During the last period, the health crisis related to pandemics has largely impacted the lives of many.
While keeping us safe from the virus has become our primary concern, on the other hand, concerns about financial health and stability have tremendously increased.
The most entrepreneurial among us reached out for second income sources.
They ventured into freelancing, online trading stocks, cryptos or foreign currencies with Forex broker, or side hustling. However, besides creating the additional streams of cash inflow, there are other practices to be followed with the aim to improve your financial health. Here they are.
Limit the use of your deferred debit cards
Deferred debit cards represent a real brake on you to properly handle your finances.
These are neither more nor less than a debt to your bank. And it distorts the view of your spending over the month.
Depending on the banks, it is difficult to read your bank balance before getting your paycheck.
If you want to use them, you have to reserve them for business expenses that you may incur and reimbursed to you by your employer.
Know your fixed expenses
Whether you are an employee or self-employed, it is always essential to have an excellent knowledge of your monthly fixed costs.
Most often, we tend to minimize them. Also, and when we start to sum them up, we reach fixed charge ratios greater than 70% of total charges. Then it is normal to feel “suffocated” by the amount of these loads at this stage.
To correct the situation, you sometimes need to question a lifestyle that is not suited to your income.
Save at least the equivalent of 3 months of income.
Available savings are considered to be the money that is stored in secure savings accounts.
Savings are a fundamental tool (and a very relevant indicator) of financial management.
That part of your resources that is not (immediately) consumed is essential for:
Covering the vagaries of life (disasters or loss of income): it is precautionary savings.
Provision for anticipated constrained expenses (taxes, copro charges, etc.) that would not be paid monthly is constrained provision savings.
Provision for your medium-term projects (vacations, car changes, professional retraining, real estate projects) represents “project” savings.
Strive for financial independence: these are the savings in expectation of investment.
Savings are, in a way, a shock absorber that allows you to compensate for the financial variations that you may encounter, both in terms of income and expenses. Its importance is paramount.
Make your banker an ally.
We recommend that you maintain a healthy and regular relationship with your banker. You might think that hitting the right bank advisor is more a fluke than a management choice, but we don’t really agree.
You should see your banker as a service provider (financial in this case), a true partner with whom you can maintain frank and useful communication in the service of your financial situation.
Your banker will thus be more inclined to offer you financing solutions adapted to more strained financial situations.
If you do not manage to have this kind of relationship with your banker, perhaps you should think about changing it. Or at least start updating your knowledge in personal finance.