There’s no denying that the coronavirus pandemic has created a lot of uncertainty in our lives. Most of us are feeling uneasy about many things — including our finances. Since your financial health, like your physical health, is essential to leading a healthy and fulfilling life, it’s important to make it a top priority.
But how do you do that? By prioritizing certain financial goals during the crisis, you can improve your finances and help ensure you have enough money in the weeks, months, and years ahead. Here is a deeper dive into how you can work on your financial goals during the COVID-19 recession.
3 ways to get your finances in order
With a bit of hard work and persistence, you can gain control of your finances and start to set yourself up for success even during the pandemic, and beyond. Here are some tips to help you out.
1. Stretch your paycheck
If you’re lucky enough to be earning money, make an effort to make the most of it. This way you’ll have more to save and find it easier to avoid debt. Here are some suggestions to help you stretch your paycheck.
- Cook at home: While carry out is convenient, it can eat up a lot of your hard-earned paycheck. Try to cook most of your meals at home. Your bank account and waistline will thank you.
- Buy generic: It can be tempting to throw name brand food and household products into your shopping cart. Doing so, however, can cost you a lot of cash. Since many generic products are just as good as their brand name counterparts, try to buy generic as much as possible.
- Avoid sales: This may seem counterintuitive, but staying away from sales can save you a significant amount of money. Here’s why: Retailers are pros at creating a sense of urgency and making you feel like you’re going to miss out if you don’t participate in their sales. Since spending on items you don’t really need can quickly drain your paycheck, do your best to sale-related ignore emails or commercials.
- Pay with cash: If you have a tendency to overspend, cash can help you put your bad habit to an end. Since it’s tangible and you can literally see it leave your hands, you’re more likely to spend less when you use cash.
Although stretching your paycheck may require some lifestyle changes, it could save you hundreds or even thousands of dollars each month. With more money at your disposal, you could be able to buy a house, save for retirement, pay for college, and meet your other financial goals.
2. Expand your emergency fund
An emergency fund can be a real lifesaver if your car breaks down, you’re faced with an unexpected medical expense, or you lose your job. Ideally, your emergency fund should be at least 3 to 6 months’ worth of expenses or more if you’re self-employed, a one income family, or simply want some extra peace of mind. With these tips, you can work to make that happen.
- Get creative with your income: You may need to think beyond your full-time job to boost your emergency fund. A side gig or part-time job can help you save more money at a faster rate. Put your side income directly into savings.
- Choose a high-interest savings account: Keep your emergency fund in a separate account from your regular checking and savings. A high-interest savings account can help you earn some extra cash on interest.
- Make regular contributions: Treat your emergency fund like your retirement account and contribute to it via automatic deposit from your paycheck until you’ve saved enough.
If you have to pull money out of your emergency fund, be sure to replace it as soon as you can so that when the next financial roadblock hits, you’re still in a good position.
3. Pay down debt
While paying down debt is easier said than done, it’s crucial to do so during a recession, as long as you still have a job or a bit of certainty about your shorter term income. With less debt to worry about, you’ll have fewer payments to make and more money to save. Consider these options to help you pay down debt.
- Debt avalanche or debt snowball: With the debt avalanche strategy, you pay down your high interest debts first. Focus on paying your smallest debt and then once it’s paid off, take the amount you used to pay into it to pay off the next smallest debt.
- Debt consolidation loan: A debt consolidation loan lets you pay off multiple high interest debts so you’re left with paying a single monthly loan payment at a lower interest rate. If you’re overwhelmed with the task of paying off multiple debts each month and have credit that could qualify you for a low interest rate on a loan, this solution could be good for you.
- Cash-out refinance: If you own a home, a cash-out refinance may be a solid choice. You’ll replace your existing mortgage with a new one with a higher balance so you can keep the cash difference. You can apply the cash toward your high interest debts.
- Debt settlement: Debt settlement occurs when you negotiate with your creditors to settle for less than the outstanding balance of your debt. This solution can lower the amount of debt you owe and move you away from debt much faster than paying the minimums on your card each month.
Once you have little to no debt, you’ll feel like a weight has been lifted off your shoulders. A job loss or financial emergency won’t be as big a deal because you’ll have more money to work with every month.
Enjoy more tips on improving your finances during the pandemic
Our blog is full of useful articles that can help you learn about saving money, reducing your debt burden, and meeting your financial goals during the coronavirus pandemic and beyond. Come back each week and check it out.
- How to Find the Coronavirus Assistance You Can Get from Your State (Freedom Debt Relief)
- Learn a New Language During Quarantine: The Language of Money (Freedom Debt Relief)
- Are Debt Collectors Still Calling During Coronavirus? (Freedom Debt Relief)
- Protecting Your Finances During the Coronavirus Pandemic (Consumer Financial Protection Bureau)