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Navigating your finances during COVID-19

Last Modified: 6/09/2020

finances during COVID

This post was written by Heather Burgette, MBA, Employee Financial Educator, Parkview Employee Assistance Program.

Did you know that before COVID-19 arrived at our doorsteps …

  • 78% of Americans lived paycheck to paycheck
  • 70% had no savings
  • 80% said that money was their No. 1 stressor [1].

Needless to say, American families were already in a precarious situation before “nearly half of U.S. households lost some of their income since widespread coronavirus social distancing measures went into place in March"[2]. In a time when nothing feels normal, we’ve all been forced to look at how we manage our money. What if we came out of this season with new, healthy habits with our finances? It’s possible, by working through the following five steps.

Step 1

Your mind matters. We often disregard what we think and say about money because it’s intangible. However, our thoughts and words about money directly impact how we earn, spend and save money. To undo those unhealthy habits, we must first do the internal work to figure out where they started and why. Remember that, on average, it takes more than two months to create a new habit. So be patient with yourself but don’t give up. It’s worth the work.

Step 2

A budget isn’t just a good idea. It’s a crucial component of being in control of your finances.

The strengths of a budget are:

Better to know where you stand (instead of wondering)

Understand the whole picture

Determine what is best

Gives peace of mind

Extra fat to cut

Try it and try it again

It’s helpful to start every month laying out your income, expenses, debt payments and savings. Every dollar you earn should be assigned a job. In time, you will see that a budget is a tool of empowerment, not restriction. It’s a fantastic feeling knowing exactly where your hard-earned money is going every week.

There are a lot of free budget resources available, whether you want to do it on paper, on a spreadsheet or in an app. The point is – do it. You’ll never regret it.

Step 3

A healthy money habit is to pull your credit report every year. During this time, the scams are rampant. Annualcreditreport.com is offering free weekly credit reports from the three major reporting agencies through April 2021[3]. Be on the lookout for the following:

  • Identity errors
  • Incorrect reporting of account status
  • Data management errors
  • Balance errors

Everyone ages 14 and older can pull their credit report. At the very least, begin doing it when you turn 18 to protect yourself.

Step 4

Take care of yourself and your family first. Too often, all the other bills and debts are paid, and nothing is left for groceries. With many families facing an extreme loss of income, looking at the budget (see Step 2) helps families see what they have to spend and where it needs to be. Whatever income you have, first pay for the home, utilities, groceries, and gas. Cover those essentials.

It may be necessary for you to do an audit of where you’re spending your money. Is there an expense that isn’t truly essential right now? Could you hit pause on those items for three to six months? It’s easy to get in a spending rut. This is a great opportunity to assess what you could cut and do without temporarily.

Step 5

Consider building your emergency savings now. Did you know that “59% of Americans cannot cover a $1,000 emergency with their savings”[4]? Unfortunately, the majority of families have now experienced how essential that emergency savings can truly be. Do you still have your stimulus check? Are you earning extra income due to your work hours? Perhaps summer camps and vacations have been canceled and those funds are now freed up. You can take this opportunity to build up your savings quickly.

  1. Cover your essential expenses
  2. Pay minimums on any debts
  3. Tuck the rest away in your emergency savings account

If you have your emergency savings but want to pay off debts, then repeat the steps - cover those essentials and throw extra at your smallest debt. There are various strategies to employ here. I encourage you to find a debt payoff tool online that makes sense for your situation. Seeing the money you can save in interest alone can be very motivating to paying off debts early.

Lastly, I encourage you to start. Putting it off may be easier but it won’t benefit you in the long run. Take action on one of these steps and begin to make financial health a priority for you and your family. Ask for help if you need it. Seek counsel. Take a personal finance class. One choice at a time, one step at a time. You can do this.

 

Sources

  1. financialsocialwork.com 
  2. rollcall.com
  3. annualcreditreport.com
  4. cnbc.com

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