Current Financial Crisis
The COVID-19 pandemic has affected us in so many ways. The most significant impact is its existence that can kill us, and its devastating economic impact. Have you noticed how the cost of everything seems to be through the roof lately? For those responsible for doing the weekly or monthly groceries, you should have noticed that the cost of everything has increased. The increase has not been gradual; it has been drastic. According to https://tradingeconomics.com/, Canada’s inflation rate in November 2021 was 4.7%. It has been the highest since February 2003. There are issues with the supply chain, which are evident by the shortages of some food items, increasing gas prices, and the cost of household maintenance. Bloomberg.com reports that the number of people turning to foodbanks rose 10% in Ontario during the first year of the pandemic.
In our household, I am the one that manages the family and day-to-day running of the home. So, I am noticing the alarming increase in everything and the rate of increase. But what am I to do? The bare necessities are food, clothing, and shelter, and these are the commodities going through the roof. What is the solution, then?
2020…Year of the Side Hustle
I would describe 2020 as the year of the side hustle. Many persons lost their jobs and were forced to adapt to this new situation. Some persons received social assistance from the Government, but it was not enough. Some side hustles thrived while others didn’t, but it jerked people out of their comfort zones.
The Importance of Money
In a previous blog, “Let’s Talk About Money,” I discussed a few money myths, but when I think about those myths, I counteract them with this quote: “Money is not everything, but it ranks right up there with oxygen” ― Zig Ziglar. Twist it or turn it, whatever your belief is about money, it is necessary to get you through your daily life to cover the necessities of food, clothing, and shelter.
In 2019, https://www.cpacanada.ca/ indicated that Canadians need to make about $250k a year for a family to live comfortably. Several argue that this amount is way too much, but for a family of 6, I think that number is reasonable. I guess the question is, what does comfortable living mean to each of us? Comfortable living, in a nutshell, is having more money than you need for the month. It’s the ability to satisfy your needs and wants and not have to choose between the two. It’s the difference between making purchases with debit rather than credit.
The Importance of Money: Five Tips To Improve Financial Position
So, what can we do in these crazy times to stay above water? Here are five tips to improve your financial position:
1. Have a Financial Plan Done For You
A Financial Plan identifies your existing financial position, considers where you want to be, and then bridges that gap. The Financial Plan can help with the following:
a. Your Monthly Budget
I cannot stress this enough. You need to know how much is coming in and going out. Identify where the money is hemorrhaging. Instead of eating out every day, have one night per week for that and prepare your meals at home for the other days. A budget helps you to identify how much you have and allows you to avoid overspending.
b. Reducing Debt
Whatever money you pay to service consumer debt could ultimately be added to your budget for something more substantial. The faster you get rid of your Debt, the more money you will have available for savings.
c. Saving for Retirement
The faster you get rid of your Debt, the sooner you can start funding your retirement.
d. Start Investing, instead of saving
Ensure that your money is in a vehicle earning you more interest than inflation. If your annual interest is 1% and inflation is 4.7%, you are losing money.
e. Switching Insurance Companies
Look at how much you are paying for life, car, house insurance, shop around, and make the switch once you find a company that offers savings.
2. Get a Side Hustle
If you are already following your budget to the letter and still having financial issues at the end of the month, it could be an income problem and not a spending problem. Find a way to generate a second income. There are so many options for a second income; examine an avenue and get started. A great way of getting a business idea is to look for what persons may need and fill the need. Instacart got very popular during the pandemic, a simple business model that helps persons with their groceries.
If you do not have the means to get something started on your own, call a group of like-minded friends, pool your resources, and make it happen. Case in point, Bill Gates when he started Microsoft.
3. Reduce Using Credit Cards
Ideally, you should avoid spending if you cannot pay using cash or debit. If you have to use your credit card, pay it off before the interest is charged. The longer you take to pay your credit card bills, the higher they will stack up.
4. Reduce Monthly bills
Look at the necessities and then start reducing what is not essential. It will not be a forever situation; it will be until you get your business off the ground or get back on your feet.
5. Debt Consolidation
If you are drowning in debt and you are a homeowner, consider merging your consumer debt with your existing mortgage; that way, you have just one monthly payment, rather than 3 or 4. If you are not a homeowner, sit with your bank about a personal loan to cover your debt. Debt with a fixed interest rate can be paid done faster than debt with a revolving structure.
The Importance of Money: Change Your Money Mindset
When you implement one of these solutions and start noticing the savings, please do not spend them mindlessly. It can be so tempting when you discover you have an extra $300 at the end of the month, top-up your retirement investments, or your children’s school fund, invest in yourself – learn to code or something. If you start spending that money, you can easily find yourself in the same position of not having any money. Consider changing your mindset where money is concerned, dispel the money myths and start thinking of how different your life would be if money were not an issue.