COVID19 pandemic has caused several people to lose their work, and some of you have been furloughed. How long it will take to improve the situation is still up in the air, but one thing is confirmed that the pandemic has caused unemployment.
According to experts, the unemployment rate is likely to go higher down the road. Based on the current circumstances and prognostication by experts, it is clear that you are going to face difficulty making your ends meet, and some of you have been facing it already.
Financial hardships are a part of life; you cannot escape it. However, you can manage to withstand its effect. Financial experts suggest you build emergency funds as they can cushion the blow.
Having no enough savings make your circumstances worse, and you eventually end up with a debt spiral. As you know that economic conditions are not likely to recuperate soon, you should figure out ways to put up with financial difficulties. Here are some tips that can help you.
If you have multiple debts and you are struggling to keep up with repayments, you should talk to your lenders. You can tell them of your financial difficulties, and they will let you avail a moratorium period.
This will give you relaxation for a short period, but interest keeps accumulating and hence you will have to pay a slightly higher monthly repayment after the forbearance period expires. Some lenders are also offering hardship plans to their users.
Find out if you fit any of the plans. Before informing them of your financial problems will work in your favour. You can avert interest penalties and late payment fees.
No matter how much you earn, now is the time to give priority to emergency funds. Having money set aside can help you tide over in case an unexpected expenditure pops up. Even though you have been working on a cut pay, there is no guarantee that the company will not lay you off.
A company is likely to be underperforming even after the lockdown is lifted. Do not sit back in the hope that everything will get to the track after the lockdown. It will help if you start creating an emergency cushion as soon as possible.
Even though your pay is cut, you should set aside a proportion of your income for a rainy day. To find out how much you could transfer to emergency savings, make a list of all your expenses and compare them with your income.
What you have left after meeting all of your expenses should be immediately transferred to the emergency cushion. However, it would be best if you also cut down on your spending to make your emergency cushion larger.
Even though you have managed to stash away some money for a rainy day, you can have a shortfall of cash at the time of emergency. As long as you need a small amount of money, you can rely on emergency funds, but you will have to take out a loan in case you need a large amount of cash urgently.
Borrowing money is not a bad idea, but you should choose an option that suits your financial circumstances. Various short-term loans like guaranteed loans in the UK can help you tide over during emergencies. Make sure that you borrow money at lower interest rates. Before you grab any deal, compare interest rates so that you choose a deal that suits your budget.
When it comes to taking out a loan, some people prefer payday loans as they do not require any formality and you get funds instantly, but payday loans are costly, and hence you should avoid them. APR for such small loans can be up to 400%. If you take out these loans without analysing your affordability, you will fall in a debt trap.
While you need to tighten your belt, you should also find out the ways to increase your income. One income source might not be enough to keep the wolf from the door. Try to grab a part-time job or a freelance service.
It will naturally be hard to handle both jobs simultaneously, but there is no other way around. If you want to ease financial hardships, you will have to arrange for resources to have money flowing in.
There is no denying that COVID19 pandemic has caused a threat to your finances. Still, you can withstand the damaging effect by cutting down on your spending, building emergency cushion and increasing your income sources.
It is impossible to imagine your life without budgeting. Whether you like it or not, start budgeting so that you do not overspend money. You can also use budgeting apps to get better control of your money.