One of the most difficult situations to deal with is a decrease in income, especially if you are like many Americans of late – living paycheck to paycheck. Many of us base our lifestyle around and live right up to the limit of what our income can afford us to purchase. Living this way can really hinder your budget no matter how much you bring in.
However, spending above our means and not sticking to a budget can really be a problem – because what happens if life throws out a curveball? This unfortunate instance happened to many Americans this year during the COVID-19 pandemic. Here are a few ways to make sure you are financially prepared should you ever experience an unexpected income drop.
The Importance of a Variety of Income Sources
One of the best ways to handle a potential loss of income is to build up income from various sources, if possible. This can be important so that you aren’t relying on one source of income for everything.
If you don’t make as much as you’d like in your daily 9 to 5, starting a side business or part-time job in order to be able to fall back on additional income can be a help. Try to consistently save some of your extra income when times are good so that you are prepared the next time a crisis happens.
What Can You Cut from Your Budget?
It’s important to know which items you would cut in a pinch from your budget if you had to. It’s also good practice to plan ahead of time and figure out where you could cut back if you ever needed to.
Look at your spending patterns, and figure out what is most important. Items such as groceries and bills are necessities, and will need to be managed even if you are making less. However, dining out and added services such as cable can always be temporarily cut from your budget if you needed to.
Review what you spend money on currently and start to get prepared. You could even think about cutting back on some of that spending now, and put it aside in your emergency savings fund to be ready for a rainy day.
Do You Have an Emergency Fund?
This is one of the most important savings accounts to ever have. An emergency fund’s purpose is to be a safety net in the event that your income takes a cut, and you no longer have enough money to meet your current financial obligations. When you have somewhat of a buffer saved in the bank, you’ll feel better prepared and less stressed should you experience any sort of financial emergency. Continue to save what you can and keep putting it away into your emergency savings account – every little bit helps!
Article Source: Moneyning.com