4 COVID-19 Financial Resolutions
4 COVID-19 Finance Resolutions
Lockdowns and economic uncertainty due to COVID-19 dominated much of the last year and a half and put many in tough financial situations. This has led many to closely examine their finances and spending habits. Layoffs, furloughs and an increase in unemployment has reminded us that the future can be uncertain and it’s important to make sure we are prepared by having our finances in order. While resolutions are typically reserved for the start of the New Year, now is a great time to make COVID-19 finance resolutions. Below are four resolutions that are sure to help provide stability for your finances.
Save for an Emergency Fund
Individuals and families with emergency funds have an extra layer of financial security in the event of a job loss, illness that prevents you from working or other unexpected financial crisis. Most experts recommend an emergency fund of at least 3-6 months of essential living expenses. Essential costs include: mortgage/rent, car payment, groceries, utilities, childcare and any other necessities. Calculate what essential expenses you have and make it a goal to ensure you have a buffer of that amount saved to get you through several months if needed. Saving that amount may seem overwhelming at first, but putting aside any amount of money each month will build up over time and help prevent you from taking on debt during a crisis.
Focus on Trimming Discretionary Spending
For some, the height of COVID-19 caused many to cut back on discretionary spending as closures of non-essential businesses prevented many casual purchases. For others, the ease of clicking on an item to make a purchase online and having it delivered to your door made spending money all too easy. However, with our economy moving forward, the urge to spend money via date nights, travel, shopping, etc. has returned for some. Part of being financially stable and secure is managing your discretionary spending and ensuring your spending habits are in order. Reckless spending can lead to increased debt, lack of savings and living a paycheck to paycheck lifestyle. In order to prevent this, it’s a good idea to track your monthly spending and take note of the impulse purchases that you can live without.
Improve Your Credit
During COVID-19, many people saw job losses, cuts in pay and economic insecurity that directly affected their credit reports and scores. With the world re-opening and a sense of normalcy returning, credit scores will need extra attention as individuals work to bounce back from the damage caused. Below are good practices to help rebuild your credit score:
Review your credit report at www.annualcreditreport.com to verify everything on your report is accurate. This should be done at least once a year.
Lower your revolving account balances. High balances on credit accounts can lead to a high credit usage rate and hurt your scores. Refine your budget and make an effort to lower your account balances.
Eliminate late payments. Late payments can stay on your credit report for a few years and damage your overall score. Set up auto pay and make sure you never have a late payment again.
Increase Retirement Savings
One financial area that held steady during the pandemic was contributions to employee-sponsored retirement accounts. According to Fidelity, one out of every three individuals increased his or her contributions to 401(k) plans at some point in 2020. If you’re someone who didn’t increase your contributions, why not? If your financial situation allows you the ability to bump up your contributions a percentage point or two a year, you should be doing so. Not every employer offers a match on contributions, but if yours does, not contributing enough to maximize your 401(k) employer match is essentially leaving money on the table.
Among many other things, the pandemic made us think more about what’s important to us and what we want to prioritize moving forward, especially as it relates to our finances. Coming out of a global pandemic is a good chance to reset some of the bad habits we fell into and strive to make better choices, ensuring we have a thriving financial future.
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