Global economic activity is going through a whirlwind of changes and expecting a sharper-than-expected slowdown as inflation reaches its highest rate in several decades and adversely affects the cost of living for many. The International Monetary Fund (IMF) predicts global growth will slow to 2.7 percent this year. Aside from the global financial crisis and the acute phase of the COVID-19 pandemic, IMF says, “this is the weakest growth profile since 2001.”
The IMF recommends amending monetary and fiscal policies and altering structural reforms to support the fight against inflation and alleviate the cost-of-living pressures. These measures can be effective but may take time to implement. However, many households struggle to control their finances during these challenging times. So, here are some ways you can better manage your money during slowing global economic growth.
Grow Your Emergency Savings
When times are uncertain and costs of living unexpectedly increase, you need emergency savings to handle your finances. This can lead to you pulling out money from your savings account for other essentials, such as medical expenses or savings for your children’s education.
One of the most important things that can help you better control your finances during trying economic times is a safety net in the form of an emergency savings account. Start setting money aside and growing your emergency funds account to pay your monthly bills in the event of an unexpected job loss or deal with other emergencies. Some ways to grow your emergency savings involve cutting unnecessary expenses and saving money, following a strict budget, or looking for additional income sources.
Diversify Your Investments
Putting all your eggs in one basket is a risky move, especially when it comes to investments. An economic downturn can lead to significant losses if your portfolio contains similar investments. Holding various investments across asset classes (i.e., bonds, stocks, real estate) and across securities and sectors (i.e., energy, bank, technology) can reduce risks and allow you to balance your finances in case the value of one goes down drastically.
It’s also important to remember that some industries can better handle economic storms. For instance, large-cap stocks in mature industries may be better equipped to handle a financial crisis than newer and smaller companies. A key benefit of diversifying your portfolio is that it saves you from significant financial losses.
Pay Off High-Interest Debt
If you have different types of loans and bills, you might need help controlling your finances. Take some time to categorize your debt and pay off high-interest or variable interest rate loans first to prevent your expenses from piling up.
Paying off all your debt can be challenging during economic times, especially with limited income. However, since lower debt can help you better control your finances, looking for ways to pay off high-interest debt is essential. One way to do this is through debt consolidation. Look into short-term payday loans online and find that they allow you to pay off other bills, such as credit card and utility. This will reduce the risk of high-interest rates from unpaid debt. A reputable online lending platform will allow you to customize your loan based on your needs, allowing you to gain a clearer picture of your finances and make informed decisions.
Managing financial uncertainty during a period of slowing global economic growth can be challenging for many individuals and households. Improve your finances by growing your emergency savings, diversifying your investments, and paying off high-interest debt to reduce financial stress.
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