Ever since COVID-19 became a reality earlier this year, people have taken extra precautions to stay healthy. They’re washing their hands more often, taking additional vitamins, staying socially distant from others, exercising from home, and wearing masks in public. But while we’re all so focused on staying physically healthy during the pandemic, what about our financial health?
In a recent survey conducted by the Associated Press AP-NORC Center for Public Affairs Research, 49% of people said that COVID-19 has affected their household’s paychecks, whether by a layoff, reduced salary, or a cut in hours. And yet for some Americans, the pandemic has resulted in spending less, saving more, or paying down existing debt with 66% of people reporting that they are spending less because of the coronavirus outbreak.
The COVID-19 crisis has certainly impacted everyone in a different way. And while there are those who have been fortunate enough to be able to pay down their debt by simply curbing their spending, others have experienced major economic hardship. Between job losses, business closures, and the economic downturn, many Americans have been forced to put their finances on the back burner. So how can you regain your financial health after the pandemic? Consider the 4 tips below:
Pay Down Your Debt
Carrying a lot of debt is expensive. If you have student loans, credit card debt, or even personal loans, now is a good time to review what you owe. Make a list of your debts and the interest rates on each of the loans. It may make sense to start paying off the loan with the lowest balance or the one with the highest interest rate.
Once you’ve decided which debt to begin to pay off first, you need to figure out where you will get the money from. Can you put your stimulus check towards a credit card bill? What about taking any money that you’ve saved from spending less during the quarantine and putting it towards your student loan? If none of those options are possible, consider getting a weekend job or taking on some freelancing work.
For people who have multiple high-interest debts, it may make sense to consider debt consolidation. Debt consolidation involves combining multiple unsecured debts into one bill. This can be helpful if you’re overwhelmed by an assortment of monthly payments or if you simply want to reduce your total debt and reorganize it, so you pay it off faster.
Stop Using Your Credit Cards
Credit cards are incredibly convenient. Unfortunately, they are also extremely easy to mismanage. In fact, 55% of U.S. adults who have credit cards also report to having debt. Although it may seem drastic, if you if you are looking to get control of your finances, temporarily stop using your credit cards altogether. Instead, use cash or debit cards so you prevent yourself from accruing additional debt. You can even take it a step further and withdraw the amount of money that you need for the week in cash. Spending cash instead of credit cards on groceries and your necessary expenses gives you a visual idea of what you have left.
When you do resume using credit cards again, think twice before swiping blindly or making impulse purchases. It’s important to live within your means and to only purchase what you can pay off right away on your credit cards.
Create a Realistic Budget and Stick to It
Creating a budget is not as complicated as it seems. First, note all of your sources of income. Then, make a simple list or spreadsheet of your necessary expenses like rent or mortgage, food, and utilities. Next, review what you spend each month on variable expenses such as groceries, clothes, and entertainment. This will give you a clear picture of possible areas where you can cut back. If you need to curb your spending, minimize unnecessary expenditures like going out to eat or purchasing new clothes. Review your subscriptions for tv, apps, or games and think about giving up your daily trip to the coffee shop. With a few minor adjustments you can quickly cut your spending and begin working towards your financial goals.
Create an Emergency Fund
As the COVID-19 pandemic has shown us, it’s important to save for a rainy day. And although we may not want to think about it, you never know when a future crisis may arise. A good rule of thumb when creating an emergency fund is to allow enough money to cover 3-6 months of living expenses. Try to consistently put a small amount away from every paycheck towards your emergency fund. Setting up an automatic monthly transfer may make it easier to stay on track.
For more information about how Corporate Capital Solutions can help you regain your financial health, contact us here.