How To Manage Your Finances In A Crisis
By Angela Dorsey
Given the current social distancing guidelines, market volatility, and rise of unemployment, to say these are stressful times is an understatement. You are undoubtedly experiencing a multitude of emotions, including uncertainty and fear.
There’s plenty to worry about—that’s to be expected given the situation, but the key is to worry about the right things.
Much of what’s happening in the world right now is beyond our control, and worrying about things we cannot control does us no good. Instead, let’s focus on what we can control—like our actions (and reactions).
Here are four actions within your control that will help you manage your finances in a crisis.
The first (and arguably most important) step is to stay calm. With all the scary emotions stirring, it’s easy to make rash decisions. But rash financial decisions almost always end in regret. Before making any big decisions, try to look at them objectively and weigh all the pros and cons—for both the short term and the long term. Better yet, speak with a financial advisor who can help you expand your view, see the big picture, and act appropriately.
Create A Crisis Budget
Desperate times call for desperate measures. Most of us are feeling some degree of financial pressure right now. It’s never a bad idea to revisit your budget and look for ways to cut back until hard times pass.
The idea of downsizing and living a more frugal lifestyle doesn’t sound fun, but you’d be amazed at how fast humans adjust to new circumstances. Give it a week or two, and your adjusted living conditions will start feeling like the new “normal.”
When it comes to investing, we all know not to put all our eggs in one basket. But this applies to income streams as well.
Relying on one source of income to stay afloat is risky business. To minimize this risk, look for side hustles you can do to bring in some extra money (bonus points if your idea is recession-proof and can be done from the safety of home).
Follow The Plan
In an ideal world, you’d have a “crisis plan” established before calamity strikes. By having a plan in place (and understanding the logic behind it), you’ll be less likely to panic and make any costly financial mistakes. But if you don’t already have a plan in place, don’t worry; it’s not too late to make one. The financial choices you make during a crisis can make or break your future wealth and security.
If you’re wondering how to handle your finances during these hard times, it’s best to speak with a financial advisor. Dorsey Wealth Management will show you the best way to weather an economic storm and teach you exactly how to protect yourself during a crisis. If you’re interested in setting up your own smart financial plan, schedule a free introductory 30-minute phone call. I look forward to hearing from you.