While the world is in lockdown and people are working from home, it is time to rethink a lot of things related to our day to day lives. Restaurants are reopening with a different business model (takeaway instead of dine-in) and as much as possible, workers are encouraged to still work from home. Where you may have seen a drastic reduction in your expenses during the lockdown, it is important to realize that despite numerous steps to ease the lockdown all over the world, the crisis is far from over. We should also learn how to make money last longer during the lockdown.
One of the disruptions that the current crisis has brought upon us is a huge loss of work for businesses and a spike in unemployment for the masses. This has started a vicious circle where people have started spending less due to the fear of loss of employment, which in turn leads to businesses scaling down, or even shutting down completely leading to loss of jobs. This means that although the intensity and the rate of spread of the pandemic may have slowed down and the lockdown conditions relaxed, the economic crisis is far from over. Experts believe that it may take years for the economy to fully recover to its former glory, while some sectors may never fully recover due to the change in lifestyle that this crisis has forced upon us. Therefore, saving up and making your money last is even more important than ever.
While our daily habits have changed in many ways as we have adapted to the new norms, it is also a good time to reevaluate our financial habits. It is good to support your local businesses in crises but doing so in a smarter way will also help you plan better for future contingencies. Below I have compiled a list of ways that you should consider in order to save up more and to plan for the unexpected.
Use the internet to find the best deals
This is something that does not specifically relate to the lockdown but is the first thing you can do to save up a little on your spending without cutting back. If you haven’t been doing this already, you should use the power of the internet to search for the best deals for yourself. Starting with groceries to clothing, shoes and gadgets, everything is now available to shop online. You can use this opportunity to compare the prices of your shopping from different online stores.
Since the lockdown, it is also recommended to avoid going to the malls and superstores. Even the corner shops have started delivering items to people’s homes in order to facilitate everyone. In such a scenario, when you are already shopping from home, there is no reason why you should not be comparing the prices of everything you buy.
To start with groceries, you should make a list of your shopping as usual. Now instead of going to the store, you can go online and fill up your online shopping cart with the items on your list. Do this for a few online stores and go for the website that gives you the cheapest total. You can also take a printout of the list of items and prices on each site, or take a screenshot of the cart and compare the prices of individual items side by side. If you are good with spreadsheets, it may come in handy for long lists of items.
If you want to go one step further and avoid all the hassle, there are dedicated browser extensions such as Shoptimate and Shopbrain that are specifically built for this purpose. These extensions compare the prices from many different online stores and provide you with the cheapest options. In this way, you can make money last longer during the lockdown.
Chase refunds for services you can’t use
Because of the lockdown, where services such as amazon prime and Netflix have seen a spike in the number of subscribers, there are other services that have become completely redundant because of people’s inability to utilize them. In cases where the businesses are closed or unable to provide the tier of service that you have subscribed for, or you are simply not utilizing their service, it is important to end that subscription and get a refund on it.
Top of this list would be your gym membership. Since it is impossible to implement any real social distancing SOP’s in a gym environment, your gym membership is even more useless now than the time you visited twice a month. In most areas, gyms are still not legally allowed to open. In this situation, it is important that you cancel your membership. You may also be eligible for a refund on any payments made after the gyms were shut down since they were not able to provide the service that they charged you for.
Claim the benefits you are entitled to
Many governments around the world are offering support for their citizens in order to help out in these times of crisis. While it is recommended that you only take such benefits if you need to, it is also important that you make full use of every opportunity if you are not in an amazing financial situation. in the current situation where the uncertainty regarding the future is high, if you do not have at least 6-12 months’ expenses in your savings, it is recommended that you claim the benefits that your government offers. It is one of the best ways to make money last longer.
