Here is How You Can Get Your Financial Backup Plan Ready

The outbreak of Covid-19 has worse hit the global economy; needless to mention that lower and middle-income groups have faced a grave situation. Although the presence of an invisible virus threatened bigwigs, they managed to ride out the impact of shattering the economy.

Economic uncertainties can threaten your financial life, and therefore it is a must to have a financial backup. According to the findings from a survey, fewer than half of the population had a backup to weather the storm.

You never know when an emergency catches you off guard: from a conked out car to a death in the family. Relying on your full-time job may not be a good idea, especially during pandemic time. You can lose your job tomorrow, and landing a new one can be a herculean task. Believe it or not, you are putting your finances at risk if you do not have an emergency corpus.

No matter how secure your job is, imagining a life without a financial safety net after experiencing the impact of the pandemic will be completely doltish. Note that a financial backup plan is instead of saving money for meeting contingencies that can pop up tomorrow, next week, or next month. It aims to help you in both the short run and the long run.

Of course, it does not mean to get your full attention off retirement funds, but you need to concentrate on building a backup plan too.  Although you can take out a bad credit loan from lenders when you are running out of money, it does not mean that you will not bother about creating a safety net. Research has revealed that a couple of lenders have stopped lending money in that they suspect the repaying capacity of borrowers.

Since the economy is brutally shattered, it seems harder for lenders to sign off on applications of small loans. Lenders are looking to help borrowers with secured loans because the collateral lowers down the risk on their part. So, now is the time to learn ways to create a financial backup plan instead of typing in the search bar “loans near me.”

Look over your current financial situation.

First off, audit your financial condition yourself to get an idea of your financial estate. You must know how much money is lying in your account and how much is blocked in assets like property, jewellery, and movable furniture, etc.

Knowing about your estate will help you have an acute vision of where you are and whether you will manage in case of a big emergency. Sometimes liquidity is not enough to get by. You may need to cash out by selling your valuable items. It would help if you got a clear idea of such assets.

Have savings worth eight months of living cost

Gone are the days when you used to hear the slogan “have savings worth six months of living cost.” The pandemic has clearly dispelled it. It is conspicuous that you should have as a big emergency corpus as possible to deal with the problematic situation. You had better resign to the fact that life can throw a curveball at any moment. Therefore, you should focus on stashing away a lot of money.

  • Cut down on expenses: You will be surprised to know there are a lot of ways to save money without any discomfort, for instance, stopping the purchase of the physical newspaper, premium cable channels, magazine subscriptions, phone call plans, broadband plans, and the like.
  • Predict future expenses: You can easily predict some of your costs likely to occur in the future, for instance, buying a car, wedding, etc. As you know them in advance, make sure that you have had enough for them, so you does not need to run to borrow money.
  • Understand the difference between needs and wants: Buying branded clothes, replacing old furniture, and night out with friends do not count as emergencies. Understand that if you really need it or are doing it for the heck of it.

The bottom line

Undoubtedly, you will have to work harder because the economy is doom. The money will not work the same way as before the outbreak of the pandemic. Savings are requisite. They will give you peace of mind and help you tide over during an emergency.

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