How to Prepare yourself Financially for an Economic Crisis like COVID?

I have recently read the book “Richest Man in Babylon” by George S. Clason. It is one of the best books on Personal Finance. By following its principles, each person can achieve financial freedom and is better off in situations of recession and economic crisis such as COVID.

COVID-19 has disrupted many livelihoods around the world and people are barely surviving. A lot of change has been seen in the personal finance habits. People are spending less, setting higher amount aside for emergency expenses and preparing for any future money needs. Each person should now create a proper financial plan which can help them to tide over such future economic crisis.

The 7 learnings from the book which help you improve your finances are:

1. Start thy purse to Fattening

For every amount you earn, set aside a minimum of 10%. There would be no drastic change in your current quality of life if you set aside 10%. In the long term, this will offer you a lot of satisfaction and a feeling of self-achievement. You must decide what you desire: spending money for your short-term satisfaction or long-term benefits.

2. Control thy expenditures

Everyone in this world has desires beyond what they earn. Create a budget for yourself. Divide it into expenses which are necessary and others as per your requirement. This will enable you to have a better accounting of your money and self-check on your spending habits. Keep unnecessary expenses to a minimum. Also, do not spend money from 10% set aside earlier.

3. Make thy gold multiply

Make investments in areas which you understand or hire a financial planner. Invest again the returns which you earn through the investment. This will lead to a continuous stream of income in the future and allow you to increase your wealth rapidly.

4. Guard thy Treasure from loss

You work hard to earn money. Make your investments wisely and understand a scheme properly before investing in it. Do not invest in areas which offer unrealistic returns and involve high risk. Have proper knowledge of your investment or consult with people who are experienced in the handling of such investment.

5. Make of thy dwelling a profitable investment

This means “Own your own home”. Instead of paying rents each month, take a home loan where the installments will be similar to the rent you pay. Become your own landlord.

6. Insure a Future Income

A time will come when you are no longer young and able to earn. Prepare for your retirement and ensure proper funds to support your family in such a scenario. Out of the income you earn today, invest regularly in areas which will you help to realize a higher amount in your future. Insure your family against any catastrophic events.

7. Increase thy ability to earn

There are seven sources of income: Earned Income, Profit Income, Interest Income, Dividend Income, Rental Income, Capital Gains and Royalty Income. Inflation is going to increase each year. So, you should focus on increasing your income and diversify your income sources.

This also involves: Becoming Financially independent, study and become wise, become more skillful.

By following these steps, you will acquire confidence in yourself to achieve all your desires.