The benefits that the governments are offering fall into three broad categories: loans, grants and rebates. The most lucrative of the three are grants as it is free money if you meet the requirements set by the government. The loans are usually offered to businesses rather than individuals, on a 0% interest or a discounted rate. If you operate a business, you should definitely consider taking the loan if it can help you improve your liquidity or profitability. The rebates are offered to both individuals and businesses. The two most common rebates are deferral of tax payments and holidays on different types of loans and mortgages. While taking such holidays can increase the total amount paid in the form of interest, these may help you with liquidity, helping you build a buffer for future payments.
Pay off your debts first
It goes without saying, interest can be your worst enemy when it comes to personal finances. The best thing you can do to make your money last longer is to pay off your debts. Although I mentioned above that a holiday on your loan payments can be helpful in improving your cashflows, if you are not struggling with paying off your monthly minimum on your loans, it is recommended not to take it and pay off your debts as soon as possible.
This is even more important during the current crisis where job security is at a risk. Paying off your debts first will rid you of that extra financial burden in case you lose your job even for a short period of time. There are many strategies and approaches that help you quickly pay off your debt, however, my personal favorite is the debt avalanche. This strategy requires you to start paying off the minimum on all your loans and use all the money that you have leftover, except your emergency fund, to pay off the loan with the highest interest-bearing loan that you have. This way you save the maximum amount of money in the form of interest, allowing you to pay off your debt in the quickest way possible.
In order to further accelerate the process, you may consider combining the debt avalanche method with other techniques such as debt transfer (when you transfer a higher rate loan to a lower rate loan), debt consolidation, and refinancing. This may further decrease your finance cost in the form of interest, reducing the total money required to pay off your debts and in turn allowing you to be debt-free in a shorter period of time with the least cost.
Draw up a budget – and stick to it
If you fail to plan, you plan to fail. This is something that we often hear but seldom implement in our daily lives. Planning plays an important part especially in things that are difficult to achieve or are spread over a long period of time. Personal financial management has both those vices. It takes a lot of time and effort to build wealth and achieve financial independence. Therefore, it is very important that you plan your finances in advance and stick to it.
An easy way to achieve your financial goals is to break them down into monthly targets and incorporate them into a hard budget. This not only allows you small victories every month when you meet your budget but also helps you to keep focused on your financial goals and this will help you to make money last longer.
During the lockdown, when a lot of expenses are cut down due to no eating out or traveling, it is important to reimagine how you can increase your savings. A formal budget will allow you to objectively look into all the expenses you incur and filter out the unjustified ones. The saving that you make due to the changes in your circumstances, should go towards building your rainy-day fund or boosting your investment targets. Without a renewed budget, it will be easy to start spending on useless items those extra savings that you could have been making.
Save first, spend later
This goes hand in hand with the budgeting. If you are making a budget, your savings, being the primary objective, should be an essential part of it. Once you are done with budgeting, your strategy should be to put away those savings as soon as you get paid, and spend only from the money left over. This way, it will be easier to stick to your budget when you do not mix your savings and spending money.
It is also beneficial to lock your savings into something less liquid so that you do not have easy access to the funds in case you derail from your budget. This will further reinforce the idea of sticking to the budget. Simply knowing that you have access to more money can make you slack and spend on something that you do not need to be spending on. Removing that option helps you better stick to your plan and help you towards achieving your financial goals.
In the wake of increased savings and the uncertainty related to the lockdown, you should also review your emergency fund. Increasing your liquidity may be beneficial when it comes to potential loss of employment. For this emergency fund, reevaluate the options you have in terms of different savings accounts and the return they offer. Some banks offer better returns on the savings account if your balance exceeds their threshold. While you are at it, maybe negotiate a better rate with the bank you go with. You will be surprised by how flexible they can be once you start negotiating.
Return items – even if shops are closed
This goes without saying that if you buy something, you are entitled to return it if it does not match the description, or is of lower quality than advertised. This applies even to whether the shops are open or not. If you have an item to return during the lockdown, get in touch with the seller and find out how to proceed. Some sellers would expect you to ship it to them while others have their own procedures in place while the shops are closed. However, the important thing is to know that you are still entitled to return the items just like normal days. You should exercise your rights instead of collecting junk at your home.