The COVID-induced crisis has made financial upheaval and uncertainty a norm for countless Americans. Even if you are lucky enough not to sustain pay cuts or job loss, your personal finances may have taken a hit. To make things worse, there’s no idea what lies around the corner.
Businesses are closing and economic slowdown is a reality, so you cannot be too sure about the future. Right now, it makes sense to secure yourself financially and salvage what you can.
While there isn’t a foolproof plan you can follow, there are some smart money moves that can keep you financially safe during the pandemic. Let us highlight the ones that really work.
Cut down on expenses
It isn’t much you can do to increase your income at this point in time, except for finding a job if you have lost yours. But what you can do is cut down your expenses to bring your personal finance back on track.
Start by having a close look at the monthly expenses and identifying the ones you can cut off straightaway. For example, you can close your gym membership because you wouldn’t want to get back even when they open up.
Reassess the list again and see where you can curtail them. You may ask for mortgage payment breaks or defer some bills if possible. Small cuts in groceries and conscious efforts to reduce power bills can take your budget management a long way during such hard times.
You will probably be able to save a decent amount every month and funnel it into your savings plan.
Build up your savings
Nothing is more important than creating a financial safety net right now, considering the uncertainties that the post-pandemic economy brings. Start building an emergency fund and be extra serious if you don’t have any savings in place.
You can open high-yield savings account because it gets you high returns and encourages you to save as much as possible. Squeezing money out of your current budget might seem tough but start small.
Set small savings targets every week and work on increasing them as income levels come to normal. Automating deposits into a savings account on a weekly or monthly basis is a good idea as it can effectively grow your money over time.
Making savings a lifestyle rather than only crisis-mitigation action is the best thing to do right now and continue with it in the future as well.
Create a financial plan
Apart from expenses and savings, all other aspects of your finances also deserve your attention. Look at the short-term and long-term factors to come up with a sound financial plan for today and the future.
Consult your tax attorney to learn about the current tax implications. If you have them due, pay them sooner rather than later to stay away from stress.
Considering your long-term money goals is also important as you plan for the changed circumstances. You may want to close all debts other than your mortgage, save up for a comfortable retirement, or put aside enough money to help your child’s college.
Reconsider the goals which you had before the pandemic and realign them if there is a need. You may need to set priorities now, considering that a recession is looming ahead.
Prepare for the worst
While you may have already taken the right steps to get your money on track, you have to be prepared for the worse. The “worse” here could be a pay cut, lost job, or someone in the family getting infected with the virus.
Applying for life insurance is a wise move although the risk is high only for the elderly and people with comorbidities. Still, getting a cover will give you peace of mind if you have dependents to support your income.
You would hope that the worst wouldn’t happen but this is one good excuse to get life insurance if you have been delaying it for long. Having a will is equally important, even though nothing may happen.
Also, have a good look at your health insurance plans and get a COVID cover to minimize your anxiety. If you don’t have a family cover, you must get one sooner rather than later.
Although you must handle personal finances smartly, it becomes all the more important during a crisis like this one. A good plan can get you through, even in the toughest situation. Savings can help you survive and sustain through the toughest times, so the entire financial strategy for the future should revolve around them.