Covid-19 is not like the common flu. It is way more contagious and has a much higher death count to its name. With no vaccine in the picture the only option people are left with is to take precaution and practice social distancing. The question on everyone’s minds then is for how long?
The economy cannot sustain this inactivity for long. With factories shut down and the entire globe experiencing some form of a lockdown, nobody knows how bad it will get. Last week, a record 6.65 million new unemployment claims were lodged, double the number of new claims lodged the week prior. This number will only increase in the coming weeks. We might even face a worldwide recession like never before. In times like these, it is essential that you cut any corners and save all you can for when you can. For all you know you could be next to lose your job. So, how do you go about it? Here are ways you can cuts costs and save money.
Put Retirement Savings on Hold
We’re talking about savings and at the same time asking you to put your retirement savings on hold. That’s sounds counter-intuitive, doesn’t it? It’s not, not really.
First off, stocks are crashing right now so you don’t know if investing in risky ventures is a good idea. Add to this, once you put your money towards savings it gets harder to liquidate easily and in these times when you can’t be sure if you’ll get the next paycheck you want money in your hands. After all, if you can’t get a meal to eat and survive how will savings help you?
Instead, we’d recommend that you create an emergency fund with the money you were putting towards retirement.
Establishing an Emergency Fund
If you’re money smart then you we bet you already have an emergency fund. Ideally, that’s how it should be, but worry not. It’s never too late to begin one.
To start, you must divert all your retirement money towards this fund. Next, track all your expenditures and see where you’re spending your money. Is it going towards necessities or towards extravagances? Once you know you’ll be better equipped to make a budget. With the shutdown in place, going out for dinners and drinks is out of question so you’re already on track. Now just make sure you know the numbers.
Put Money in High-Yield Savings Account
If you must invest, invest in a place which allows you to liquidate easily and high-yield savings accounts are a great option.
Traditional bank savings account usually offer low interest rates compared to a high-yield savings account, going as high as 2%. The best part about these accounts is you can take out your money with ease from these accounts whenever you want and your money is protected against things like inflation.
Change the Way to Pay Student Loans
Student loans are still breathing down are necks years after graduation. They plague most of us and if you too are stuck in their vicious cycle you might want to change the way you pay these loans to ensure they don’t burden you excessively in these times.
There are two ways by which you can suspend payment towards these loans namely, deferment and forbearance. In the case of deferment you can avoid interest accrual which is great. On the other hand, forbearance doesn’t give you that option which means you debt will grow further. If you must choose the latter, make sure that you keep paying the interest portion so you debt doesn’t grow.
So, How Much Money You Need to Cushion You?
This all sounds good. The more you save the better, but how much should you have to cushion any fall you have in this economy. Well, to put it simply you need to have between three to six months’ worth of living expenses. Given that the coronavirus crisis isn’t going anywhere for the next year or two, getting ahead by at least 6 months is a good idea.
We’d suggest you keep one month’s expenses in your current account and divert the rest to a high-yields account. We are sure to see a drop in interest rates on savings accounts following the Federal Reserve’s emergency rate cut, so you might want to get all these things in order fast.
People are losing jobs and all the non-essential staff are vulnerable. In the time of crisis it is in the best interest of all to spend wisely. Given that the economy will take a long time to get back on track, you might be out of work for a long time. So, it is better to be cautious. Stay indoors and take this time to reflect and learn. If you need to learn more about how to save you can always surf the internet for answers. All you need is a high-speed internet connection so call Spectrum service number for one. No need to get out of your homes. So, take care, save and self-isolate!