The financial challenges of the 2020 coronavirus pandemic came out of nowhere for many people. It left a large part of the population unsure of their financial future. While you might not be someone who lost a job, suffered a demotion or pay cut in anyway, you still might be unsure of your financial future.
Even households whose income has remained the same might be feeling some strain from added expenses. Working from home and having children in remote learning means larger utility bills, more groceries, new home office furniture and perhaps some gadgets to make the arrangement a little easier.
During these uncertain times, you should re-evaluate your expenses to look for opportunities to save and spend money more strategically. Even when times are good or just OK, you have an opportunity to consider your long-term wealth and wellbeing.
Evaluate which expenses are necessary
Spend some time taking a hard look at your expenses to see what’s truly necessary. For example, how many streaming services do you really need. Or, can you exclusively use streaming services and free yourself of a cable bill.
Look at ways to decrease recurring monthly expenses on luxury items, such as subscription boxes or services you rarely use. Get your whole household involved to look for ways to reduce the monthly budget.
One way to reduce grocery bills is to be disciplined in making a list each week. Those quick trips to the store cost your family gas money and often inflate your overall grocery budget. That’s because most people buy more than just that one item they ran to the store for.
Shrinking your monthly expenses can provide some padding in case your monthly income reduces. No financial analysts are quite sure when the economy will rebound from the pandemic or how quickly unemployment will reduce once the economy improves.
Consider your financial future
When evaluating expenses, do your best to avoid cutting 401K contributions or limiting monthly savings. Before cutting those financial investments, look to other areas where you might lower your monthly bills first.
It’s difficult to get back on track for saving for your future once you’ve missed several months of contributions or accruing interest on that money. And if you’ve found yourself in trying financial times, try to avoid taking a loan from your 401K until it’s absolutely necessary.
Instead of dipping into these funds, consider making up lost income in these ways:
- Purge your home and sell stuff you don’t use.
- Start a side hustle. Many warehouses and delivery services are hiring right now as their demands have increased during the pandemic.
- Be flexible and open to new job opportunities, even if they aren’t your dream job.
Build an emergency fund
If you didn't suffer financial hardships due to the pandemic, use this as a wake-up call to get your finances in order. You should have at least three months of expenses in savings as an emergency fund.
Many people who were doing well financially before the pandemic were questioning why they needed an emergency fund. This year underscored the importance of an emergency fund because no one really saw these financial hardships coming. A recent study found that 28 percent of Americans have no emergency fund whatsoever.
Ideally, you should be putting money into your savings account each month, even if you already have three months of an emergency fund. At the end of each year, you can evaluate the status of your saving account to see if you should move some of that money to an investment account to help it grow more rapidly. But never reduce that below your emergency fund needs.
What spending is good spending?
At this point, we’ve talked a lot about how to save during uncertain times. Now let’s talk about spending that’s good spending.
You’re likely under more stress than ever right now. Doing nice things for you and your family can be very helpful during these stressful times. Maybe it’s takeout once a week, a monthly new board game to help you all connect or saving for an annual family vacation.
Just make sure that your splurges are planned and accounted for to ensure they fit in with your budget without decreasing the amount you put into savings each month. And make it an annual practice that you sit down and look at your recurring expenses to look for opportunities to scale them back so that splurges never get out of hand.
When evaluating where to spend money, also consider supporting your local community. Ways to do this include:
- Shop local. Go to your local hardware store instead of the larger chain stores, even if you have to pay a little more.
- Dine at local restaurants. Restaurants have been hit hard by the pandemic. As you evaluate where to get takeout or dine out, consider your local restaurants.
- Donate to charities that help individuals who have fallen on hard times. When times are good for you, remember those who are less fortunate and do what you can to help.
Financial wellness advice and services
Sunset Finance provides personal loans to help people who struggled during the pandemic get back on firm financial footing. We also offer a wealth of budgeting tips and financial wellness advice. If you’re looking for a partner in tax preparation, we do that too.
Contact us for more tips and advice or information on a personal loan to help you cover your expenses during the pandemic.