In January 2020, most of us did not imagine that this year we were going to live amidst a pandemic, nor did we manage to foresee its consequences: lots of people losing their jobs and thousands of families with their finances affected.
While governments around the world try to take measures to stop contagions and boost economy, from LuxSOS we advise you not to sit around doing anything.
- Create a budget and record all your expenses
A budget. It sounds like something tricky, but it is actually just about knowing what your income is and what your expenses are during a period of time: a month, for example. So that, you can find out if you spend everything you earn (or more), or if, on the contrary, you have a surplus to save.
Tip within the tip: It is easy to record our income, since normally you only receive a few large amounts a month. It is more difficult to know your expenses, because they are many small amounts. Our advice is to track everything. Use Excel or an app for this purpose.
- Control your debts
Here is a blunt truth: you are allowed to have debts, but the sum of all of them should never exceed 35% of your income, if you do not want to live suffocated by debts.
So try to reduce your credit card expenses and the money you borrow (either from the bank or friends / family). And this is very important: try as much as you can to reduce the debt of your financial products with interest rates, since this one can grow.
- Create an emergency fund
Life is full of unforeseen situations: things break, products fail, people get sick. Therefore, having an emergency fund gives you peace of mind, because you know that you are not helpless when an unexpected situation takes place.
We recommend that your emergency fund is at least the equivalent of 3 months of your fixed expenses.
- Set your savings goals
A common mistake when saving is doing it without a goal on your mind. You save a little in May but then in June, you save less or nothing at all. So, you better set some savings goals: save a fixed amount every month or try to gather a specific amount during one year. Having your goal clear will help you make a conscious effort to save money.
- Spend wisely
Many of our expenses are the result of impulses: that new outfit, that dinner in a restaurant because you did not want to cook, that unnecessary cell phone update. Think about it and be honest to yourself. Before making any expense, be aware of whether you need or just ´want´ the product or service you are paying for.
There is a lot you can do to protect your money while the worst part of the COVID-19 pandemic passes by.
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