How to get your finances in order while the economy sinks | 13 January 2021
Recession … just hearing that word can cause some people to clench their teeth, clutch their chest, and run to the bank. With unemployment and businesses closing their doors, the Covid-19 pandemic is causing financial hardship across the country.
President Wavel Ramkalawan has stated many times that Seychelles’ economy is in a downward spiral and people should be wise in spending money.
It can be challenging to prioritise your finances to support both your immediate needs and your long-term plans, and during an economic recession that balancing act can feel even more exacting. Through planning, understanding your real needs, and preparing for the future, there are ways to weather the storm and navigate uncertain times.
Keep reading below to find out ways you can strengthen your finances in order to be resilient during times of economic uncertainty.
Re-examine your budget
Even the smallest expenses can add up fast. And cutting expenses can help you regain control of your own finances even during an economic downturn.
You could take a look at your budget and lifestyle and consider different ways to cut expenses. For example, common household expenses could be taking up a major portion of your budget. Programming your thermostat and improving your home’s energy efficiency can cut costs and save you money on household expenses. And meal planning, making your own basic pantry staples and buying in bulk are ways to reduce food costs.
After examining your budget and cutting back on expenses, you may be able to use that money for important necessities instead ‒ like saving for an emergency fund.
Also do not take loans that will not reap financial benefits in the long run, do so for other things that have the potential to grow in value such as land and properties.
Not only can debt be overwhelming and stressful, but it can strain your budget too. That’s why minimising your debt can be so important.
There are lots of different strategies you can use to pay off debt. With the ‘snowball’ method, for example, you focus on paying down your smallest debt first. Then you can move on to the next smallest debt, essentially creating a ‘snowball’ of payments as you pay off each debt.
The ‘avalanche’ method is another way you can minimise debt. With this method, you pay off the debt with the highest interest rate first. Then you pay off the debt with the next highest interest rate. And that can help you save more money in the long run since the highest interest rates cost you the most.
No matter which strategy you choose, keeping up with your minimum payments can help you minimise debt. And that’s because making minimum payments can help you avoid penalties or fees when you’re unable to pay your balances in full.
Save when you can
Saving may be a difficult habit to keep up during this period. If your budget allows for it, this is one habit you should not give up. Review your budget frequently or whenever there is a change in income.
This will help you stay on top of the situation. If saving 10% of your income is not possible after you have worked out your budget, you can start by saving a smaller amount to build up your emergency funds. Increase the amount you save when your financial situation has improved. Generally, an emergency fund of 3 to 6 months of your expenses should be a good buffer.
Live within your means
Spending more than you make is never good. When you live within your means, the total of what you spend in a month is equal to or less than the money you bring in during that time. This tactic will not only help save you money, but it will help ensure you're not overextended should your income be impacted by a recession.
To figure out if you can afford your current lifestyle, total up all your current monthly expenses and subtract that number from your monthly income. If you still have money left over, you're living within your means. If not, you should consider cutting back where you can.
And yes this also applies to online shopping.
Start a money generating activity online
For anyone who has a particular skillset this pandemic might bring some extra cash their way, since most stores and online shopping sites are closed many people have started businesses on social media such as food delivery, baking and selling homemade items.
Sell things you don’t need
We all have something we were once fond of and now barely pay any attention to it, may it be an old guitar, books or even clothes.
With the increasing popularity of farmers market and car boot sales in the country, one way to generate some extra cash would be to sell items you no longer use.
Compiled by Christophe Zialor