The government has decided to help businesses weather the storm with a stimulus plan, but the pandemic has highlighted the value of financial planning for households and businesses of all sizes. Consider the following suggestions about how to brace yourself to mitigate the financial risk in the future during an emergency or crisis.
Read more: 150 Free USA Business Listing Sites 2020
Reduce and eliminate debt
Debt can reflect a substantial portion of your monthly budget in the form of credit cards, personal and business loans, and medical debt. The debt you carry incurs interest that eats up a portion of your monthly allocation for debt repayments. A portion of each monthly payment you make goes to interest, delaying basically your goal of paying off the debt in full.
Reducing and reducing debt will free up a portion of your company or household budget so that the funds can be diverted towards more critical priorities such as expanding a savings account or investing.
Check your current business and personal debts to see which ones cost you the most. When identifying those of highest interest, first pay them off. A few forms you may be able to pay off the debt more easily include:
Read more: 6 Steps Plan to Start a Small Business
Consolidate your debt
A debt restructuring loan is meant to consolidate the existing debts into one payment. The loan will come with better terms and a lower interest rate than your current debt. Consolidating your higher-interest debt into a single, lower-rate loan simplifies the repayment timeline and saves you interest capital so you can chisel away faster from your debt’s main part.
Find passive income or start a side hustle
Boosting your current income to distribute the funds to repay your debt could be one of the quickest ways to discharge your liabilities. Try starting a side company that you can run on weekends or evenings to boost your profits, or branch up to your current company. Brainstorm company and side hustle ideas, do your market analysis, and find out what people need right now, put a business plan together, and get going.
Have a savings fund
If it comes to financial advice, most believe that it is a smart idea to have an emergency savings fund which will cover unexpected expenses. The pandemic provides the best example of why the principle works. In a crisis, individuals and entrepreneurs with contingency savings plans are likely to be better off.
The idea behind the definition is basic. Businesses and households able to cover expenses of at least three to six months can continue to operate and pay their bills for the short term. You are best placed to handle a decline or sudden event and come out unscathed.
Others who have not saved are all too aware of the impact of a sudden change in their finances, such as job loss, medical illness, or shutdown across the country. We may have adjusted or stopped their income but the bills are still due. Most resort to credit cards and loans to fill the void, leaving them with heavy debt that could take years to pay off.
Both businesses and individuals will voluntarily contribute money to their savings or investment accounts. Look for a sum which would provide a buffer for company operating expenses or your personal budget of at least six months. Save regularly until you hit your target, then set up an automatic savings program to get yourself into the habit of putting money away for the future consistently.
Diversify your investments
Holding investments in a money market or high-yield savings account for six months can be acceptable but not ideal. The interest received is small but in an emergency, you have easy access to the cash. It is important to assign greater sums of money to an investment portfolio. The crux: The market, particularly during a crisis, can be volatile. Investors are anxious, with the confusion in the weather.
To minimize some of the uncertainty, periodically check your investment portfolio to ensure you have a strong stock-and-bond ratio. Diversification is a must. Consider adding asset allocation funds that take the guesswork out of your investment diversification. Depending on your level of comfort with risk, you can choose a 70/30 allocation fund which holds 70 percent of your stock investment and 30 percent of your bond investment. Consider also adding an index fund to your holdings of mutual funds.
Recall the Boy Scout motto: “Be prepared.” Unless the pandemic has taught the world something, it’s almost impossible to foresee how you would be impacted by a disaster or an emergency. Entrepreneurs already feel confident with a certain amount of danger. You can’t eliminate the risk altogether but you can be prepared financially to resolve it.