2020 was a challenging year that changed how people interact with their money going forward. The only other event that was slightly comparable to last year was the economic depression of 1950. Though in 1950, the world was not wrestling a pandemic that swept across the globe and affected the economy negatively.
Some companies were forced to downsize and even close down. Being the beginning of a new year, I am now forced to look into my money habits and see how I can better prepare myself should a significant event like covid-19 happen again. In this piece, I share some of the tips that enabled me to survive in the wake of salary cuts and working from home. I am thankful I did not lose my job.
2019 forced me to look at my expenses keenly and see where I can trim the fat. I analyzed all my subscriptions and realized that there were some I hardly utilized, so I terminated some of my streaming subscriptions, gym memberships and various online subscriptions that I did not use. I ended up saving around $100 every month. Additionally, I may consider using an energy-efficient furnace to save money on energy bills. Previously, it seemed that people bought fuel for one to three months collectively by paying hefty amounts together. However, with the assistance of a 24-hour fuel delivery service (available at portals like https://www.romeosfuel.com/), I only need to order a minimum amount of fuel rather than a stockpile of two to three months. Consequently, this could save me money.
It is a well-known fact that larger homes need more maintenance. A boatload of the money goes into taking care of the dwellings, primarily because, as a homeowner, you may not be able to take up all the cleaning chores. You would necessarily have to hire help. Contrary to this, having a small house can help in cutting expenses. Since you would have a smaller space, you would be able to clean it yourself. You can save the money, which you would have otherwise spent on hiring a maid service for future necessities. That’s why many people today are looking to downsize to a smaller house by selling their big houses to firms like Florida Homeowner Solutions — searching for we buy houses FL on the Internet could offer some insights on them.
If you are like me, then I am sure that when your salary hits your account, the first thing you think of is the bills that need to be paid. This was my mode of thinking up until some two years back. This mode of thinking pushed savings to be the last item I budgeted for, and in most cases, I did not save since there was no money left. I reversed this around and I now save before I pay my bills. To avoid the temptation of not saving, I automate my savings such that when I am budgeting my money, I have already saved. This is how I pay myself first.
If you feel stuck and are wondering how you can begin saving since you spend everything you earn, you need to analyze your expenses. Once you spend less than you earn, then you free up money you can save.
There is nothing as good as a windfall as a bonus or a pay rise. When this happened, I rushed to spend it all on items that I could not buy before. After the money ended, I sometimes thought back and wished I had something better with that money. I came up with a better way. I now save any bonus or raise thus forcing myself to retain my current lifestyle. This has helped me increase my savings over the last three years and given me money to invest.
When it comes to debt, there are two schools of thought. Pay all debt off or pay the debt off slowly at the lowest payments possible. I think both ideas are good depending on which debt you are tackling. For instance, if I have a mortgage for which I am paying an interest of 2.9%, then I will not pay it off quickly. Instead, I will take the extra money that I could have used to pay off the debt and invest in an index fund that might give me an interest of 5% to 10% annually.
However, if I have a credit card debt whose interest is 20% then I will make higher payments to clear the debt as soon as possible. Therefore, do not wait till you have cleared all your debt to begin investing. Manage the debt wisely on a case-by-case basis. Also, if the time and extra money used to pay off can be used to earn you better returns elsewhere, then there is no need to clear the debt fast.
The pandemic caused companies to adopt a work-from-home model. This means little to no work-related transport costs. When our company launched the work-from-home option, I redirected the money I used on transport to invest in some office furniture and the rest to my savings.
Last year saw mortgage interest rates fall to an all-time low. I refinanced my home from a mortgage interest of 3.9% to 2.9%. A 1% reduction in your mortgage might not seem like much. However, it can save you at least $100 every month, which comes to $3000 in savings for a 30-year mortgage. Availing lower interest rates and changing loan terms could be considered as two of the common reasons why people refinance their existing mortgages. Therefore, homeowners might want to look for companies like Reali or other such refinancing institutions that can help them save money by taking advantage of lower interest rates, or a longer repayment term.
Have a fantastic year ahead and remember to stick with the above money management tips for a financially sound 2021.
