By Ana Snyder, M.S., Exercise Physiology; CPT, FNS
The COVID-19 pandemic has been a stressful time for all of us, to put it mildly. It’s turned the world upside down, leading to closing schools, restaurants, stores, and offices as everyone practices social distancing. Whether you’re on the front lines, temporarily furloughed, or working from home, few can say their working life is unaffected. And, of course, if you’re working less than usual or can’t work at all, you’re not earning your regular income. Many people are highly anxious about how they’re going to make ends meet right now. That’s why this is a great time to learn effective money-saving tips and set actionable financial goals. Here’s how to weather the remainder of the pandemic without going broke, and how to achieve greater financial stability going forward.
If you’ve received a stimulus check from the government, you may be tempted to splurge on something fun. And it’s not as though anyone could blame you—these are stressful times, and everyone needs a little TLC. That said, if you’re truly committed to improving your financial wellness, use your stimulus payment for necessities first. Pay your rent or mortgage, make your car payment, or put the money toward groceries and gas. If there’s money left over after you’ve met all your financial obligations, put the majority of it in your savings account. Allowing yourself a small indulgence is fine (And it will help to stimulate the economy!), but only after you’ve met your responsibilities first. You don’t want your debt to pile up while you shop your stress away, as enticing as it sounds right now. You’ll thank yourself later for the good financial decisions you make now.
With over 40 million people unemployed in the U.S., the country is deep in an economic recession. Thankfully, lenders (banks) are offering some excellent options to help mitigate that. If you have any loans, you should take advantage of the refinancing programs many lenders have made available during the pandemic. Even if you’re currently furloughed or unemployed, you can achieve greater financial stability by making smart decisions about your debt.
In simple terms, refinancing is when you take out a new loan with different, usually more favorable terms to replace an existing one. By doing this, you should be able to reduce your interest rate and perhaps the total amount you owe. It’s worth looking into refinancing major loans like your mortgage, as current rates are at a record low, along with student loans and car payments. Here’s a quick primer on how to get started.
Does it sound like a hassle? Just think: you could save thousands of dollars this way, and it shouldn’t take too much of your time and energy. Call your lender and ask to speak to a financial management professional about refinancing.
If there’s anything the pandemic has taught me about money, it’s that a substantial “rainy day” cash stash is an absolute necessity for financial stability. And if you’ve never had an emergency fund, there’s no time like the present to start one. Although I hope there’s never another major disease outbreak like this one, it’s always wise to be prepared for the unexpected. You’ll sleep better at night knowing that you have enough cash to cover your expenses in case life throws you another curveball.
If you’ve paid all your bills and have money left over from your stimulus check, you might think about using it for this purpose. As the economy restarts, consider putting just 5–10% of your monthly income toward your emergency fund—every little bit helps! Ideally, you should save enough to cover your expenses for three to six months. And once you’ve reached your goal, keep saving! It doesn’t hurt to have a little extra buffer for your time of need.
An important part of achieving and maintaining good financial health is the idea of living within (or even beneath) your means. In everyday terms, that means spending less than you earn, or at least breaking even if you’re in the midst of eliminating debt. Here are some quick money management tips that should help you knock out any unnecessary expenses.
As I mentioned earlier, banks are extending greater flexibility to customers in light of the pandemic. That means that if you have significant credit card debt, you may be eligible for financial assistance right now. For example, you may be able to lower your minimum monthly payment and interest, freeing up cash for necessities like rent and groceries. Here’s some useful information about requesting help from your credit card company.
That said, if you’re able to pay your full balance on time, I encourage you to continue to do so. There’s no reason to carry a balance if you’re able to make your monthly payments, and the interest is a waste of your money. In fact, carrying a high balance can lower your credit score. This goes back to the idea of living within your means: don’t spend (or charge) more than you have.
This hasn’t been an easy time for any of us, and it’s difficult to say when we might be back to normal. For now, all you can do is your best, and that’s okay. Spend wisely, and save as much as you possibly can. Hopefully, we’ll see a more stable economy—and a waning pandemic—very soon.