For the most part, we are fortunate to live in a stable society. A high rate of unemployment is usually considered 6 percent, and while 49% of Americans live paycheck to paycheck, they at least have the benefit of a stable paycheck.
However, as recent events have demonstrated, sometimes life is not so certain. Disasters can strike at any time, and when they do the aftershocks can ripple through society, causing anything from stock market crashes to mass layoffs.
Fortunately, you’re not helpless. While you can’t control the stock market or whether or not employers start laying people off, you can control your personal finances. Here are some tips on how to manage money during uncertain times.
Make a Budget
The absolute first step to take when you know uncertain times are ahead is to know exactly where your money is going. In other words, you’ll need to make a budget.
Making a budget is a vital step on the path to financial success, and it’s something you should already have. If you need create a budget or make it current with your financial situation, read our beginners guide to budgeting.
Cut Down on Expenses
In uncertain times, you’ll want to have cash on hand for emergencies. The quickest way to do that is to cut down on your expenses.
If you already have a budget and you know where your money is going each month, go through it and start getting rid of any unnecessary expenses. Maybe you don’t need that daily coffee from the drive-through, especially if you’re working from home. You might also want to cut down on the amount you spend on restaurants for the next month and look at all of your streaming subscriptions to see if there’s any you haven’t used in a while.
Pad Out Your Emergency Fund
Having an emergency fund is the most important way to make sure you can remain stable in uncertain times. Ideally, you should have enough money to cover at least six months of your salary.
If you don’t have six months of your salary in your living expenses, try to accumulate as much money as you can as quickly as possible. You should at least put all the money you’ve saved from reducing your expenses to your emergency fund, and you might even want to reduce your budget expenses even further for a month or two.
While you should make sure your emergency fund is readily available, make sure you keep your money in a savings account, and not in the proverbial mattress. That way, your money will be insured by the federal government, and if you don’t have to withdraw your money it will still be earning interest.
Reduce Your Debt
Now that you’ve got a budget and you either have or are working on an emergency fund, see what you can do to reduce your debt.
While you might not be able to pay off your debts immediately, you may be able to reduce the amount of interest you owe and potentially lower your monthly payments.
One of the best ways to do this is through loan refinancing. When you refinance a loan, you take out a new loan with better terms to pay off your original loan. However, refinancing also comes with fees, so you’ll need to talk with a lending advisor to make sure you’re going to get ahead.
You can also use loan refinancing to consolidate your debts. Doing this allows you to pay one low interest rate instead of paying multiple rates, which is a good option if you have debt on multiple credit cards. It also combines several monthly payments into one low payment, which saves time and reduces hassle.
Another way to reduce your debt is to transfer your existing credit card debt onto a low-interest credit card, such as the First Alliance Platinum Mastercard. Just remember to keep your eye out for any fees that might be involved.
Create Some Financial Stability With First Alliance Credit Union
Uncertainty is never fun. It’s stressful, worrying and downright scary if you feel as though your financial well-being is at stake. Fortunately, you can create some stability of your own if you plan ahead, budget and make sure you have a healthy emergency fund.
You can also use several products that First Alliance Credit Union offers to help you become more stable when you become a member today. You can rest easy knowing that your money is safe in traditional savings accounts, talk with our lending advisors about refinancing loans and use our online and mobile banking app to keep track of your finances.