2020 changed the way we all think about money. America faced dramatic job losses, business closures and remote work. Shopping online and home delivery services became much more common. The financial landscape changed altogether.
2021 is moving steadily with a glimpse of hope as vaccination proceeds. People tentatively look forward to a life after the pandemic, but with some trepidation.
Although the virus caused drastic changes in people’s finances, there is an opportunity for a plan of action to transition into normalcy.
Here is what financial advisors are proposing going forward.
4. Create a Brand New Budget
Lauren Maxwell, an assistant vice president at Trustco Bank, advises creating a new budget for the household. The first step she said is to identify your monthly expenses. Thousands of households had fluctuating incomes due to layoffs or government stimulus payments.
The next step to creating a new budget is to keep accounts for all essential expenses. This includes mortgages, rent payments, utility payments, groceries, debt payments, transportation, child care, etc.
Many people find sticking to a budget challenging. There are budgeting apps available, however, like Mint and YouNeedaBudget. Utilize whatever means you can to help you budget. You will find that these apps will become valuable in the coming months as your budget becomes more complex.
3. Check for Overlooked Expenses
As you formulate your budget, there are some expenses that people often overlook. Food inflation is one such expense that keeps elevating since the pandemic. Another is grocery bills that experts expect to remain high in the foreseeable future.
Federal student loans deferred due to COVID-19 still have to be paid. It’s time to place that back in the budget and start paying monthly, so interest will not accumulate as your principal goes down.
Another area to consider is child care. Due to the shutdown of child care facilities, you might have had that extra cash flow. Looking forward, however, the operating cost might increase and capacity decrease, causing some child care programs to remain closed.
This may lessen spots for families and drive up prices. Maxwell advises that parents look at options from now and prepare for what is ahead.
Also, you might have adjusted your retirement savings or eliminated them to have more cash flow during the pandemic. Now would be a good time to revisit and include it in your post-pandemic budget.
2. Look for New Saving Opportunities
Many people already cut back on unnecessary spending since the pandemic broke. If you have not done so, it’s a good time to start, especially if you have depleted your resources and have drawn from your emergency savings.
Take a look at your entertainment budget. This is an area where many Americans can save money, even after the pandemic. TV entertainment has taken a new turn which may continue post-pandemic also. It’s a good time to call and ask for a discount and stick to those who are willing to work with you and your budget.
If you are doing remote work due to the pandemic, negotiate to have this permanent to save on transportation costs. Always look to see where you can cut expenses like a monthly subscription you don’t necessarily need.
It’s time to build an emergency fund, whether you’re just starting or restarting. Take advantage of any emergency savings plan your bank is offering. Also, take advantage of your employer’s compulsory savings plan. Many times employers have programs where they match an employee contribution to a 401(k) fund. If you don’t take it, you’re leaving give-away money on the table.
1. Manage Your Debt
The final point in budgeting is to pay attention to your debt and take steps to eliminate them. The pandemic has put a lot of people in debt over their heads.
Bank overdrafts and credit card overruns are some of the financial woes facing many people. It’s time to formulate a plan to tackle your debt.
First, you must set some goals. Start paying minimal amounts on your highest debt interest, like your credit cards. Negotiate for lowered interest rate if possible. Now is the time to ask for the help you need.
Maxwell suggests that it’s time to negotiate for a refinance of your mortgage. Interest rates are at a historic low, given the stress on the economy for over a year.
The expectation from the Federal Reserves is that this will go on for a while, so homeowners should jump at the opportunity to refinance for lower and more manageable rates.
The household could see more disposable income allocated to other areas of need in the budget, like paying debt or going towards emergency savings.
It’s your time to save!
As Americans look ahead in 2021 and beyond, the reality of everyone is unique. There is a mixture of hope with a tinge of fear of the unknown. Still, there is a ripe opportunity to rethink financial strategies of survival to get through the rest of the pandemic and after.
Having a determined mindset to manage your budget will help you get on track for a financially secure future. May this be the beginning of your economic stability and the recapture of your elusive peace of mind.