How to Manage Your Money During a Financial Crisis

The global economy is facing significant headwinds. Uncertainty around the spread of the coronavirus (COVID-19) and its potential economic impact has triggered market volatility and raised concerns about job security and overall financial stability. It’s understandably unsettling, but proactive financial management can provide a crucial buffer and help you navigate these challenging times. This guide outlines key strategies to manage your money during a financial crisis.

1. Understand the Situation & Don’t Panic

The first step is to acknowledge the situation and resist the urge to make impulsive decisions based on fear. Panic selling stocks or drastically cutting expenses without a plan can actually worsen your financial position. Stay informed about economic developments, but focus on what you can control – your spending and saving habits.

2. Review Your Budget – Seriously

Track Your Spending: If you aren't already, meticulously track every penny you spend for at least a month. There are plenty of apps like Mint, YNAB (You Need A Budget), and PocketGuard to help with this.
Identify Non-Essential Expenses: Pinpoint areas where you can cut back. This might include subscriptions, dining out, entertainment, or unnecessary travel.
Prioritize Needs vs. Wants: Distinguish between essential needs (housing, food, utilities) and discretionary wants.
Consider a Temporary Reduction in Expenses: Aim for at least a 10-15% reduction in non-essential spending.

3. Build an Emergency Fund (If You Don’t Have One)

This is the most critical step. A healthy emergency fund – ideally 3-6 months of essential living expenses – will provide a crucial safety net if you lose your job or face unexpected expenses. Even starting small with a $1,000 buffer is a significant improvement.

4. Reduce Debt – Aggressively

Prioritize High-Interest Debt: Focus on paying down credit card debt and other high-interest loans as quickly as possible. The interest payments can quickly eat into your finances.
Consider Balance Transfers: If you have credit card debt, explore options for transferring balances to a card with a lower interest rate.
Don’t Take on More Debt: Avoid unnecessary borrowing during this period.

5. Assess Your Income & Explore Options

Talk to Your Employer: Understand your company’s plans regarding potential layoffs or salary reductions.
Update Your Resume & Network: Start preparing for potential job searching.
Explore Additional Income Streams: Consider freelance work, part-time jobs, or utilizing skills you have to generate extra income.

6. Protect Your Investments (Without Reacting to Market Volatility)

While market downturns can be unsettling, drastic reactions (selling low) are often detrimental. If you have a long-term investment strategy, stick to it. Consider dollar-cost averaging – investing a fixed amount regularly, regardless of market fluctuations. Consult with a financial advisor if you need personalized guidance.

7. Stay Informed, But Don't Overconsume Information

Constantly checking the news and social media can increase anxiety. Limit your exposure and focus on actionable steps you can take.