rates really add up and you’ll be shocked at how much money you’re wasting on interest alone.
Start with the card that has the highest rate of interest. Pay that one off first while making minimum payments on the rest. Once you pay the first one-off, start paying off the next one with the money you usually used for the first card.
This is the fastest way to eliminate your debt. NEVER allow your balances to roll over. Paying the minimum sum on your credit card bills will make you a slave to the banks… and that’s exactly what they want.
As a policy, it is good to never spend money that you don’t have. Carry only one or two credit cards. You don’t need more than that. These two cards are for emergencies and if you do use them to buy items at the mall or online, always pay your bill in full.
4. Increase your income
There’s no better way to increase your wealth than by increasing your income. Don’t think that you don’t have any skills to earn more money. Keep learning new skills, which has become quite easy with the range of online learning platforms available now. Just do some courses in your free time, and you can easily acquire more skills to earn more.
Even if you are working a 9 to 5 job, you can still pick up some side hustles to make extra money. The internet is loaded with side hustle opportunities. Just pick the best one suitable for you and dedicate some time for that.
The more you earn, the better off you’ll be. There is no question of that. It is extremely difficult to become rich simply by saving off a monthly wage of $3k. You need to increase your income. The opportunities are plenty. Take advantage of that.
5. Spread Your Investments
Lastly, diversify your portfolio. Don’t invest all your money in one stock or with one firm. Do not put all your money in one bank. Spread out your risk. During an economic crisis, many institutions can go belly up.
So, be wary and invest wisely. There are many low-risk options backed by the government like treasury bonds, certificates of deposits, etc. Even when trying your luck with high-risk, high-return investments, have some rainy-day funds in your low-risk schemes. It is especially to handle situations like an economic collapse.
Having cash stashed away for an emergency will give you flexibility and more options should you face a crisis. Start planning and saving today and you’ll be better off tomorrow.
Following these financial tips religiously can get you out of any major economic collapse. Remember, patience is the key to building any type of emergency fund. Learn the habit of saving at least a portion of your money from today. It will help you in the long term without a doubt.