The world is suffering from a deadly virus, COVID-19. People all over the world have been affected, either directly or indirectly. Everyone is under home quarantine or self-isolation.
This global pandemic has brought upon deaths of lacs of people worldwide and has left many more infected and suffering. Not only this, but it has also brought the world economy to a halt.
The share market has suffered a lot. It has rocked the whole system of the supply chain quite significantly. Businesses all over the world are being affected.
The economies are experiencing tougher challenges than they faced in the year 2008-2009 due to the economic slowdown. More significant drops in global trade and world economic contraction will be evident.
COVID-19 has forced businesses and tech-firms to fire their employees. With the economy hurt, and the vanished cash flow, they don’t have the means to pay for their employees.
A slowed-down economy means no jobs or less income. People will have limited opportunities for salary growth or job change. Fixed expenditures such as car loans, home loans, etc. don’t change, and paying them back during an economic crisis can break your back.
All of this can put you in a lot of trouble if you haven’t built the habit of saving. Covering day to day expenses might become difficult for you. The best way to ensure stability in such disturbing times is to have savings.
When anyone talks about saving money, people think it is about putting some money away for future uses. Of course, it is saving money, but that is not the only way. You can save money by investing it too.
The primary purpose of building up savings is to help you out with money should you need it in the future. The same is true when you invest it. You can have money for yourself if you need it afterward.
There are a lot of hidden risks, but it also has the highest returns. Investing is a better option, but you should never do it before analyzing the risks. You may even lose all of your savings.
Here are 7 Simple Steps to Save Money During an Economic Slowdown
The 50/30/20 Rule
Elizabeth Warren, who is an American lawyer and a politician, suggests that a person should spend 50% of the monthly income towards essential bills (house rent, transportation, food, etc.).
The rest 30% of your income should be spent on discretionary spending, while the rest of the 20% towards saving. Once you have developed a habit of saving, it will be easier for you.
You should also start saving towards a goal. After all, the money that you save now will help you tomorrow. You might be able to understand how only two-three months’ worth of savings cannot help you in surviving through a global crisis.
In a global crisis like this, it can take years for the market to be healthy again. So if you are saving for such a goal, you need a couple years’ worth of savings to back you.
Invest in SIPs
Simple Investment Plans or SIP can help you save towards a particular goal of yours. Mutual funds offer SIPs as a facility to investors so that they can invest in it.
Small investments, some as low as INR 500, are also allowed. You can pay for an SIP over a fixed interval of time, allowing the investors to pay weekly, monthly, quarterly, or yearly.
SIPs are more beneficial because compound interest is calculated on your principal and also your previous returns. So SIPs have the power of generating more profits for the same amount.
Cut Back on Your Lifestyle
These are tough times. To survive, you have to make sure that you don’t exhaust the resources that you have. These resources include the capital that you have saved.
Let go of all the luxurious habits of eating out often, taking a private cab to work, or spending more on non-essential items. Put away your plans to buy a new car or even a new house.
Develop a habit of spending on only those items that you think are essential. If you don’t hold back on yourself and spend too much, you risk losing all your savings.
Diversify Your Income
It is always a good idea to have side businesses or side gigs from where you can earn a little extra. You can always find someone who can give you some extra money for small jobs.
Teach your neighborhood kids, start a new shop where you can sell handmade goods, or help your local food joints in delivering. There are tons of ideas for part-time jobs lying all around you.
All you have to do is go that extra mile, and you can always earn a little more than you do.
Focus on Long Term Goals
Prepare yourself for the worst. The only long term goal that you need to focus on should be that you have to live out this crisis. On regular days, saving up for a grand holiday or a new car might be justified.
But during times like these, it becomes complicated. Many people have lost their jobs and don’t have money for regular meals. The day you think you can spend some more money, remember it can always get worse.
Plan for the Unexpected
Invest in health insurance or term life insurance. You have to be ready for what comes next. People were fighting over toilet paper in America as the whole country went under lockdown.
Ration all essentials and food items so that you don’t have to worry about anything. Saving up will not help you if you don’t even spend on minimum essential commodities.
Build up Skills
Educate yourself, acquire a new skill. During an economic crisis, people lose jobs because they are no longer needed, or their skills have become obsolete.
Educating yourself and building up skills will always help you, as you will be valuable no matter what the circumstances are. You can also work part-time jobs which require a different set of skills.
These are tough times. Nobody knows how the circumstances will turn out to be. For now, the economy is just facing a slowdown. In situations like these, economies might crash altogether.
All you have to do is be strong, follow the government’s guidelines, and look for opportunities so that you don’t lose your money. Let’s wish for a better tomorrow and a better future.