Are there financial lessons in the middle of this health crisis?
The COVID-19 virus started from Asia and swept across Europe and found its way into US soil. Much like what it has done anywhere else in the world, it is putting huge stress on the healthcare system. A lot of people are getting infected and needing medical care. In turn, this overwhelms hospitals pushing medical personnel into exhaustion.
That is just the medical side of the pandemic. As you know and might have felt by now, the economy is taking a beating. Numerous companies are trying to stay afloat. Businesses are shifting into a digital approach. This has led to a boom in telecommuting. It is making people learn how to effectively work from home.
This is just one of the lessons you can learn from this crisis. In fact, there are also a number of financial lessons you can discern from this pandemic. It might sound strange knowing that this crisis is also putting a tremendous amount of strain on your personal finances. But there are positive lessons you can get from this.
Think of how a diamond is formed deep under the Earth. The intense heat and pressure produce this rock. If you apply this to your situation now, the health crisis is the intense pressure that will form your character. You just need to set your sights on the lessons this pandemic brings so you can come out on top.
Your emergency fund is important
One of the most obvious financial lessons that this crisis has underscored is the importance of your emergency fund. At a time when people are asked to stay at home, it is tough to manage your finances. For one thing, work has been on hold for a lot of people. As most businesses close their doors, income has been a problem for people.
This is the reason why your emergency fund is considered a crucial part of your finances. As the NY Times shares, almost two-thirds of consumers lack financial buffer. This is good but with the health crisis, this will not be enough. Yes, a stimulus check is on its way but even with that, you need to have a few more in your pocket.
A robust emergency fund should be able to cover for your expenses for an extended period of time. The idea is that it will help you take your mind off your expenses. This will help you focus on finding a way to augment any impact on your income. This crisis highlighted the importance of saving for the rainy days because you never know when you will need it.
Your credit score has many benefits
As you look at financial lessons from this pandemic, another one you will soon realize is the importance of your credit score. You might not be paying much attention to it in the past because you do not see the actual score. Out of sight, out of mind. Now that you are looking for ways to improve your financial position during this pandemic, your score will begin to play a big role.
As you try and look for other sources of funds during this pandemic, applying for credit will be a top option. You might even be looking to start a loan application from existing or new lenders. All these are on the table now that everyone is being asked to shelter in place and your income is impacted. When you do this, your credit score is on top of your application checklist.
This helps lenders assess your creditworthiness. Especially during these times, this will form an important decision making detail for your lenders. Your credit score will also help determine the interest rate on your application. The higher your score9, the lower your interest rate can be. In the same concept, your rate can be higher when your score is not ideal.
Not keeping balances on your card has its benefits
You will find an increase in dependence on your card during this time. This is the case especially for consumers without much emergency fund to dip into. The problem begins when you are already carrying huge balances on your card before the pandemic begins. This is one of the financial lessons you will soon see the importance of.
You might have heard how important it is to always pay your credit card bill in full every month. The main focus of that argument is how it can help you save money in the future. This is because choosing to pay just the minimum will allow lenders to add fees, penalties, and interest on succeeding monthly payments. This is money you could use for something else like an investment or savings.
If you took this tip to heart, you will find yourself in a better financial position especially when using your credit cards. A huge debt amount from past statements will limit the credit you can use at this time. And with your income severely affected, paying your cards down is not your priority. This is one of the reasons why you need to pay your card down every time.
It is a good idea to diversify your income
Taking on a side hustle is not a new concept. In fact, CNBC shares that about 3 in 10 Americans need the side gig to make ends meet. This is one of the financial lessons that can come out of this pandemic. If you have been relying on one income source and you are let go from work, you are left with nothing. This is an extremely difficult situation to be in at this time. You have no source of income to help you through the pandemic.
This is why you need to have a side gig to augment your main source of income. Normally, this will help you save more every month. But when you are laid off work, your side gig becomes your main source of income. It might not be enough but this is better than nothing. You can now focus on increasing the amount you earn fro your side gig.
While staying at home, you can still pick u some side hustles online. Take note that the amount you might earn could be lower than what you are used to. You can use it for essential expenses. One thing that can help is income-positive hobbies. This way, you get to earn money while doing something you already love doing.
Living below budget
It also pays to try and live below your budget during these times. Some people would refer to this as frugal living. When you choose to spend less, you get to extend your funds on hand to cover more expenses
Creativity is heightened when you choose a frugal lifestyle. You are forced to think of ways to spend less. When you are cutting down on food expenses, you could be forced to start cooking your own food. If you need to cut down on recurring expenses, you can always find ways to replace them with something better. Choosing to stick to one movie streaming app can be a family event. You can make drinks and popcorn for everyone to enjoy while watching.
There are financial lessons in this health crisis if you take the time to understand what is happening around you. These will help you get through the pandemic and even prepare for the new normal after the pandemic.