We all are aware of the fact that worldwide, the coronavirus and its socio-economic impacts are hurting millions. In different parts of the world, the virus has created an economic slowdown. Many people are being hospitalized and even dying due to its outbreak. This pandemic has caused global supply chains to be interrupted. It has also caused many business industries such as transport business, commodity supply business, travel industry, food industry, online shops, etc to stop their services. Multi-national or international companies are cancelling their business conferences and other large events. The situation is so serious that even schools, colleges, universities are also getting closed and international sporting events are being cancelled or moved online.
People are staying at home and maintaining a lockdown situation – constantly waiting to get some good news on this subject. Apart from the health issues, they are also worried about the upcoming economic fall, as due to such a disastrous pandemic, a big blow to the world economy is inevitable. In this economically stressed situation, our only hope will be maintaining personal hygiene/cleanliness, and our saved emergency funds. A solid emergency fund can help you to cover all the necessary costs when you face a sudden downfall in income. During this emergency caused by the pandemic COVID – 19, having an emergency fund is essential for billions of human beings who just have lost their jobs and are struggling to survive.
Trust me! When you are facing lockdowns all over the country, and you have limited money in your hand, if suddenly you lose your job, nothing can be more depressing and traumatic than this.
Bruce McClary, spokesman for the National Foundation for Credit Counseling added,
“There are far too many Americans who are financially unprepared for an economic downturn, and lack of sufficient savings will be most people’s Achilles heel.”
Here are a Few Steps to Help You Get Started on Your COVID-19 Fund
Before we get started I would like to share a personal example I have seen happening with one of my friends. She is a single mother, living in Nevada, California, with her 7-year-old son. She worked as a storekeeper in a departmental store in her neighbourhood. When the pandemic hits the USA and lockdown starts in Nevada, she had to leave her job and stay at home. During this time she is surviving solely on her saved funds for emergencies. She is getting the child support money from her Ex-husband but managing any other expenses from her emergency fund. 5 years ago when she got the job, she started created this saving fund and, fortunately, it is very beneficial for her in this drastic situation.
I talked with her last week and she told me about her experience and how she managed to create such a fund previously, and she is still continuing to add to it. And if she can do it while being a single mother, you can too!
So, let’s check out some simple steps to build up emergency savings and make it last longer during the COVID – 19 crisis.
1. Get a Fresh Start
If you didn’t create an emergency fund in the first place, guess what! You are not too late to create one. Just start keeping aside some money now.
If you are still employed, you may set up an automatic payment system to send money directly from your paycheck to your savings account. If it is not possible, then ask your bank to automatically draw it from your checking account every month. It doesn’t matter how you earn the money, the main thing is to make it saved for emergencies.
2. Create an Emergency Budget Plan
During this crisis, your normal budget plan won’t help you to survive for a long time. So, you should modify or create a new emergency budget plan if you don’t have anything planned.
The emergency budget plan will help you to focus on necessities and avoid overspending. The target of this budget plan is to free up enough funds to boost your savings. If you can save as much as 20% of your paycheck, it will be a great achievement.
Stay on this budget until you successfully save at least 3 months’ worth of income in your emergency fund.
3. Reduce Any Non-Essential Expenses
Apart from the core necessities such as paying your rent, paying off credit card debts, insurance premiums, water bills, gas bills, try to cut expenses as much as possible. When you’re depending on the emergency fund to manage daily spending, stick to buying the things that you need to survive. You may even need to cut your budget for grocery shopping and make daily meals from inexpensive ingredients at home.
You are in a lockdown mode, so cable and internet service is not a luxury anymore. During social distancing, these are the things that will help you keep your sanity. But still, you don’t need to subscribe to multiple streaming services or buy a lot of new movies or books. You may download free Ebooks and choose free streaming services.
4. Carefully Withdraw Money From the Fund
Using your emergency funds and cutting extra spendings may help you to keep your investment and retirement accounts safe. It can also help you to fulfill your daily needs. But if you require more money, make sure you think before withdrawing. You should prioritize your additional money sources and stop adding new contributions to the emergency fund.
If you need to withdraw money from your investment accounts, you should do it from any taxable brokerage account of yours. These accounts have zero withdrawal penalties, so you won’t be charged a single penny for your withdrawal. You may also pull funds from your Roth IRA as you may withdraw from there without penalty.
Congress has passed a bill recently which enables the COVID -19 affected people to get up to $100,000 from their 401(k)s and traditional IRAs without paying the 10% penalty.
These withdrawals will be taxable, but over the next three years, it will be spared. The borrowers may get tax relief if they return those funds to their retirement accounts before that 3 years.
5. Find Ways to Earn Additional Income
Do not leave your house during the lockdown. But, if you want take on a job without risk, you can join essential service providers. Such as many food delivery services, grocery services, and medical stores. They are currently working and need extra hands to provide these services.
If you don’t want to take the risk of getting out there, try to earn money from home. You could sell your old, unwanted items via online auction sites. The postal service will pick up the packages from your place, so you don’t need to go outside for deliveries.
While many financial experts may suggest you focus on your life goals, you also need to learn how to save as much as possible. Having a small amount saved from the budget may help you to buy any medicines or groceries during this lockdown.
Final Words
It is uncertain when the entire world will recover from the outbreak of COVID – 19 virus, or how long we will be locked in our homes. But for sure, it will take time to restore the economy from the impact of the coronavirus. So, while facing so many financial issues, it’s justified to make your emergency fund last as long as possible.
