How to manage finances in a crisis
With the onset of a full-scale war, many people have faced stress and suffered material losses. In this article, our guest expert on financial literacy, investments, and coaching, Yulia Banit, will share information on how you can stop losing money in crisis situations and why it happens.
Whypeople lose money in times of crisis
The first is the emotional factor. Every crisis situation affects your wallet to some extent. In an effort to "drown out" anxiety, people "drain" money on impulse purchases, gambling, and often make unprofitable investments.
Due to altered hormonal levels during stress, our ability to think soberly and make good financial decisions is distorted.
Analyze how the financial decisions you've made over the past few years have most often ended? Did they bring you losses or profits? Having done this analysis, you will understand the dynamics of your decisions for sure. If most of them were unprofitable, write down what exactly led you to losses. Find the strategy you have been following for the past few years and replace it with a new, more profitable one.
The second reason people lose money during a crisis is the desire to get money quickly and easily. Being in a financially difficult situation, people, out of desperation, may choose to get money "here and now". This leads to investments in pyramid schemes that promise high returns in a short time. In other words, the desire to get rich quick can make you give your money to fraudsters.
How to manage money in crisis situations
- Download a mobile app to keep track of your finances or record expenses and income by hand.
- Create your own financial plan. Write down how much money you need to have to ensure your basic standard of living (food, utilities, transportation, loan payments, etc.), your desired standard of living (entertainment, purchases that are not included in the basic standard of living), and how much you need to save.
- Start building up your savings. Even a minimal amount of savings will help you relieve basic permanent anxiety about money
- Pay off your debts properly. Set aside up to 20% of your income per month to pay off your debt obligations. At the same time, set aside money for savings
- Set a realistic financial goal that you can definitely achieve. Achieving your goals during a personal crisis will help you become more confident and accelerate your next results
Saving is just a habit. Even if you are not able to save the minimum 10%, start with smaller amounts. Don't wait for better times to start saving. If you can't save $100 with an income of $1,000, you won't be able to save anything with an income of $10,000. Don't be fooled by future decisions. Start acting now!
At the same time, start optimizing your expenses. Pick up your phone right now and check the number of subscriptions to mobile applications you don't use, unsubscribe from correspondence you don't read. Cost optimization is not about saving money, it's about making smart purchases. It's about not buying unnecessary things that you won't use. Take a look at your smallest expenses. They tend to take up a big chunk of your budget.
How to stop losing money
After you have analyzed where your financial decisions have led you over the past two years, start implementing the recommendations that were given above in this article.
Don't neglect your psychological state. If you feel like you're at an "emotional" low right now, visit a psychologist or sign up for group therapy. Because money alone will never solve your psychological or emotional problems. And without solving them, money can slip through your fingers like a sieve.
Therefore, in addition to "solid" practical actions, do not forget to devote time to your inner state.
Money is common sense, and then numbers and letters.
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