Managing money is extremely hard during a period of lockdown because cash is not flowing in, and you are dipping into your savings, making it smaller and smaller. Having spent a couple of months at home is driving people crazy. Savings are shrinking, and lockdown is being extended. How long people will continue to live off savings when there is no injection of cash at all. Most of the companies have scaled-down already. The rate of unemployment is going to be worst down the road.

Research has revealed that only a few people are on track to reach their financial goals. Since the pandemic has frozen the global economy, over 40% of people are unable to handle their debts, and over 25% of people have no control over their cash flow. People are making so many mistakes that their financial health is deteriorating by piecemeal.

When it comes to money management, you need to be a bit patient. You are not going to get a magical wand to get everything under your control. You will have to look over your overall monetary condition. It would be best if you consider how you could make do with available funds without hurting your ability to manage day-to-day expenses. During the period of lockdown, you will have to be very careful with the use of your money. You cannot be reckless with your spending even if you have savings worth of six-month living cost. Here are some mistakes you are likely to make during the lockdown.

Dipping into your emergency fund

When money is not flowing in, you can dip into your savings, but remember emergency cushion should not be touched to meet our regular expenses. Most of the people do not bother to have an emergency cushion. A good rule of thumb says that you should use only your savings to tide over during the lockdown period. Since emergencies can happen at any time, you should let funds at your emergency cushion untouched.

Try to manage all your day-to-day expenses within the available funds at your savings account. An excellent way to avoid overspending is to create a budget. Since, you know most of your costs will go on debt repayments, food bills and utility expenses; you can set a budget for each category and allocate them a particular portion of funds so that you know how much you have to spend in a month.

Make sure that you do not have a rough idea of where your money is going. People usually count bills, debt repayments, rent and some other expenses that are in their head, but actually, they are always spending three times more than they think. You should have a full record of each penny you paid. If you do not like making a budget on a spreadsheet, you can use online budgeting apps.

These apps will let you manage your money efficiently. You can also set a spending limit for the everyday expense. As you reach the set limit, it will notify you immediately to prevent you from overspending.

Neglecting debt repayments

During the lockdown, the government has given a moratorium period so that borrowers can stop loan repayments. It sounds good to hear that you do not have to go through a burden of debt repayment, but the moratorium period does not release you from debt repayments. Your debt repayments stay pending, and interest keep accruing. When the moratorium period expires, you will have to pay off monthly instalments. This time instalments will be slightly higher because interest had been accumulated. Further, the lender will reassess your financial capacity to determine if you can settle all your dues.

As long as you can pay off your dues, you do not need to avail moratorium period. If you have been juggling with multiple debts, you should prioritise debts with high interest. Talk to your lender if they can allow you a further extension or scale down the repayment size or revise the repayment plan. If you inform them before the due date about your struggle with repayment, you can escape interest penalties and late payment fees.

Also read: How to improve business after lockdown

Withdrawing investments

If you are an investor, you may lose hope and try to exit the market. During the lockdown, the market will be staggering, but it does not mean that you can free up cash by selling your investments at losses. It will help if you understand that crisis could fill you with negativity and you may lose patience. When the market is down, it seems that you have lost everything. It can happen with anyone, but a good investor holds tolerance and waits for an opportune moment.

If you exit your investments at a loss, you will cause permanent damage to your wealth. Instead of losing money, you should wait unless the market catches its spirit. Once I get to a standard track, you can decide to sell your investments if it allows you to make the right amount of profits.

However, selling investments is not always a risk. Sometimes, people overbuy stocks. The best time to invest in stocks is considered when the market is sluggish. If you intend to buy stocks, you are highly likely to invest in them. Be careful with buying equities during the pandemic as you will block cash. This time you are relying on your savings, so make sure that you have enough money available to meet your regular expenses.

You will likely commit these most common money management mistakes during the lockdown. Be careful with your finances during the pandemic. Try to make do with available things. However, if any emergency pops up, you can take out instalment loans with direct lenders.

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