Money is unarguably one of the essential things in one’s life, if not the most important thing. It is this money that incentivizes everyone to wake up every morning and go out for work. But ever since this pandemic arrived, both going out of work and money became a dream for many.
People working in the manufacturing sector had to go through furlough, and even in the services sector, the situation is far from being hunky-dory. In such a gloom and doom scenario, the cashflows became inconsistent, and the savings of the household are gradually depleting.
There are direct lenders present online in the UK who came to the rescue in this pandemic by offering same-day loans on benefits. These loans are even for bad credit borrowers, so even if you have a substandard credit history, then also you are eligible for these loans. These are no guarantor unsecured loans for which the borrower does not have to pledge any security as collateral, and neither will he have to produce any guarantor to represent him.
Money management became important more than ever; it was after the onset of this pandemic. This is why we wrote this blog to introduce people to some of the money management tips for better personal finance management. Here it goes:
If there is one lesson in this pandemic to manage your personal finance, then it is creating an emergency corpus. This should be approximately equal to your 6 months of take-home salary as suggested by many money managers. This fund will come to your rescue in emergencies like you losing your job, working on a pay cut, or a medical emergency.
You can choose to keep this money in the form of cash or invest it in a liquid asset class like a savings bank account or a fixed deposit.
Insurance is another essential investment option that should instead be looked at as a protection cover and not a wealth-creating asset. Every person having a family must insure himself and the dependents in this family with life insurance and health insurance.
Personal finance experts suggest taking insurance early in one’s career as it is comparatively cheaper when it comes to monthly premiums. Many families suffered due to no health insurance in this pandemic when their dear ones were admitted for treatment in hospitals.
The next lesson is to have a decent credit profile, which will enable you to take loans at lucrative interest rates. There are situations of emergency which require you to borrow money like this pandemic is a case in point. Though there is an option of no guarantor loans from direct lenders, the interest rates on these loans are higher, which defeats the entire purpose of borrowing. If you maintain a healthy credit score, then you can sail through any emergency, even if you have to borrow.
It is better and highly advisable for money managers to let your money work for you even if you are not working. Your savings is working for you when it is fetching returns over the period.
You can choose to invest in a combination of asset classes based on your risk appetite. If your risk-taking ability is low, then prefer investment options like Government Bonds, Term Deposits in banks. These asset classes will give fewer returns, but the risk is lowest here.
However, if you love taking a risk, then go for asset classes like equity investing, real estate, mutual funds, options or commodities trading, etc. These investments will build wealth for you in the long term.
You should avoid taking debt as much as possible and buy anything from your savings only. The basic premise is to avoid buying stuff which you cannot afford, and you would borrow money to finance that purchase.
The rationale behind it is simple, which says that this borrowing comes at the cost of interest. Thus, you end up paying much more than what you borrowed, and if you miss any repayment deadline, then your credit score gets exacerbated.
If you have existing debt obligations, then it is better to finish all of them by taking same day loans on benefits for debt consolidation.
You need to go back to a drawing board to prepare a list of your expenditures. Now bifurcate expenses which are necessary and observe the amount of money you have been incurring on things that do not provide any value to you.
Cut down on these expenses to save more money and invest it. There could be subscriptions you don’t use, expensive internet plan, gadgets that are not used etc. are some of the unnecessary expenses which can be reduced for better money management.
A budget is exceptionally vital for effectively managing your money. You can approach a financial advisor or a money manager to do this task for you if you are finding it complicated.
The budget will have your total income at the top and then all the fixed and variable expenses below it, which will finally give you the savings you can have every month. A budget gives you better clarity about where your money is going and how you optimize it for more savings.
Prepare a budget, stick to it, and follow it in a disciplined manner to achieve financial prudence.
This is ideally the first stage of financial planning in which you set goals and attach a timeline with them. For instance: you want to buy a car in 3 years, build your house in 10 years etc. Based on these financial goals, you prepare a plan to achieve these goals in the specified timeline. It is for these goals that you start your financial planning and do budgeting, make sure to have rationale goals and practical timelines.