- August 3, 2021
Nothing could have adequately prepared us for the Coronavirus pandemic and the havoc it caused.
Fortunately, the world is seeing signs of economic recovery. For most of the Caribbean, a revival of tourists travelling has resulted in more employment, business opportunities, more spending and much needed funds trickling into public coffers.
However, for many people, the damage will linger for many years as they look to reenter the workforce and pay off debt they might have accrued during the last year and a half. Even those who didn’t lose a job due to Covid-19 may need to revisit their finances as prices have risen and spending habits may have shifted.
Here is what we suggest you focus on to get back on track.
Rebuild emergency savings
The pandemic took the country by surprise and showed many just how unprepared they were to withstand an emergency. Now, as the Bahamas rebuilds the economy and more people are going back to work, is a good time to rebuild your emergency fund.
How much should you have in your emergency fund? A general rule of thumb - you should have three to six months of living expenses in an emergency savings fund. Granted, that is a wide range — so what should you aim for? Everyone’s circumstances are different, but if you have children or ongoing medical expenses, it can be wise to plan for the higher threshold or more.
The events of 2020 showed us that certain industries are particularly hard hit by economic crises — for undetermined periods of time. If you are in a job that is vulnerable to market variations, you may need an even higher target.
Pay down debt
Debt reduction is another important financial goal that you should focus on, especially for those who added to what they owe to keep themselves afloat during the pandemic. Now is the time to review all your expenses and find the best solution to control your debt. The following are some ideas for you to consider.
- Refinance major purchases, such as a home, to take advantage of lower interest rates and possibly extend the length of time for payments.
- If high-interest credit cards were used to finance expenses, consider consolidating this debt into a lower-interest loan.
- Pay off debts with the highest interest rates first and then continue with lower interest rate.
- Delay major purchases if possible, including getting a new car or remodeling the house.
- Rethink vacation plans.
The above is by no means an exhaustive list, we encourage you to find creative ways to reduce your debt and increasing your savings.
Review your budget
Last year was unusual, and for many that resulted in drastic changes to their budget. Whether people lost work and had to find other sources of income or found that they had extra money from canceled trips, budgets may need updating.
Reevaluating your budget—or building one from scratch—is one of the most important keys to financial success. It might not be the most exciting task, but it’s one that will give you a clearer picture of where you stand financially and how much you can truly spend without increasing your debt. A budget sets solid boundaries that empower you to live within your means—and pave the way for a solid financial future.
A solid budget will also give you a realistic idea of how much you can spend on outings. After calculating your fixed expenses, which include things like rent and utility bills, income that’s leftover can then be allocated to “fun” spending. Building that category into a budget will help you determine when you have had a little bit too much fun and need to reel in your spending.
Life is unpredictable — but just because you cannot predict the future doesn't mean you can’t plan for the possibility of financial emergencies. If you do need help managing your finances and planning for your financial goals call or email RF and speak with one of our Financial Advisors today at:
Phone:
Bahamas: 603 6000
Barbados: 435 1955
Cayman: 746 6010
Email: invest@rfgroup.com