Millions of people are fighting fiercely in 2020: battling to save lives and livelihoods. Some are working with a compassionate heart to save lives in hospitals. Others are trying to protect their lives and livelihoods by staying at home. While being shut-in isn't always ideal, people have found a way to become super-efficient with both their time and money.
The forced self-isolation has made many realize what they are capable of, which is good. It has also helped people save a lot of money as there are no movie outings, dinners at expensive restaurants, and mindless expenses. People are eating at home and cutting down on expenses from their household budget more than ever. Almost 78 % of consumers have stopped spending money on take-out food, which has triggered an average savings of $251. Moreover, around 75% of consumers have saved $1,411 by canceling their vacation plans this year.
How to use the money saved during the pandemic.
It's a good thing that people are saving money on eating out, clothes, vacations, music events, beauty regimens, sports, drinks, entertainment, and so on. More than 60 percent of people are saving money in these categories. The average savings vary between $120 and $207, which is a significant amount.
The question then arises as to what people should do with their saved money.
Should they spend it on shopping and entertainment after the situation gets normal? Or should they use the money to build a secure financial future?
The second option is a much more feasible and viable option than the first one.
Let's discuss how to use the money saved during COVID-19 to build a robust financial fortress.
1. Strengthen your Emergency Fund: With the sheer economic collapse and massive job losses, many people worldwide are facing an uncertain future. Many companies have already shut down permanently. Some companies are still fighting to survive. And, a few companies have changed their business plans altogether to fit in with the new normal situation. Media reports say that some jobs won't even come back.
The future is uncertain, and the job situation is not all good. So, it makes sense to build an emergency fund with the money you save while staying at home. The focus should be on creating an emergency fund that covers around 6 to 7 months of expenses. Considering the given situation, it will take much time to revive the country's job market, and an emergency fund will help you to survive those excruciating months.
2. Build your nest-egg: If you already have an emergency fund, you can keep your savings in a retirement savings account. Put what you can into this type of account, and after 20 to 25 years, you will be surprised to see how much it has helped grow your retirement savings. Even if you can contribute $2,000 toward your retirement savings account, you can expect it to become around $7,000 after 20 years. That's the power of compounding interest!
3. Pay off your debts: Both the government and credit card companies have introduced a lot of debt relief programs to alleviate consumers' financial stress. However, all these programs are only for 3 to 4 months. So what will happen after that?
Ultimately, you'll have to gradually pay off the entire debt, which can cause more stress in the long run. So instead of going in a completely relaxed mode, the best thing you can do for yourself is to be thinking about getting out of debt strategies right now. If you want to settle your debts, use the saved money to do that as soon as possible.
4. Make lucrative investments: If you are young and don't have any financial responsibilities right now, you can make investments to see a steady growth of your money. These include both secured and risky investment ventures. If you are too apprehensive, you can go for secured investments, and, if you are willing to take risks, you can consider buying stocks while the prices are low to see significant growth when the economy strengthens.
You see, desperate times call for drastic measures. People are compelled to stay and work from home as there is no other option right now, but this restraint has also given people a golden chance to save money.
And people are saving money, which is good.
So take advantage of this rare opportunity to use your money to build a safe financial future. Those who have decided to keep the money in the retirement savings accounts will benefit a lot in the future. Those who have decided to keep the money for their children's education will also reap benefits later. Some of them are planning to get out of debt with the saved money, which is an excellent financial move as it will help them save thousands later.
No matter how much you save money, it's essential to use it wisely. We are not in a position to waste money now.
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