Whether you think the pandemic has been a great equalizer or whether you think that it has exposed a lot of inequity, the current financial downturn has already or likely will challenge you in some way. How you manage through these challenges will depend in part on your money mindset. If you didn’t have great financial habits before, it is not too late to improve your money management and financial planning skills.
In “Personal Finance 101: 6 Things Everyone Should Know,” The Motley Fool offers basic advice for staying afloat. Here are a couple of things to consider:
You need an emergency fund you can access quickly.
First, you need an emergency fund in place before you start to save for specific goals like a house or a college education. You need to be able to cover your current, daily expenses.
Some of us like to hide money from ourselves to we can’t spend it. For example, people may put money into a CD that stays locked in for a certain amount of time or open an internet bank account that has a delay in transferring money. These are not good for emergency funds. You need money in an account that will allow immediate withdrawals should you find you have an emergency.
You’re better off saving for large purchases than borrowing.
It may take longer to save but you will spend less. Borrowing, be it via a loan or a credit card, will incur interest so will spend more than if you have saved the money. The article includes an example of how much it might cost in interest to put furniture on a credit card. We understand that you may not want to save all of the money it takes to buy a car or a home but for other purchases, try to save.