1: Eliminate Unnecessary Spending
This is definitely not the time to be buying yourself luxuries unless absolutely neccesary. Tighten your belts, and accept the reality that we’re surrounded by uncertainty currently. While everything will most likely work out smoothly for you, I always believe it is better be be over-prepared than under-prepared in these scenarios.
If you’ve got an abundance of expendable income, then it might be worth considering some smart investments for the long term, as the reality is that markets are down at the moment, and therefore there are great opportunities for buying into the market. However, I must stress that you should focus on creating a cash buffer to get you through the next 12 months.
Sit down, and calculate how much it would cost you to live your life for the next 12 months, and work towards that balance. Theoretically, if you lost your job tomorrow, could you continue to live your life if there were no available jobs for you to obtain? If not, then it is time to eliminate excessive spending, and focus on putting as much of your money into a savings account as possible. At least when we come out of this you will be fully prepared for any future uncertainty.
2: Create a Spending ‘Action Plan’ for the next 6-12 months
I touched on this a little bit in my first point. I would sit down and make a plan for the near future. Think of the worst case scenarios and try to prepare for them.
- Could you lose your job?
- What if a family member gets sick? Do you have health insurance?
- Are there any high maintenance costs involving your house?
Think of anything and everything which could go wrong in the next 12 months, and make sure you’re prepared. The last thing you want is to be in a situation where suddenly the boiler you meant to fix last year suddenly blows up and you need to fork out extortionate rates to resolve it.
Not having a plan for your spending and saving habits is one of the key mistakes I think people make on a daily basis. It is an incredibly easy trap to get into where you snowball into over-excessive spending just because you can. If you make £3,000 per month, you don’t need to spend £3,000 a month. Your income shouldn’t be your target for spending, however, for many of us in the world, this is indeed the case.
Create a budget, and stick to it, based on the potential of the next 12 months!
3: Learn about the Economy & Markets
The economy and the financial markets are currently in turmoil. Constant erratic movement on a daily basis is causing confusion around the world. However, the more you understand these movements and what is causing them, and what the outcome might be…the better you will be in the long term.
Being able to understand why the markets are moving will allow you to adapt and benefit yourself. Knowing when a good time to put money into the markets, or when is a good time to save or spend is key to coming out of an economic downturn better than when you entered it.
If you would like me to do a more in-depth post on learning the basics of understanding the Economy & Markets, let me know.
4: Discuss Loan Situation with Lenders
This one may not apply to all. But, if you’re in a situation where you have upcoming loan payments looming which you’re worried you may not be able to pay, then pick up the phone to your lender immediately.
It is infinitely better to be honest with your lender and tell them you’re going to struggle to pay, rather than not pay and discuss it with them afterwards.
Many lenders may put you on a payment plan of temporary reduced payments. They would much rather you paid something, than defaulted on the loan.
Trust me…pick up the phone.
5: Consider Freezing Credit Cards
Unless you’re ONLY using a credit card as a form of credit enhancement. IE – You’re paying off your credit card balance at the end of the month without fail, then you should freeze your credit cards until this period of time is over.
I personally have a British Airways AMEX which I automatically pay off at the end of the month. My limit is approximately £10,000 – but I maybe use £1,000 of it on a monthly basis at most. Some months more, some months less. However, I have NEVER failed to pay off the balance at the end of the month.
The last thing you want is for your credit score to be harmed right now. So, if you’re worried about your cash balance, stick to using cash & debit cards for the time being,