The COVID-19 pandemic has affected many different areas of our lives. Almost everything that happens is also financially affected: the economic crisis caused by the pandemic is called the worst since the Great Depression.
In this situation, many people think about how to make their financial future more stable – for example, how to finally get an airbag that will help to cope with severe shocks such as job loss.
We will tell you what you should remember first of all to those who decided to save money.
Remember it’s never too late to start saving
Most people think that it would be good to have savings only when something bad happens. And this is not surprising. Modern life – as it was before the strict isolation regime – dictates its own rules.
We are forced to obey its incredible pace and respond to endless challenges, devoting all our time and energy to what needs to be done here and now. There is usually no time to think about the future.
Unfortunately, with the exception of a very narrow layer of wealthy citizens, such shortsightedness leads to the fact that in the case of force majeure – illness or job loss – a person is financially vulnerable.
Indeed, in addition to the fact that he is actually left without a livelihood, stress and panic often force him to take ill-conceived decisions that exacerbate an already deplorable financial situation.
For example, a consumer loan taken to cover urgent needs at a huge percentage gives only the illusion of a solution to the problem. In fact, he sucks a person in the quicksand of a debt hole.
But the financial world is a complicated thing, and not everyone can, without proper preparation, determine which banking product is profitable and what is simply trash wrapped in a brilliant advertising wrapper, which you should stay away from.
For this reason, regardless of income level, you need to have something for a rainy day. It’s never too late to start saving. This helps not only to create a reserve, but also to discipline yourself, to make spending more reasonable.
Save money little by little, but steadily
How can I start saving? The easiest option is to save 5-10% from each salary on a separate bank account. Save money and not spend it, even if you really want to.
How long? Ideally, your whole life, as long as you have a regular income. And at least – until an amount equal to three to five of your monthly income is accumulated.
It is precisely such an airbag that will help to hold out for some time while you are recovering, looking for work or another source of income.
Do not take risks until the situation stabilizes
It is also important to understand that for a person who has just begun the path of accumulation, the most important thing is to save money and not to increase income.
After all, there is a significant difference between the investment strategy of a wealthy person who wants to make his capital work, and those who are trying to create a certain supply of “living money” for an unforeseen event.
For example, if you just saved up the first serious amount, and your wealthy neighbor advises you to “invest in real estate to rent,” do not listen to him, let alone take a mortgage for such a purpose.
Your investment strategy option is a deposit with a modest rate in a trusted bank. And so on until you yourself become a “rich neighbor” who can afford to risk part of his capital, and in case of failure, will easily survive the loss.
In other words, you should not invest the first accumulated amount in mutual funds, stocks, bonds, start playing on the currency market, and so on – no matter how “profitable offers” banks receive.
Remember, high income is always an increased risk, and investing in financial instruments that you do not understand enough, you can lose everything that is accumulated with difficulty.