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News reports about major investments by Warren Buffett or hedge funds, whether in Europe, Asia or America, are always at the top of the business pages. Regardless of this, however, the businesswoman or businessman or the average citizen who does not just quickly dispose of a few millions for investment is wondering how 2022 can best be mastered financially.

With a pandemic and an economic recession still looming ahead, try to make sure you have enough emergency cash to survive. Even though Warren Buffett always stated as his first investment recommendation that cash (a collective term for readily available funds) is not a good Investment, he does the same thing, except that his emergency fund, or war chest, is in the billions of USD.

A few months after the COVID-19 pandemic began, the US National Bureau of Economic Research (NBER) announced that the US economy was officially in recession. We are still there and while parts of the economy have started to recover, many are still lagging behind. For example, unemployment has fallen dramatically since it hit a record high in April 2020. Yet, almost a year later, the US economy has still lost 10 million jobs. The recovery has also been very uneven, with some Americans escaping virtually unscathed and others still feeling the financial impact of the pandemic.
If you're struggling with job or income losses, you're not alone. This year is best spent getting back on your feet, whether that means paying off debt or focusing on making ends meet. However, if you're lucky enough to be in a position to save money - meaning you can pay the bills and don't have high-interest debt - 2022 is a good year to boost your savings even more than you normally would. Here's why. Keep extra money in the bank during times of economic uncertainty. If you ask pretty much any financial expert what you should do with your money during an economic recession, increasing your cash reserves is probably at the top of the list for several reasons.
For one, it's a good idea to boost your emergency fund whenever you're suffering from financial uncertainty. Whether it's an insecure job, an ongoing medical problem or a recession, having extra cash on hand in case an emergency expense arises will keep you financially secure and help you avoid getting into debt or at least cash shortages.
Loss of job and income are some of the biggest threats during a recession, especially when paired with a global pandemic. If you find yourself in this situation, you don't want to have to deplete your retirement account or resort to credit cards and loans to cover your living expenses while you look for work, new clients or projects. You want to keep a healthy amount of liquidity so that you can access extra money quickly if needed. Also, there is always a high risk that the stock market will fall during a recession. If you don't have enough cash reserves, you might be forced to sell while the stock market is falling.
HOW MUCH CASH YOU SHOULD KEEP ON HAND? A typical, healthy emergency fund is about six months' worth of basic living expenses. However, some experts suggest that you should have a larger emergency fund - more like nine months or a year's cash. This could be particularly useful if your financial situation is unstable - for example, if you're a freelancer, your industry is suffering or you're in the middle of a recession. This rule of thumb needs to be adapted to your own situation. If you're paying off debt, especially high-interest credit card debt, it's wise to put extra money into repayment now, even if it means your savings account gets smaller. If you have investments that you can liquidate fairly easily if needed, and you're fairly risk-tolerant, three to six months of living expenses might be fine for you.
INCREASING SAVINGS. To increase your savings, you need to make a habit of putting money aside regularly, whether it's €25 or €250. The best way to do this is to automate your savings so you don't even have to think about it. The best online savings accounts offer higher interest rates than you'd get at a traditional bank, and they have features that let you automate your savings with a few clicks. You can have money transferred from your bank account to your savings account once a week or month - ideally right after you get your salary so you don't have a chance to spend it. Even if you set it up so that you only transfer 25 euros a week, you'll have saved 1,300 euros in a year, and that's without interest.
Saving more can be enhanced by using additional savings features. Some of them round up purchases and transfer the difference to your savings account, while others analyse your spending and identify extra money that can be saved every now and then. Once you have done this, you can start to identify areas in your budget where you can reduce your spending to save even more. There are many different budgeting methods you can try. You'll even find some great budgeting apps that do the hard work for you. Once you've categorised your spending and noticed areas where you can save, commit to budgeting a certain amount each month and set up an alarm in your budgeting or banking app to notify you when you hit your limit. If you really make it a habit to save more and spend less, you can do it. Putting more money aside this year will not only help you when you run into problems - it will also give you more peace of mind at all times. By the way, cryptocurrencies are not a real alternative for safe cushioning in times of crisis.