Four Financial Lessons from the Pandemic
As we head into the 10th month of the pandemic (and not to mention a new year), how are you holding up? Sometimes it helps to step back, reflect and take some time to make a plan to move forward. From managing unexpected interruptions in income to prioritizing monthly expenses, here are four financial lessons the pandemic has taught us:
You may need to put away more in your emergency fund. We realize building an emergency fund may seem like a tired talking point, but if you hear it all the time, it’s because it is such an essential component of financial wellness. Generally, it’s a good idea to save enough to cover three to six months of your living expenses, keeping that money in an account that’s easily accessible, like a savings account.
However, if you’ve experienced serious or prolonged disruptions to your income due to COVID, you may have realized the need to rethink your emergency savings goals. In other words, instead of thinking in terms of three to six months of savings, you could aim for, say, 12 months or whatever would make the most sense for your financial situation.
Pay off debt as quickly as possible. Take a few moments and add up all your recurring debt payments.
- How much do you spend on your mortgage, student loans, credit cards, car payments, or other loans?
- What percentage of your monthly income do those payments make up?
You will be much better off in the long run if you eliminate your debt as quickly as possible should another crisis strike. If you can’t do that right away, look into refinancing your mortgage, student loans or auto loan to a lower interest rate when rates are lower than the original rate you received.
Start a budget (and stick to it). Setting a household budget doesn’t have to be complicated. Many people find they reduce financial stress by creating and following a simple budget.
Make finances a family affair. Meeting financial goals as a family presents unique challenges. It’s not always easy to explain to your child the concept of saving, planning and passing up the toy they love at the store. But financial struggles are difficult on families, and nothing beats being prepared for the unexpected. Use this as a learning opportunity and make it a time to bring the family closer by working together (our financial education for kids and teens program may be able to help)!
We know the last several months have been difficult for everyone, but with careful planning and budgeting we can all make it through this uncertain time. And of course, we are here to help! Please reach out to us if you have any questions. Don’t forget, we also created a website that puts everything COVID-19 related in one place. Visit www.westaystrong.org for the latest updates from national and local sources, financial resources and more.