Managing personal finances can be difficult enough as it is, and it’s now made even harder thanks to the economic recession that the coronavirus pandemic has caused.
The most important thing to do now is deciding where your limited resources need to go first. To help you do just that, here are some questions you should ask yourself to better prioritize your spending.
Does Your Income Match Your Essential Expenses?
If you are one of the many workers who lost their job in the wake of the pandemic, you may find yourself unable to pay for your basic utilities, your rent or monthly mortgage payment.
Depending on your lender’s policy, you can ask your creditor to defer your payments for up to a year and talk about ways to pay them off after.
Those who answered yes to the first question should ask themselves the following.
How Many Months Can Your Savings Cover?
The current uncertain times is exactly what your emergency fund or savings are for. If you have neither though, now is also a good time to start putting money in a high-yield savings account to start building a cash reserve.
If possible, build a fund that would cover three to six months of your living expenses with any leftover money you may have right now.
Do You Have Debt?
Those who do have a cash fallback should then consider the kind of debts they currently have. Credit card debts should be repaid even if your interest rate may have significantly fallen recently.
Consider diverting your free money, considering that you may have fewer expenses being stuck at home, to keep making payments as much as possible.
Do You Currently Invest?
Now may also be the perfect time to start investing, especially if you still have a paycheck coming in every month. Make automatic contributions to your retirement account and practice a strategy called dollar-cost averaging.
Other Top-Priority Goals
If you already have an investing account, then congratulations! You should be financially capable enough to survive the recession just fine.
You can even focus on meeting your other goals whether it’s wealth-building or finally starting a business. Other goals you may want to prioritize now are relocating, buying a house, or even getting into a new hobby.