This is an unprecedented time. Only a few living humans have seen such a situation in their lifetimes. People are losing lives and jobs, both with little notice. In such a time of crisis, if you have lost a job or incurred losses in business, it is the right time to do a review of your financial behaviour. It is important to do a small survey of your financial situation, to look at your wisdom. A five-step exercise to increase your financial prudence will be useful.
1. Examine your Expenditure: What is your monthly and annual expenditure? Examine the major areas where your money has gone in last five years. Where did you spend most of the money? Were they on household requirement? Education for children or medical bills? Were they on buying and maintaining luxuries, like a costly car or beautiful furniture? Also, examine your total expenditures under such categories as compulsory and optional.
2. Identify your Assets: During your career, you must have acquired some assets. It may be in the form of real estate, i.e. land, house, investment in property, etc. or may be in the form of liquid assets like cash, gold or bank deposits. If you have a good amount of asset created, it will be useful during any hard time. Remember, assets are yours and you can use it for job loss and financial emergency.
3. Get rid of black holes: A black hole has a very strong gravity that no particle can escape from it. If you have certain products which are sucking your money regularly, they are black holes. So it is better to get rid of black holes. You might have monthly subscriptions for various entertainment platforms. Do you need all of them? You might be paying for a gym, a coach, or any other regular services. If you have not been using them to justify the expenditure, this is the time to get rid of such black holes.
4. Declutter demanding products: Some products you have bought demand maintenance and service regularly. If you do not need those products, declutter them. If you have three cars in the family but one can suffice, now is the time to declutter and reduce parking, road tax and insurance expenditure. Remember, anything in your possession has a maintenance cost. Even an extra shirt will cost you for dry cleaning. An extra piece of furniture requires cleaning and polishing. There might be other such products, which are not useful in any manner, or you can live without them. So, if you do not need, declutter them.
5. Strengthen your Saving: While I was young, we had a small piggy bank at home. I would put savings from my pocket money. At the end of the year, we would open the piggy bank and count my savings. An insignificant amount in my saving didn’t matter to the family, but it gave a sense of accomplishment to me. Siblings would boast amongst themselves about their piggy bank possession. This was a more childlike game. But I realise the habit of saving some portion of our earning is very important. So be determined to strengthen your savings in the future.
This five-step exercise will surely make us financially prudent and sound. Our unnecessary expenditure will reduce and will make us shock-proof to a certain extent.