10 Tips for Managing Your Finances in an Emergency
In the year 2020, many things led to significant changes in our daily lives. It was the early stage of a global pandemic that led numerous countries to issue stay-at-home orders for citizens across the globe. Many people went weeks without so much as going outside.
Fortunately, we live in an era of great technological advancement, so for many, it doesn’t have to be all that difficult to take the appropriate precautions to address changing circumstances. This is not only true for one’s physical health, but can also be applied to a person’s financial well-being. Here are a few ways you can manage your finances well, even in an emergency.
1. Utilize Digital Services
For most people, being stuck in one place is far easier today than it would have been even a few years ago. If you find yourself unable to get out and about for an extended period, it is still relatively easy for a lot of people to work, stay in touch with loved ones, and handle their day-to-day affairs. The same modern communication technology that keeps us entertained and in the loop can also enable us to do our banking from anywhere. Digital banking tools make it easy to manage accounts, make transfers, pay bills, and more.
2. Order Online Whenever Possible
One of the most impactful ways technology has made it easy to maintain our normal rhythms in the face of trying circumstances is our ability to order things online. From a physical standpoint, this has obvious benefits. There is also a tremendous financial upside. When shopping online, consumers are able to compare prices from a wider selection of merchants to ensure that they’re getting the best deal. Many retailers are also willing to offer online-only discounts or incentives to encourage customers to place orders over the web.
It’s easy for consumers to come out ahead when shopping online. There are three things one should always do when purchasing something over the internet:
- Compare prices
- Look for additional discounts
- Find options with free shipping
Pro-Tip: When shopping online, always double-check the security certificate on a website. In your browser, you should see either the “HTTPS” protocol in the URL or a lock icon next to the URL that shows whether a site is secured using SSL encryption. Never provide any personal or financial information on a site that doesn’t display proof that it has taken these security measures.
3. Find New Ways to Pay
Sometimes, going to a physical retailer simply cannot be avoided. However, in today’s world, it is seldom necessary to have a physical, hand-to-hand exchange to complete a transaction. This is great news if for anyone who has no choice but to go out right now.
Over the last 20 years, many people have switched over from using cash to debit cards. Today, many people are using their cell phones like debit or credit cards thanks to mobile wallet technology. Many physical retailers have made it possible to pay for your goods without ever having to touch your wallet.
In addition to contactless in-person transactions, ecommerce and online bill pay make it easy to buy the things you need or take care of your ongoing expenses without fishing cash out of your pocket. Many mobile wallets and banking apps allow for an immediate transfer of funds between friends and family. Most workplaces will even deposit employees’ paycheck directly into their accounts instead of cutting physical checks. Paper currency is no longer required to get by in our daily lives, so we recommend avoiding it wherever possible – especially during a time of widespread illness.
4. Stick to Your Budget
If you’ve worked hard to create a healthy budget, don’t abandon it now. In times of crisis, you may feel pressured to spend more money than usual — stocking up on supplies, ordering food, and paying for home entertainment. However, it’s more important than ever to stick to your budget. Remember, the crisis is only temporary, and the decisions you make now can have positive or negative long-term outcomes.
As we’ve seen with recent events, there is a big difference between stocking up and stockpiling. Buy only what you need, and don’t make any panic-purchases. Listen to officials in your area about the availability of food, medicine, gas, and other supplies and act accordingly.
5. Reconsider Your Current Expenses
While many businesses are closed, we have a great opportunity to look at our usual spending habits and make some decisions that can be beneficial in the long run. Pay attention to how much you save by not eating out quite so much or stopping by the coffee shop for a drink and a treat on your way to the office each day. As you see this adding up, consider whether there is an opportunity to make some adjustments for the better in your monthly budget. See if there are any expenses can be paused, reduced, or cut out entirely.
In addition to day-to-day expenses, you might also be able to save on your monthly payments. Refinancing your mortgage or car loan can help reduce your monthly payments. Rates change pretty frequently, and it is not unusual for the Federal Reserve to cut interest rates during periods of market volatility. If you’ve had your home and/or your vehicle for a while, you might be able to get a better rate and spend less each month.
