Keeping your finances in check during cost of living crisis
This year has already been financially difficult for a variety of income earners due to the high cost of living, which has posed a significant threat to many people.
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Current economic pressures appear set to persist into the next quarter, exacerbating a difficult period for businesses.
The cost-of-living crisis also poses a significant threat to many people's long-term goals of being financially capable of dealing with unexpected increases in goods and services and making the most of their money on a daily basis.
Debt, unexpected expenses, and unplanned purchases can all contribute to financial stress. It is more difficult to stay on track with your financial goals, especially given the high cost of living.
As a result, you must keep your finances under control during this time.
The strategies listed below will assist you in keeping your finances under control.
Creating an emergency fund
Creating an emergency fund to cover unforeseen expenses is one of the most effective ways I'm managing my finances during this time.
This may be unrealistic if you are struggling with debt and are not earning enough to save money.
To establish the fund, you must contribute at least GH¢20 or GH¢50 per week or month.
In my experience, this emergency fund has helped relieve my stress in a variety of ways, including providing psychological security to remain calm in stressful situations.
When my car broke down, I had to rely on my emergency fund.
This allowed me to stay out of debt and stick to all of my plans for the rest of the day and week.
Examine your sources of income
Sustaining one's livelihood will necessitate earning an income that is critical to one's survival.
Having a definite source of income can be considered a bedrock of budgeting, and as such, you must consider what your current income is, whether you have the capacity to earn more than your current income, and what proportion of your income you can save and spend.
Reviewing your earnings will allow you to account for uncertainties such as health issues, social engagements, inflation, unemployment and so on.
Evaluate your expenses
The process of assessing an organisation's actual or potential expenses and determining the amount of money needed to meet those expenses is known as expense appraisal.
I must admit that it is one of the best ways to keep track of your weekly or monthly spending.
Expenses are classified as variable or fixed. Fixed expenses are typically incurred over a short period of time and include (housing, medical costs, electricity, utilities, toiletries and clothing).
Variable expenses, on the other hand, are more long-term and irregular, and include property and machinery investment.
Appraising your expenses will assist you in reassessing the pattern and direction of your expenses, as well as the effective and efficient reallocation of available resources.
Make a budget that is flexible
Running a flexible budget will allow you and your company to adjust your spending plan as market and business conditions change throughout the year.
It will also allow your company to pursue new opportunities and reduce risk. Budgets are not set in stone and should be flexible if your circumstances change.
For example, money saved for a car can be invested in a promising venture such as pursuing a master’s degree and adding value to yourself.
Recognising current economic situation
Keeping an eye on evolving developments such as current inflation rates, exchange rates, fuel costs, and economic and financial news will be extremely beneficial in making financial decisions, especially during this period of high living costs.
Such economic conditions can have a significant impact on market movements, as well as demand and supply.
Understanding such issues, I believe, will help you develop your budget and understand the external factors that affect your current business model.
The writer is Lecturer/Business Coach, University of Professional Studies Accra,[email protected]