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Caroline Biggs Caroline Biggs Caroline is a writer living in New York City. When she’s not covering art, interiors, and celebrity lifestyles, she’s usually buying sneakers, eating cupcakes, or hanging with her rescue bunnies, Daisy and Daffodil.
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The pandemic has hit a lot of people’s bank accounts hard. Between record high levels of unemployment and income and benefit cuts, more and more people are struggling to make up for financial losses. It’s likely that no two people are looking at the same exact set of circ*mstances, but the current crisis is a reminder that unexpected things can happen, and that it helps to be financially prepared when they do.
“The hardest thing we see people dealing with right now is uncertainty,” Victoria Sechrist, a certified financial trainer at The Financial Gym, tells Apartment Therapy. “There’s no definitive finish line for COVID-19, so a lot of people are concerned that they might not be able to generate as much income as they were making pre-pandemic.”
Whether you’re worried about paying your bills on time or searching for ways to get ahead financially, there are several steps you can take to protect yourself from future money problems. From building an emergency fund, to tracking your expenses and more, here are some goof-proof moves financial planners say anyone can make to avoid a personal financial crisis down the line.
Build or strengthen an emergency fund
If you don’t already have a designated savings account for emergencies, now’s the time to start one. “An emergency fund is a separate savings or bank account dedicated solely to covering the expenses of unforeseen situations,” Priya Malani, founder of Stash Wealth, tells Apartment Therapy. She adds that now is a great time to allocate money you might have spent traveling or going out to eat towards this account to help it grow more quickly—basically, throw as much of what was once your “fun” money into your emergency savings account.
Ideally, an emergency fund should cover at least three months’ worth of your fixed expenses—think food, rent, bills, and transportation—which may understandably take some time. According to Sechrist, an effective way of starting your emergency fund is by opening a high-yield savings account with a higher annual percentage yield than your standard savings account. Make sure it’s one you won’t be able to access as easily as you would your day-to-day banking—this can help curb the impulse to spend that money as it grows.
“If possible, schedule automatic withdrawals from your checking to your emergency fund after payday,” she adds. “Saving 10 percent to start is a good idea, but depending on where you are at financially, you may want to save more than that or less. The important part is to save what you can.”
Reduce your major expenses
If you want to slow the outflow of cash while making strides in your savings, Sechrist recommends looking for ways to reduce the costs of your fixed expenses. “For most people, their top three expenses are rent/mortgage, food, and transportation,” she explains. “If you can work toward limiting your expenses in these categories, you’ll see even more savings.”
There are several steps to save money on your monthly bills, Sechrist says. “Negotiate your rent when it comes up for renewal, and if necessary, move to a cheaper place,” she says, though be sure to check that the cost of moving won’t undo the savings you’ll make with reduced rent. “Or, get a less expensive car insurance policy by calling and updating your miles driven and asking about discounts.”
Sechrist also recommends using an app like Trim to reduce some of your monthly bills. The app works by analyzing transactions linked to your checking and bank accounts, to see which ones are recurring and how much you’re spending on them. “Trim can negotiate lower rates with cable service, internet, and phone companies,” she explains. “It will also help you cut out any unused subscriptions you might be paying for.”
Take a closer look at your spending habits
Instead of focusing on budgeting, which can be especially daunting if you’re struggling financially, Malani suggests eliminating as much nonessential spending as possible to save money. “Reevaluate your last weeks’ worth of expenses and look for purchases where the satisfaction you experienced was unequal to its cost,” she explains. “Being more discriminating with nonessential expenses is a great way to free up cash without feeling like you’re micromanaging where every dollar goes.”
To keep better track of your spending habits, Sechrist recommends using an app like Track-It to manually log all of your transactions. “Having to do this yourself, versus relying on an app like Mint or Personal Capital to pull all of your transactions for you, will very quickly make you see where your money goes,” she says. “Then, you can answer important questions such as: Do I like where my money’s going? And, am I spending my money in line with my values?”
Prioritize cash over debt
In times of financial uncertainty, Davon Barrett, an associate advisor at Francis Financial prioritizing having cash readily available over paying down debt. “Your number one goal right now should be to preserve your cash on hand for as long as possible,” he explains. “Credit card companies may lengthen their payment deadlines, lower the APR on cards, or waive late fees, so contact your service provider to negotiate repayment options before paying off debt.”
This is especially important if you haven’t already established a solid emergency fund. “Don’t aggressively pay down debt if you don’t have an emergency fund,” Sechrist warns. “When you’re paying down credit cards or student loans or any other type of debt, it can seem really appealing to throw all of your extra money towards it in order to get rid of it, but right now those extra dollars are better suited for savings.”
Know which federal assistance services are available to you
Whether you are currently unemployed or simply trying to build up your savings account, Barrett says researching the government services available to you could save you lots of moolah every month. “For example, the Coronavirus Aid, Relief, and Economic Security (CARES) Act created two important mortgage-related protections,” he explains. “For most federally or GSE-backed loans, your lender or loan servicer may not foreclose on you until at least December 31, 2020, and if you experience financial hardship due to the coronavirus pandemic, you have a right to request and obtain a forbearance for up to 180 days.”
Additionally, Barrett says it’s crucial to stay in the loop about student loan relief programs, to make sure you are receiving all the financial assistance you qualify for. “Federal student loan payments have been automatically stopped from March 13th to December 31, 2020,” he explains. “These dates may be extended, so take care to keep on top of announcements so you don’t make unnecessary payments in the future.”
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