It’s obvious by now that people from all the world are grappling with the financial effects of the Covid-19 pandemic. Many have lost their primary source of income with widespread lay-offs being announced and business revenues nosediving. Countless others are suffering as they receive huge pay cuts or are put on unpaid leave.
If this isn’t a financial emergency, we don’t know what is.
If you were wise enough to have an emergency fund in place, you’d agree with us when we say it is a lifeline during such times. However, if you’re among the millions of people who have been financially impacted by this crisis, chances are you’ve already dived into your emergency savings. So below, we take a look at how your emergency fund should be used, replenished and kept going.
Before the pandemic…
Now the big question is – Were you prepared for financial emergencies before this crisis? So it’s not just a question about whether you had an emergency fund or not, but instead, whether it was sufficient to keep you going during this crisis.
Financial experts recommend having at least three to six months worth of your living expenses saved up for emergencies. Looking back, you can see why having a bigger emergency fund is the smarter choice, especially now that we don’t know how long the current crisis will last.
During the pandemic…
If the Covid-19 ripple effect has already put a strain on your finances and forced you to tap into your emergency savings, your next concern should be – How to stretch your emergency fund during this pandemic. So here’s what you need to do to make your emergency savings last longer…
Work out a crisis budget – Your first step should be to strip your budget down to the bare minimum. For example, if you’ve lost your job, you may only be able to rely on your savings and end of service benefits to tide you over till the situation improves and you’re re-employed. So your regular budget will have to be replaced with a crisis budget, which just includes your basic living expenses.
Get financial relief – Have a loan or credit card? Your bank will already have financial relief measures in place. All you have to do is ask or apply. Think 3-month payment holidays on loans and free-of-charge installment plans on credit cards, among other relief options.
Put your big spending plans on hold – This is a no-brainer when you’re looking for ways to cut your expenses. For instance, that house renovation project can wait, and you’re better off delaying a car upgrade as well.
Reevaluate your financial goals – In a normal world, paying down debt or investing your money would usually take precedence over saving up in a bank account. But times of crisis call for pressing the pause button on your long-term financial goals and building up your savings – especially those that are easily accessible.
Find a new source of income – It’s a good idea to find new avenues to supplement your income or to keep you afloat if you’ve received a huge pay cut or have lost your job. Look for part-time, freelance or temporary work opportunities, starting with industries and sectors that haven’t been impacted by the crisis.
Beyond the pandemic…
The next question – Have you starting planning for the post-Covid-19 future? While this pandemic has completely blindsided everyone, what’s even worse is not knowing if and when another crisis of this scale will strike again. Hence, the importance of being prepared…
- Prioritize your emergency fund savings going forward. It is not an option or a luxury anymore.
- Replenish your emergency fund as you along. And that applies during these tough times too, be it by supplementing your income or slashing your expenses.
- You were doing a good job saving at least three to six months worth of your expenses, but those were pre-Coronavirus times. We’re sure this expectation would change going forward – How about saving at least six to nine months, or even one year worth of expenses in the future?