UNITED STATES—The effects of the COVID-19 pandemic are evident and no matter where you are in the world, almost everyone is affected. Many hospitals, schools, and other sectors remain closed due to the danger of coronavirus. While this pandemic has threatened the lives of millions of people, its impact goes beyond physical health. Whether you experienced its health effects or not, this pandemic is certain to affect personal finances.
The COVID-19 crisis had crashed the global economy, making industries and businesses suffer. Some businesses have even been forced to permanently close their doors. Unemployment has increased, and people’s incomes are being cut off while bills and expenses keep rolling in. This chain reaction is likely to continue and affect personal and household finances in the years to come.
Thus, it is essential to plan and use your resources efficiently to maintain financial stability both during and after this pandemic.
Be Aware of the Economic Impact of COVID-19
There is no substitute for awareness during these trying times. Knowing what’s going on around you is critical to financial preparation and decision making. While monitoring the number of COVID-19 cases in your area, keeping track of its economic status is also essential.
You might have not yet felt it, but this pandemic is already having a massive impact on the U.S’ economy. California is no exception. It is facing a deficit in its forthcoming budget as tax revenue drops as a result of quarantine, while also trying to address immediate funding needs.
The projection of unemployment in California for this year is around 18%, which is a higher rate than the worst economic decline a decade ago. As a result, personal income is also anticipated to fall by 9%.
It is, therefore, necessary to arm yourself with practical ways to manage your finances during this difficult time. The pandemic might have already disrupted the state’s economy, but it’s not too late to protect your finances.
Evaluate Current Financial Situation
If there is a perfect time to evaluate your financial situation, it would be during this crisis. Managing your finances is necessary at all times, but it becomes more vital when an emergency like a pandemic occurs.
Just as this crisis affects your work and lifestyle, it might have brought significant changes to your finances. Analyzing your financial situation would help you identify these changes and their corresponding consequences. Expenses, income, and savings are some financial matters you need to take a look at and manage.
With all the unprecedented challenges caused by this pandemic, how well are you keeping up financially? Your assessment of this matter will impact the rest of your financial decisions later on.
Assess Financial Resources
Effective management of your resources depends on how seriously you take your financial condition. One of the pressing concerns is whether you have the resources to get by.
While the lockdown is ongoing and you are forced to stay in your home’s comfort, assessing your financial resources could help you strategize better. If your income is significantly affected, you can perhaps rely on other resources, such as personal savings.
As mentioned, California is just one of the many places experiencing the financial consequences brought by this pandemic. Despite the continuous effort of the state to provide economic assistance to its people, the available resources could not cover everyone’s needs.
The good news is there are several alternative resources to help you in tough situations like this. You can opt for a California personal loan application in case you need additional funds to get by.
However, your financial resources should determine your living cost and not the other way around if you want to maintain financial stability. In this time of crisis, prioritizing where your money should go is important.
Implement A Crisis Budget
Budgeting during a pandemic is essential. Now that financial resources are limited, it is vital to focus on priorities such as groceries and other household essentials. Thus, this is the ideal time to reconsider what is most important to you.
Implementing a crisis budget can make you feel more prepared and confident as you move forward in these unprecedented times. But to do this effectively, keeping track of your expenses is a great place to start. It’s the most basic method of personal financial awareness aside from assessing your earnings.
Reduce Nonessential Expenses
Uncontrollable circumstances such as this pandemic might have caused you to lose your job and income. But regardless of that, you can still be proactive with your finances. The key is to focus on what is within your power to change, and your expenditures are just one of them.
Reviewing your previous purchases can give you a general portrait of your spending habits. Which among those expenses can be considered nonessential? If you can survive without it, you can take it out of your emergency budget. The first rule you can apply is to buy only what you need now.
By doing this, you can take control of your finances while the financial effects of COVID-19 are still prevalent. Managing what’s coming in and out of your finances remains the basic economic concept during this pandemic.
Create An Emergency Fund
While you are still generating income during this time of crisis, sending a portion of it straight into your emergency fund would be beneficial. This pandemic is an ideal time to be more assertive in contributing to your emergency savings account.
However, not everyone’s income can provide the opportunity to build a fund in this challenging time. Fortunately, there are other ways to create a financial cushion. Saving what you would normally spend on nonessential items like entertainment and vacations can help you grow your emergency fund. Other than that, keeping a line of credit with zero balance can help you cover emergency expenses.
Several unexpected circumstances and factors could impact your finances. The financial consequences brought by this pandemic could be a wake-up call to take financial preparedness seriously. When tough times like this occur, an emergency fund would be a great help to cope financially without losing your footing.