6 MONEY SMART TIPS TO SURVIVE A TOUGH ECONOMY
Before the COVID-19 pandemic, the economy’s situation was not ideal. Still, it was far better than now, as it gradually emerged from the recession. However, Nigeria’s economy appears to have worsened with the pandemic still wreaking havoc on the global economy. Making it almost impossible for anyone to survive. Particularly for the common people and those whose means of subsistence are in jeopardy due to job losses. Many businesses have failed due to the circumstances. At the same time, those still struggling to stay in operation must cut employee salaries to stay afloat, severely purging unemployment rates.
Another factor that hasn’t helped is the ongoing increase in the price of goods brought on by the rising inflation and the decreasing value of the Naira. Both of which have negatively impacted people’s quality of life. The country’s economy is going through a rough patch, making it difficult for people to feed and afford the necessities of life, especially if their source of income is uncertain or not particularly promising. The current state of the economy makes it more crucial than ever to take good care of the money you have laboured so hard to earn because money is pretty tight everywhere.
Do you realize that, regardless of how much money you make, you might not be able to achieve financial freedom without exercising sound financial judgment? So, spending responsibly and avoiding unnecessary purchases is imperative to maintain your standard of living. Moreover, in the current tough economy, only self-determination, wise financial planning, and cautious spending can help people overcome financial obstacles. In this economy’s slump, the following advice can help you manage your money, spend prudently, and reduce financial stress:
Income Diversification
The implicit risk of relying entirely on one source of income is that if the economy collapses and you lose your job, you will also lose your single source of income and your ability to meet all your financial responsibilities. Even if you have a great full-time job, having an extra source of income on the side works better. With job security so low these days, having more jobs means having more job security. Diversifying your income streams is very crucial for survival in a tough economy.
Having several sources of income can be pretty beneficial. You have other revenue sources to rely on to keep you going if one source of income starts to decline or is completely removed. You don’t have to create two or different businesses to make additional income. Instead, you can decide to make three more streams from just one job. For instance, if you are a makeup artist, you can run the same business providing services like hair styling (hair and frontal installation) and semi-permanent make-over. Starting an online business is also advised for those currently holding paid employment. Social media can get you much more than you think. You can also learn a tech skill that can enable you to work at your own pace.
Having diverse income streams is vital because If you lose a source of income during a recession, at least you still have the other. Every little bit counts, even if your income is not as high as before. As the economy recovers, you might even emerge from the recession with a flourishing new firm.
Budget and Planning
A budget or spending plan is essential, especially in this tough economy where survival is a significant challenge for many people. It helps to keep your finance in check.
However, having one will guide and assist you in understanding how your money is spent and utilized. You can create a weekly, monthly, quarterly, or yearly budget to know how much money you spend on your needs and wants. In other words, keeping track of your monthly costs will help you create a budget. That will often include housing costs, food, clothing, health care, transportation, etc.
There are several ways to maintain a budget, such as jotting down your expenses on a notepad or Word document, using money management applications, or creating budget calendars. Budgets are so crucial that you might spend several hours creating the ideal one, but in most cases, the difficulty is not in making a budget but in sticking to it.
Budget and planning can help curb impulsive purchases. Setting up a modest portion of your monthly spending will help you avoid impulse purchases and maintain your emotional wellness.
Expense Tracking
You can control how you spend money by keeping track of your expenditures. You can learn more about your financial situation and how you came into debt by keeping track of your spending, especially in a tough economy. Expense tracking will then enable you to create an effective debt relief plan.
Sometimes expense tracking could get mixed up with budgeting, but they are not the same; they stand differently. It is vital to have a budget but sticking with it is more important. Else it is pointless. Tracking your expenses is simply keeping a record of your spending and expenditures. It helps you know what you spent your money on the most and what to prioritize, clearly distinguishing between your wants and needs. It enables you to maintain your budget, reveals financial issues, and helps you meet your financial objectives.
Following the creation of a budget, which is a monthly spending plan that takes your income and expenses into account, keeping track of your spending every day is crucial to staying within that budget. You will lose track of your spending if you don’t keep track of your finances (food or clothing, for example).
Review the expenses you kept track of at the end of each month to see how much you spent compared to what you had planned. If you went over budget, try to reduce your spending in that area. If you didn’t spend enough, you might want to put more money toward investment and savings.
Also, read 10 Tips on curbing impulse buying
Live within your Means
You must make deliberate efforts to lower your costs to make room for savings if you genuinely want to live within your means and have financial security in a tough economy. And one way to achieve it is to strictly adhere to your budget and make sure you only purchase necessities.
As the current economic situation does not permit such, there is no need to purchase products that you don’t need.
Spending less will help you save more money and prevent you from having trouble getting used to a new way of life when a recession or downturn strikes. Learning to live frugally can be a great strategy.
Contrary to popular belief, leading a frugal lifestyle doesn’t involve depriving yourself of the things you enjoy. Instead, it’s not as challenging as it may sound. It is more important to make decisions about your money that minimize the influence on your way of life while still reducing expenses.
Make sure your cuts aren’t too drastic, or you won’t be able to maintain them in the long run. The secret to living through a recession is to learn how to make do with less.
Save for Unforeseen Circumstances
Our jobs and income may be in danger when the economy falters. It is crucial to saving funds somewhere for emergencies. In a nutshell, an emergency fund is a money you have set up expressly to assist you in getting by during times of financial difficulty.
Saving for an emergency will provide you with a safety boat to fall back on. So you can ride the wave and come out of recession on your feet, regardless of whether you’ve lost your job, your business isn’t earning any money, or you made bad financial decisions.
To ensure you have enough money to get through an unexpected event in a tough economy, try to save as much as possible. You save up to three to six months’ worth of income, at the very least. Even better, set aside eight to twelve months’ worth of expenses, especially when the labor market is unsteady.
If you can, save enough money to last three to six months.
Diversify your investments
Investment diversification is equally as crucial as income diversification. If you invest a more significant part of your assets in stock market securities, a downturn in the economy could be disastrous for your finances. Therefore, it’s because of this that diversifying your investments is so important.
Ensure your investments are distributed over various sectors and asset classes in your investment portfolio. So that market fluctuations will not affect you and your losses won’t be severe.
You can invest your money in different investment vehicles to help with diversification. Real estate is a frequent investment that often increases in value over time, whether you’re buying a house, an apartment, or even land. Bonds are also frequently an intelligent way to generate income. While investing in stocks is a wise strategy to help your portfolio expand. You can also consider investing internationally, as doing so might lessen your exposure to economic downturns by allowing you to diversify your holdings across different nations.
Stock values typically decline during a recession, which may impact some of the shares you now own. When you diversify your investments, you can lower your risk of experiencing total losses in a tough economy. During a recession, there will also be chances to purchase debt issuance funds. Bonds with fixed income and ETFs that pay dividends are frequently offered by firms at this time too.
Click here to explore some investment options offered by Mintyn Online Bank.
P.S; When the going gets tough, only the tough get going.