The COVID-19 pandemic has caught a lot of us off-guard. Unfortunately, a lot of people weren’t financially prepared for this pandemic. We’ve seen millions, perhaps even billions, of people all over the world come to a financial crisis.
When the coronavirus swept across the globe, it brought countries and economies to their knees. Trade and industry were disrupted. Businesses and establishments were shut down, some of them permanently. Companies and corporations declared bankruptcy. It’s the stuff made of financial nightmares.
Folks who were able to retain their jobs amid the chaos and those who had enough savings to tide them over until the pandemic lets up are fortunate. However, not everyone has a financial fallback. Unfortunately, many people out there did not have any emergency funds set up for a time like this.
Why is it important to still have an emergency fund at this time?
Things got really bad for all of us this year. A lot of people could no longer afford the lifestyles that they were used to. It got to the point that it was so bad that animal shelters were filled with pet owners surrendering their furry families because they can no longer afford to feed and care for them, much less send them to board and train in a live-in training facility.
People became industrious and entrepreneurial to sustain and continue to provide for their families. A lot of these people are having a hard time managing their finances because they need to take care of their bills, and at the same time, their eyes were opened because they need a financial cushion for the next few months in case things get worse.
Building, boosting, or replenishing your emergency fund is imperative at this time because, one, you cannot tell what the immediate future has in store for us, and two, a liquid emergency fund gives you a sense of flexibility and freedom. The pandemic has clearly shown us that cash liquidity is important in a stressful financial situation.
How to Build or Boost Your Emergency Fund amid the Pandemic
Tip #1: Make some adjustments to your budget.
Once you’ve decided to commit to building an emergency fund, you need to take a closer look at your finances, specifically, your budget and your expenses. Limit your spending on necessary things and divert the rest of your money into your emergency funds.
Tip #2: Religiously observe the 72-hour rule.
Emotional spending is something that you need to have under control. At this point, since you’re strapped for cash, you need to keep as much of it as you can to ensure you can live another day. Practice delayed gratification or observe the 72-hour rule if you’re considering buying non-essential items at this time.
Tip #3: Automate the movement of your money into savings accounts or investments.
To ensure that you really put money into your savings accounts or investments, it is recommended that you automate your transfers. You no longer have to think about it, and the temptation to spend it on other things is minimized.
Tip #4: Take advantage of bank bonuses.
Some banks still offer bonuses when you open an account with them. You can take advantage of this offer to help you boost your account with up to $500 in just a few months. Even if you need to meet a specific set of requirements to get your cash, it is still a great way to add a substantial amount to your emergency funds.
Tip #5: Hold back on some of your debts.
The CARES Act has allowed a lot of people to defer on some of their loans and stopped interests from accruing. While under normal circumstances, it is ideal to pay off your debt, at this time, you can put a hold on your student loan and divert that money intended for it into your emergency fund. If you can work on both, then it’s good and well. However, financial experts recommend that you prioritize having cash on hand for the next six to twelve months.
While it may be a bit of a struggle to build an emergency fund now, the inconvenience it costs you can make a huge difference in your family’s life. You may find it hard not to buy some of your favorite things now, but you can think of it as buying peace of mind and some security if something like this happens again. Doing so can help you prepare for other emergencies and disasters.