3 Most Important Financial Steps to Take When Living in a Crisis

The thought of something terrible happening to us rarely crosses our mind, but here we are living in a global crisis. The Covid-19 has taken an enormous toll on economies, travel, and jobs, thus on the personal finances of most people. The possibility of something happening beyond your control becomes less worrying if you are adequately prepared, it can minimise the impact of any persisting crisis.

We are not always in a global crisis, but one unexpected event can cause a personal financial nightmare, here are three necessary financial steps you should consider taking in case of any crisis situation.

Maximise your liquid cash

The most accessible financial resource in a crisis situation is the cash you have in hand. Maximise your liquid cash savings, be it savings and money market accounts, certificates of deposit (CD), and short term investments. They can help you navigate the situation, and since they are short term resources, their market value won’t fluctuate, unlike stocks, traded funds and other long term investments. The cash resources are immediately available and can be used without incurring debt or loss. One will not face any early withdrawal charges in cashing out these investments.

Minimise your monthly bills

Not in the instance of crisis but even otherwise keeping your monthly expenses down is the right decision. But in the event of a crisis, be ready to start cutting on any expenses that are not necessary. Reducing your recurring expenses will make it less difficult to pay bills when money is short. Look at your budget, categorise needs and wants so that you can understand where the money wastage is happening. Take simple steps, like buying essentials only, cancel any unwanted subscriptions, choose a telecommunication plan that only has services that you require. It can also mean changing your habit of letting the lights and AC run when you are not using a room can reduce the utility bills. And yes say bye-bye to those impulsive shopping trips.

Choose better insurance plans

Look for insurance plans with lower rates, check if another insurance provider is offering the same level of coverage that your provider does. Having low premium insurance also means you would save on your monthly expenses. Another important thing is to have an insurance plan that matches your requirements. Disability insurance can be a lifesaver if you sustain any severe illness or injury; it can provide coverage that your existing policy does not provide.

The thing is that life is unpredictable, and some things are entirely out of our controls. We might not be able to avoid the crisis, but we can be prepared. These three things can prevent a crisis from becoming a personal financial crisis.