Corona Virus has impacted us all, no one is exempted. The news channels are busy highlighting only two types of news – status of COVID19 patients and collapse of World Economy. In the midst of all these, no one is talking about the collapse of Personal Economy of a middle-class citizen. No one is talking about cash flow of a household. While Businessman’s are looking at businesses to open and cash to get generated, you should think about your cash in similar manner.
Now, who is generating this cash? You guessed it right, it’s you. Every time you go out, take out a dollar from your pocket, and give it to someone, you have supported in building the economy. How about first building our own economy and then others.
We will not talk about any investment ideas, I am not an investment guru. I am middle class salaried professional like you, and we will talk about few simple steps that you need to embody in your lifestyle to build your own economy. With this Pandemic, you must have definitely learnt that “I live for the day” doesn’t stand true anymore. You must have also learnt the importance of “Savings” by now, when you are scratching and thinking that I need to get to work fast, as your personal cash flow is depleting.
If you haven’t felt the heat so far, ask someone who has been laid off in this period and surviving on their savings or someone who is midst of a job change. Resigned from one company, and joining is delayed by another company or worse scenario – offer made has been retrieved.
There are three components to building one’s own economy – Contingency Fund, Medical Fund and Holiday Fund.
Build Your Contingency Fund
This is the fund that you need to survive yourself, when all source of your income is closed down. By now you exactly know how much money you need to survive per month. Now multiply it by 6 months. Imagine you need 700$ per month to survive, hence you first need to have 4200$ in you Bank account doing nothing, just earning interest, and only to be touched when you are jobless.
Having a contingency fund gives you the confidence to face any kind of adversity, excluding few like Medical emergencies. Plus if you don’t like a job and want to quit, you don’t have to think twice. Why six months – because one has to be absolutely useless to not be able to find a job in this time.
How do you build your Contingency Fund?
-Don’t buy imported products. Imported products carry huge taxes plus they are overly expensive, serving the same purpose. Buy what your country produces. You achieve a dual purpose – save money by paying less and support your own country’s economy by buying domestic products.
-Avoid malls/supermarkets and look for convenience stores or local vendors to buy your daily groceries. You might not save too much, but by buying from smaller shops, you help them earn some money for their household.
-Defer your loan plans. Now is absolutely not the right time. Market will get flooded with great deals and discounts, and remember that’s a trap to put you under debts. Not until you have build your contingency fund.
-Cancel your multiple subscriptions. If you are subscribed to an Amazon Prime, Netflix, Spotify or anything else, reduce the number. You don’t need 5 different subscriptions serving the same purpose.
-Cook at home. Lockdown must have taught you how to cook at home, plus you must have already tried several recipes. Your one meal at a restaurant would be equivalent to one week of household groceries.
Look at other areas where you can save money – shopping for apparels or home decor is one of the many. You should also consider watching Minimalism on Netflix. It will give you some great insight on how “Less Is More”
This is self-explanatory. You definitely need a Medical Insurance, plus you need to have at a minimum of 5000$, kept somewhere safely. This can continue to eat dust in a bank and earn interest. This is a must, or else a medical emergency will eat onto your Contingency fund. All these funds should be something which can easily get liquidated.
This sounds exciting and it is for sure. Of all the hard work that we do everyday, we deserve one weeklong holiday every year, at a minimum. It all depends on you how expensive or reasonable you want your holiday to be. Plan for that one holiday in advance and start saving little by little every month.
If you want to know how to plan for a Holiday in the most economic way - leave your comments, and I would love to share that with all of you.
The first two funds though look overwhelming, but if you have built it for yourself, you will have a much more confident life and hold the power to make decisions about your career and almost anything.
It took me 2 years to build a Medical Fund, which helped me during a Medical emergency of my Father. I spent almost 15,000$ on his medicals and I was at peace. Didn’t had to ask anyone or borrow from someone. I have even survived 4 months without a pay check, all because of my Contingency fund. My contingency fund kept me focused and saved me from frustration and depression.
Life is all about falling and rising again. Same is our own person economy, it will keep falling and we have to keep rebuilding it again. Use this time under lockdown to plan how will you build yourself and your economy again.
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