COVID-19 has disrupted our lives in many ways, especially financially. With many Americans out of work, furloughed or feeling uncertain about their current and future investments, planning your finances might feel more stressful than usual. However, there are several key actions you can take to alleviate some of your stress and adjust your financial plans to account for an unpredictable economy. These steps will help you feel more confident as you move through an era of uncertainty and help you come out the other side in a healthier financial position.
Before you change your financial plans or begin a new budget, figure out where your finances are right now. Do you still have a source of income? If not, do you have savings that will help you make your monthly payments on time and cover your basic needs? Calculate how much money you need each month to cover your basic living expenses so you have an idea of how long you can pay your bills before you need to dip into savings or find a new source of income. Once you’ve determined how to stay financially secure in the moment, you can start adjusting your future financial plans.
There are lots of things to get in order when your finances change, so it’s important to prioritize your financial goals. For example, if paying off your car within the year is a top priority, you can adjust your budget and other financial goals to focus on that repayment plan. If you’re not sure where to start, adjust your goals by how soon you’d like to get them accomplished. If you’re paying off student loans and saving for a home, put student loans at the top of your list — more than likely, you’ll be able to pay those off faster than you would a house. Making a list of priorities can help you hone in on one financial task, rather than feeling stressed about completing multiple goals at once.
Evaluate and potentially readjust your spending habits if you’re concerned about not having enough savings. Avoid unnecessary purchases and using your credit card when you can’t afford to pay it off in the moment. It’s always better to be prepared for an unexpected change in income and it’s important that you’re not relying on credit to maintain your lifestyle.
If you have a debt repayment plan, like student loans, a mortgage or credit card payments that don’t fit your finances anymore, you might want to extend your loan period to make your monthly payments more manageable. This might mean refinancing your mortgage or exploring student loan deferment options. If you’re repaying multiple loans or debts, debt consolidation can help people with loan periods of over a year lower their interest rates and get all their payments in one place.
Economic downturn often comes without warning, so it never hurts to expect the unexpected. If you have the means, now is a good time to start an emergency fund that you can dip into when a large unexpected expense arises or in the event you lose your job. Set aside enough money to cover three to four months of expenses, so if the worst does happen, you’re prepared.
Managing your money might look different than it did a year ago, but that doesn’t mean you can’t still be successful. These steps will help you move through the present like a pro, and feel confident as you plan your financial future.
Navigate your financial well-being throughout the COVID-19 situation here.