During the pandemic, economic activities are almost shut down, increasing the number of unemployed. The lockdown continues until the spread of the virus subsides. Since people have been put under the house arrest, they are struggling to make money. The self-employed are facing the problem majorly because full-time employees have been doing their office work from home.
The rate of unemployment has gone up. Most of the people have claimed unemployment benefits so far and now worrying about how they will keep up with repayments of utility bills, rent, instalments etc. For a couple of months, you could manage to dip into their savings. If the lockdown does not end soon, you will end up being broke.
Some of you will have an emergency cushion. After draining your savings, you will tap your emergency cushion, but the question is it is wise to dip into them? If yes, when is the right time to use these funds?
Whether to drain emergency savings or not
The purpose of emergency funds is to fund expenses arising out of temporary financial hardships. Financial experts suggest that you should have an emergency cushion to cover three to six months’ worth of expenses. However, the reality is most of the people hardly have money to cover even one month worth of living expenses in emergency funds.
As the name suggests, you can use these funds when there is an emergency. As you know, during COVID19 pandemic you are facing a shortage of cash and many expenses are up, it is getting hard to decide which costs should be funded with these funds. Well, it depends on your current circumstances and your spending behaviour.
Some people smartly handle money to keep emergency cushion growing. If you have emergency savings of the right size, you can tap into these funds for emergencies like car repairs, medical bills, and the like. The best time to use these funds for such expenses is when you are out of work.
As long as you have an emergency cushion, you should use it instead of taking out a loan. Guaranteed loans for unemployed are an excellent option when you do not have emergency savings. However, you will have to remember that you cannot borrow a large amount of money with such loans. Further, you will be paying interest along with what you borrow, so you will have to make sure that you do not ruin your buying power completely.
When your savings start to shrink, you begin to worry about payment like utility bills, mortgage repayments and other regular expenses. Of course, you would not like to drain your emergency savings to meet daily expenses. If you have been laid off, you should immediately apply for unemployment benefits and inform our lenders of your financial situation. They may offer you some relief options.
However, you are under the pressure of staying at home. You will save your money on entertainment and dine out. You can use this money to keep on top of your regular expenses.
This is the time to be strategic. Before you make any purchase, ask yourself if it is a necessity. Can you put off this purchase? It can help you reduce your spending. During COVID19, you will have to be careful with your spending.
What if you do not have an emergency cushion?
A few people can build an emergency cushion successfully. Most of the people hardly have £1,000 as their emergency savings. However, some people do not feel the need to make it because they earn the right amount of money. This is the time when COVID19 has become a global pandemic, forcing everyone to stay at night. If you do not have an emergency cushion, how will you manage to fund your expenses?
In this situation, you will have to rely on your savings for all of your expenses. You will have to use them frugally so that you do not end up bro0ke at the end of the year. If you are working from home, you will have to do overtime, so that your employer could pay you a bit more.
Try to create an emergency budget. You will include those things that you need to survive. As you do not have an emergency cushion, you may need to put off some expenses. Otherwise, your savings will drain quickly.
In the absence of emergency cushion, you can make rash decisions about funding your needs. You may be tempted to borrow money, but do not forget that you will have to pay off the debt. Do not borrow if you do not have a repaying capacity. You should be patient and figure out other ways to fund your expenses.
Now it is clear that you can use an emergency cushion for your expenses during COVID19, but it depends on your current financial circumstances. sprunki horror Endless Fun Awaits!
