As we continue to grapple with the effects of the Covid-19 pandemic, we have learnt the importance of having our finances in order. Many of us currently live under the threat of possible loss of income, economic recession and the rising cost of living. How do you ensure that your savings and investments are growing enough that you are not constantly worrying about the future? Is it even possible to build savings and investments in the middle of a pandemic?
- Cut expenses
The easiest way to fill your nest egg is to cut all unnecessary spending and then channel the proceeds into your savings or investment fund. Go over all your expenses and group them as either essential or non-essential. Try as much as possible to get rid of any non-essential spending. It is a big sacrifice, but one you are making for your future wellbeing.
- Use cheaper or free alternatives
Where you are unable to completely cut an expense, look for a cheaper replacement. For instance, while you cannot eliminate daily commuting costs from your monthly budget, you could switch from driving your car daily to using public transportation, which is much cheaper than the cost of fuel. The extra savings will be channeled to your investment fund.
- Start strong
It is easier to build financial discipline if you start with quick, easily achievable goals as you build up to the more difficult ones. A few fast wins, such as going through your budget and removing three expenses you can live without, will be more effective than setting a grand goal like saving two thirds of your income at the end of the month. The positive feeling of accomplishment you will get once you achieve your smaller targets will motivate you to attain the ones that require a bit more effort.
- Reset your investment strategy
Your old investment strategy may have been rendered ineffective post-Covid for any number of reasons. Perhaps your income was disrupted or your investment simply isn’t giving you the same rate of return it used to. If your income was reduced, find new income streams to cover the gap. If the product or industry you invested in was highly impacted by the pandemic, it may be necessary to liquidate it and switch to a product whose yield remained more or less the same despite Covid-19. Do not use the pandemic as an excuse to abandon your investment goals.
- Favour liquidity
With uncertainty being the order of our present Covid reality, liquidity has never been more important. Prefer investments and financial instruments that allow you to remain relatively liquid, so that you are able to pay for any emergent needs. However, you must exercise restraint so that you do not misuse your money just because it is easily accessible.
In conclusion, building a nest egg in the midst of a pandemic may be difficult, but it is not impossible. Be prepared to do some creative reorganizing and make some sacrifices. However, in the grand scheme of things, you will be glad you did it.