Financial Planning for After COVID-19
Many Americans were not prepared to suddenly be stuck at home and out of work for months on end. Unfortunately, COVID-19 took our world by surprise, and many of us never even thought that a global health pandemic would ever occur in our lifetime. Now, as the world begins to return to normal, it is important to remember the key lessons that the Coronavirus taught us about our finances, in order to remain prepared in the event something like this happens again.
Track Your Spending Habits
An initial step in the process of financial planning is to analyze and track your spending habits, especially post-pandemic! Due to the nature of how fast this pandemic shut down our normal world as we know, it also could have created some hiccups along the way. Many Americans make purchases without actually realizing how much they are spending each month on items that are not entirely necessary to support life.
Luckily, figuring out what you need to live comfortably and what are luxury items is fairly easy. Start by looking at your credit card statements and receipts to split your spending habits into two categories, “essential” and “non-essential” purchases. If you don’t save your receipts it’s okay because there are plenty of mobile applications and online tools that allow you to track your budget digitally.
Determine a Budgeting Strategy
The next step to after COVID-19 financial planning is to create a budget. Budgeting is highly important in order to maintain your financial wellbeing, and with the proper tools, creating a budget is really easy. If you’ve already established what money you need to spend each month in order to have food on the table and a roof over your head, you’re beginning your budgeting process correctly. The next stage is to determine your income for each month. After you locate this information, simply subtract your total expenses from it. The money left over can be divided into 2 parts, one to be used as “fun money” that can be spent on non-essential items, and the other to be placed into a savings account or emergency fund for future expenses.
Saving money now will affect how much money you’ll have accumulated into your creating an emergency fund later in life. Unfortunately, not many people have emergency funds that they can use in a time of crisis, like the COVID-19 pandemic. Essentially, this has taught us that having that safety net has never been more important.
Keep Debt to a Minimum
Another main takeaway from COVID-19 is the amount of debt that individuals carry around. Whether it be a mortgage, credit cards or student loans, it is important to create a plan to pay off any and all debts in a timely manner. Then, keep them at a minimum. In a time of a pandemic, or when you’re simply between jobs, it is best to limit the number of people you owe money too. If you have more than one loan, through more than one lender, there are a few important things to keep in mind when creating your debt repayment strategy.
Begin by looking at your balance. The loan with the smallest balance is the one that you should tackle first, repaying loans from the smallest balance to the largest is formally known as the snowball method. Gaining the momentum of those small wins will help you stay focused on repaying all your debt in a timely manner. The next thing to keep in mind is the percent of interest that is associated with each loan. For loans with big balances and high-interest rates, look into the benefits of refinancing in order to pay less in the long run.
Switch to Digital
The Coronavirus changed the way we performed daily business in the blink of an eye. With rules of social distancing and mask-wearing, technology is now more important than ever. Many stores and financial institutions had to quickly come up with a solution that allowed their customers to have access to their products. As well as their services without actually going to a brick and mortar location.
As the world changes into a reality of using the internet for day to day functions, it is important to get your financials online too. Creating an online bank account allows you to transfer money between accounts and know your balance from anywhere in real-time. With instant access to your finances from a smartphone, automatically saving money and paying bills is convenient and simple.
COVID-19 changed our world as we know it and created a new normal of socially, mentally and technologically. Keeping your finances safe and planning for the unknowns are two of the biggest lessons learned from this global health pandemic.