BUDGET YOUR EXPENSES AND STAY FINANCIALLY STRONG IN TOUGH TIMES
With the expected third wave of covid-19, UK is preparing itself and taking measures to fight against this pandemic. With the third wave, it is likely to lead to an economic slowdown.
The first two waves have had a significant impact on the economy and led to a recession in the year 2020. With this third wave, the economy is again rolling up its sleeves as a recession is expected.
Managing your finances during a recession
More than finances, everybody has to take care of their health with the expected third wave.
Then comes the finances. During an economic slowdown, be vigilant and cautious about your finances and keep on monitoring the market for any investment opportunity.
These are challenging times, but there may be few opportunities that you have to grab to increase your finances.
Ways to manage your finances during the economic slowdown
Analyze your finances and limit your means
Firstly, be honest with your financial situation have a clear picture of your finances. Audit your financial situation and understand all your spending and saving patterns.
Also, analyze all the sources of your money inflow and outflow. This will give you a clear picture of your finances and help you identify the discrepancies and problematic areas.
Once you have found out the areas to be worked upon, you have to be strict with yourself to spend money. During the slowdown or a lockdown, do not make unnecessary spending.
Instead, start putting money in your savings account to keep your future secure. Hopefully, you would not need it, but in case of an emergency, you should sufficient funds to come out of that emergency.
Create an emergency fund
Having spare money is good, but keeping it in a structured manner is very important. Having a spare amount of money is good as it will help you prepare for your emergency fund.
Your emergency fund should be easily accessible to you and should be able to make you survive the situations caused by the Covid-19 third wave. Start with your emergency fund as soon as possible.
Your emergency fund should be able to keep you going for 3-6 months. Keep your emergency fund separate from your regular account so that it remains untouched during your standard times. Access your emergency only in the time of real emergency.
When you have regular income levels, you can make use of that time and save some extra money. Refrain yourself from extra shopping and spending.
With sufficient savings, you can ease off your financial worries and live a stress-free life.
To make your savings, firstly, set a savings goal and contribute to your savings fund accordingly. Monitor and assess your saving strategy regularly to be more efficient with your savings.
The more savings you have, it will keep you motivated to save more in the future.
A budget is imperative
The primary step to save money is to set your budget first and then continue with your spending.
Be clear in your mind about the critical spending and expenses. Prioritize your spending by being clear of what expenses to be catered to first.
If you do not prioritize your spending slowly, you may fall short of money and get stuck in a debt or a loan cycle. Pay your bills on time as you may get a good deal if you pay them before time.
Compare products of different brands to get the best deal on your essential services such as insurance, broadband gym etc. By managing your budget every month, you will be aware of your total income.
You have to make informed choices for your saving by looking at the whole year of occasions such as Christmas, birthdays etc. You can use free budget tools to create your monthly budget.
Avoid unnecessary payments
You may have set some direct debits from your account to make payments on time. To save some money, you can remove some direct debits that are pain-free.
If you have had insurance for your mobile phone that you are no longer using, you can stop that expense and save a little extra.
Along with your old mobile phone insurance, if you have spent extra on your gym membership, you can consider cancelling it and saving an additional amount of money. You can get all these subscriptions cancelled and pay no more.
Also, for your essential services such as broadband, mobile, etc., compare the prices with various service providers and pick the best one suitable to your budget and save your money. Also, do not keep these payments on auto-renewal.
Avoid impulsive purchases
Plan your purchase 24 hours before when you actually go shopping. This gives you time to realize that you really need that product or just a mood swing.
It should not be your want but should be your need. Many times, we make impulsive purchases and regret them later. With impulsive purchases, you may pile up things that you do not need in your daily life.
Maintain a spending diary
Along with all these measures, you can maintain a spending diary that will help you track your spending and give you time to analyze its importance.
Keep a tack on your daily purchases, and understand the why behind it. If you cannot maintain a diary, you can go digital and use online applications that help you keep a record of your expenses. :
Gradually, you will be aware of your spending pattern and can cut down on unnecessary expenses.
Focus on your credit score
During an economic slowdown, a credit score may be the last thing on your mind, but it has a vital role to play.
Economic slowdown causes credit markets to function in a restricted manner. With limitations and restrictions, it may be challenging to get credit when you are in need.
Maintaining your credit score will help you get credit quickly and with competitive interest rates. You do not have to make extra effort to maintain a good credit score.
Just pay your bills and other debts on time, and you can see a positive change in your credit score.
If your finances lower down, maintain a good rapport with the creditors and maintain open communication with them.
This will help you be in their good books, and in times of need, it will be easier for you to borrow credit. Also, they may be considerate if you are slightly late in making your repayments.
Be smart with your finances
In times of recession, you have to be smart with your finances. Make comparisons in your daily products and pick up the cheaper ones.
You can access cheaper supermarkets and marts to get good deals on your daily products. You can also think of switching energy providers and get good deals with the new ones.
You can be strict with yourself now to enjoy the time later.
Make smart choices keeping your future finances in mind. Do not make unnecessary spending. Make adjustments wherever required.
Do not panic and plan your expense beforehand to stay financially disciplined in life.
Ailsa Adam is the Editor-in-Chief and former content head at Hugeloanlender. She has been a valuable member of the content strategy team since 2017 due to her abundant experience in the finance sector. Passionate about helping individuals navigate the world of loans and personal finance, she has dedicated herself to acquiring extensive knowledge on various financial products. Before her role at Hugeloanlender,
Ailsa worked as a seasoned journalist and writer, specialising in creating informative blogs and articles on diverse loan types. She is known for her meticulous research and commitment to delivering accurate and engaging content. She holds a degree in MBA Finance and has a keen interest in creative writing and art.