Pro-Tip: Using a personal loan to consolidate credit card or student loan payments may also help cut down on monthly expenses. Apply for a personal loan with a low, fixed rate and, once funded, use the money to pay off other debts.
6. Prioritize Building Your Savings
If you are able to reduce some of your monthly expenses, set aside the money you save in a savings account that can help you earn money passively in the form of dividends. Our money market savings account is a great option because it does offer higher than normal dividends but also still allows you to access your money with up to six withdrawals per month. You can also use it as a safety net by setting it up as overdraft protection…just in case the online shopping gets out of hand.
7. Have Some Credit Available
You never know when an unexpected expense may pop up – especially when circumstances are volatile. One great difficulty many have experienced as a result of the spread of COVID-19 has been job or income loss. While we always hope to have enough in savings to tackle expenses head on when they arise, sometimes that just isn’t possible. It’s always wise to have some credit available in the event that your savings is eclipsed by a new bill.
Either a revolving line of credit or a credit card with a low rate can be a good solution for this. Both work similarly in that your lender approves you to borrow up to a certain amount but that there is no obligation to use the credit at all. However, if your circumstance changes and you find yourself needing to pay for something you weren’t expecting, having some credit available can help keep you out of a bind.
8. Keep an Eye on the Market
Investing always has some level of risk, but emergencies on a grand scale can lead to market unpredictability. The market has always proven cyclical, meaning it bounces back in time. However, if you rely on your investments for regular income, you might consider speaking with a wealth management advisor to find the right balance between weathering a storm and playing the long game.
Pro-Tip: Don’t make any moves out of panic. When the market shifts, there are almost always people who get cold feet and start selling off shares at a loss. More often than not, those same shares bounce back and can even become rather lucrative in time.
9. Be On Guard against Scams
There are always heroes to be found during times of crisis. Unfortunately, there are also many who see difficult and uncertain times as an opportunity to prey on others while they’re vulnerable. There are a number of popular scamming methods out there now, and the best way to protect yourself is to carefully guard your information.
Be careful about all requests you may receive – especially if they are from someone claiming to be with a government entity. Scammers may not directly ask for financial information, but it is almost certain that the information they are trying to capture is intended to be used to rip you off. If you do receive text messages, emails, or phone calls from someone claiming to be with an organization like the IRS for example, do not respond. Instead, reach out directly to that organization and verify whether they actually are actually seeking some information from you. This gives you the chance to do your homework and know exactly who you are speaking with before you reach out.
Additionally, if you are planning to make any type of donations or charitable contributions during an emergency, always make sure you know where your money is going. Verify the organization, make sure they use a secure web connection (if you’re giving online), and always get a receipt. It’s also a good idea to check your bank account online to verify that the correct amount has been transferred.
10. Take Advantage of Free Learning Opportunities
With so many people staying home, all sorts of great organizations are providing free instructional content online. If you find yourself with some free time on your hands, learning a new skill can be a great way to help you save money long-term or even increase your earning potential. Gardening at home, for example, can become a money-saving hobby that helps you eat healthier while reducing your grocery bill.
Public libraries, museums, zoos, and even colleges and universities are opening up all sorts of virtual lessons, tours, and other resources. Taking advantage of this can help you learn and useful skills that may have a significant impact on your finances long-term.
Bonus Tip: KEEP CALM
No matter what life throws your way, good or bad, it’s important to take a step back and maintain perspective. Keep calm, plan carefully, and make informed long-term decisions.
In uncertain times, it’s reassuring to have a trusted, reliable financial partner. At First Service, we’ve been serving Houston for over 45 years. We have stood with our members through natural disasters, economic downturns, and even global pandemics. Through it all, we have maintained our commitment to providing financial products and services that enhance our members’ lives. If you haven’t already, it’s time to discover the credit union difference with First Service.