2020 started out to be a strong year economically – until the Coronavirus hit worldwide late in the first quarter. Then everything seemed to fall off the financial cliff. The stock market has crashed, unemployment has surged, and our national gross domestic product has plunged in a matter of weeks. Yes, it has been a forced recession due to the shelter in place of the states in our country, trying to stop the community spread of COVID-19. Whatever your thoughts may be of how our government has handled this fluid situation, the fact is: we are in for some hard times.
Financial Health Fundamentals
Let’s discuss some practical tips of how to handle your personal finances as we prepare for the potential economic turbulence. I believe that financial health is rooted in the fundamentals of savings, financial goals, budgeting, and debt management. In recent weeks, Congress passed, and the President signed into law, the CARES Act, allowing most tax payers to receive a $1200 stimulus check. The purpose of these funds is to assist people in paying their bills and provide “spending money” to help boost the economy. However, many financial coaches have said to put these funds into an emergency savings, preparing for the possible down-turn ahead. In fact, if you are still employed or you are receiving unemployment, now is the time to be saving as much as you can. Your needs must be met first, then the rest of your weekly pay should be put away in savings to build up at least three to six months of protection.
Re-evaluate Financial Plans
This is a good time to re-evaluate your financial plans, to determine your saving priorities. Helping meet those short term bills over the next six to twenty-four months is a priority, but mid- to long-term financial goals – saving for a car, vacation, kids’ college, or a home – may be slowed down for a while. Understanding that they are still important but taking care of immediate and essential needs – mortgage payments, rent, food, utilities, gas, insurance and loan payments – must be done first to get you and your family through these uncertain times.
Create a Budget
If you haven’t started one already, now is a great opportunity to create your budget. Understanding that the “B” word terrorizes many people, there are different apps – Mint, Everydollar, and Quicken – that provide easy step-by-step assistance to get your spending plan completed. You can even go to our fheducators.com website and download an Excel template from the library tab to utilize a quick budget tool. Regardless of what you use to set up your budget, it is a necessary function of the personal finance cycle, helping to keep you financially healthy.
Debt Management During a Crisis
Debt management is tough during times of crisis. For whatever reason, utilizing credit cards or other types of unsecured debt may become a need. At this point, we do not know how deep the current economic down turn will become. More people are saving their cash and using credit cards to pay their bills, making at least their minimum payments. Be careful with this approach because large credit balances can lead to lower credit scores and potential defaults on outstanding debt.
These Trying Times
These are definitely trying times for our county and world. At some point we will come out of this latest down-turn, beginning another economic expansion. Now is the time to evaluate your personal finances – saving what you can, reviewing your financials goals, setting up your budget, and minimizing your overall debt. By taking these simple steps, you will have a better chance of being more financially healthy as we navigate the changing environment around us.