At some point, you may have had the intention to financially prepare for any situation that could impact your income. Maybe you already have, in which case, well done.
Not long ago, we told you exactly how much money you should have in your emergency fund in an effort to prepare you for a sudden loss of work and therefore, your income.
Of course, we couldn’t have predicted that this would actually happen, and to so many Australians at once, due to the COVID-19 pandemic, which has left the economy stuggling. But this too shall pass.
To those who didn’t set up an emergency fund, it’s unfortunate that now may not be the time to start. But in the midst of a global crisis, there are some things you can do to bolster yourself in the cash department and improve your money management skills when you need them most.
Here are our five rules to de-stressing your money in times of COVID-19.
1. Do not panic
Things are not great, but nothing positive ever came out of a rushed decision. Understandably, when our income seems threatened or the economic outlook looks uncertain, we might feel tempted to act in the short-term, perhaps by selling our valuable belongings, pull our savings from the bank, or cashing shares out of the stock market.
Our advice here is to take a deep breath and re-assess the situation when you are in a state of calm. And after a lot of research. Think about what advice would you give to a friend if they were in this situation, and try to approach things as rationally as possible.
This will always be your best answer to crisis management.
2. Get to know your ‘money personality’
At Best Financial Friend, it is believed that the first step to getting a grip on your finances is to know what is important to you (your money values) and what money represents to you (freedom security, power, etc).
This means, knowing yourself, having a healthy deep dive into your inner needs and wants, and listening to your own voice when it comes to your money.
The exercise encourages you to hold up the mirror and be honest with yourself about your ‘money upbringing’, and your spending and saving habits.
Use this time in quarantine to reflect on your past behaviour and your goals. Once you know what your values and money personality are you can start making some wise decisions on what’s best for you.
3. X-ray your finances
Yes, changing your relationship with money is about understanding your money personality, values and spending habits, but you’ll need to do some digging to find out more about these factors.
Taking an X-ray of your finances means grabbing three months of bank statements and going through each line, highlighting those transactions that didn’t bring as much value into your life. The disconnect between our values and our spending habits shine a light on some areas we might be spending money on without any real purpose.
How to X-ray your finances
- Go through each line of your last bank statement and highlight with one colour the charges that are vital (and non-negotiable) for you to live, like rent and bills.
- Highlight with a different colour those charges that brought you the most joy, like that dinner out with your friends or that much-needed bag you had your eye on for a long time.
- Highlight with a different colour those charges you could have gone without, like that online purchase that you never returned because you felt too lazy to do it.
4. Understand your position and set some goals
It’s time to be hyper honest with yourself about where you stand financially. In these times of isolation, where you have (maybe a bit too much) time to reflect and make decisions about life, it’s important to be honest about your spending habits and your goals.
One recommendation is to draw, paint, or write down your short and long term goals, and then on another piece of paper, write down your spending habits (Ubers every weekend, daily coffee, etc) and think about how these spending habits are getting you closer to your goals.
If they are not, think about how you can consider changing this. What promise will you make to yourself in the future? And if you are super committed to this, tell a friend or family member to keep you accountable.
5. Look for little wins to ease your current situation
It’s been said that in times of crisis lies so much opportunity for those who look for it. The reality is that many of us may not have the mental space to think about opportunities right now, and that’s okay!
But, if you reframe your situation and try to look for ways to bring in an alternative income, you might find some little gems. Start by thinking about current expenses where you could be saving some money (refinancing your mortgage, renegotiating your rent, renegotiating your phone bill, you get it).
Then look for other areas where you can utilise your extra-curricular abilities. Could you be selling any crafts online? Or maybe could you be using your marketing abilities to help business swiftly adapt or pivot their businesses to do something in high-demand right now!
Think of what is needed right now and how you can help your community.
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Remember this. Times like this affect everyone in one way or another, positively or negatively. We are all in this together and this crisis will pass. The real question is how will you want to come out of it?
If you ever had the intention to get on top of your financial habits, now may be the time. If it is all too hard and complicated, consider the help of a Best Financial Friend or BFF.
A Best Financial Friend will help you get your money and spending habits. Find out more about how BFF can help you today.