COVID-19 is shaking up the economy. Workers across the country feel like their employment opportunitiesare hanging on by threads. Businesses are shuttering their doors. Industries that were booming a year beforehand are faltering.
On a smaller scale, people are feeling the financial consequences of the COVID-19 crisis. Their income is unstable. Their savings are getting low. Their long-term goals are getting pushed further and further away.
If you feel like you’ve lost your sense of financial security during the crisis, you’re not alone.
The Loss of Financial Security
People across the country have watched their financial security disappear in the span of a year. By September 2020, 14% of Americansstated that they emptied their emergency savings because of the crisis. These savings weren’t used for unplanned emergencies— they were used for groceries and utility bills. Without a stable income available, these citizens turned to their nearest safety nets for help.
Government relief for these financial stressors is often far too little and far too late. In March 2020, the government approved the Coronavirus Aid, Relief and Economic Security Act and sent $1200 checks to citizens to help them through the crisis. Months later, the federal government approved a second round of stimulus checks for $600 per citizen. For the average person, $600 could not cover a single month of their rent/mortgage payments.
What Can You Do to Gain Financial Stability?
If you want to regain a sense of financial stability in the midst of this crisis, these are some steps that you can take:
Start an Emergency Fund
One of the best signs of financial stability is that you can handle a bump in the road. An emergency cost won’t push you to max out your credit card or ruin your monthly budget. You can resolve the problem and move on without much consequence. How can you do this?
The first thing that you should do is start an emergency fund to cover small, urgent expenses. It could be important car repairs. It could be a crucial plumbing inspection. It qualifies for any problem you didn’t expect to pay for and that you can’t ignore for very long. You have to manage it as soon as possible.
Your emergency fund doesn’t have to be large. Having less than a thousand dollars set aside in a savings account can be extremely useful in these circumstances. With every paycheck, try to put some savings into the fund and give yourself a convenient safety net to fall back on.
Make Other Backup Plans
An emergency fund might not be enough. You might have to consider other back-up plans to regain financial stability.
If you don’t have enough savings in your emergency fund to cover an unexpected cost, you can turn to alternatives like personal line of credit loans to help you recover. You can submit a request for a personal line of credit limit. If you’re approved, you can request a withdrawal and have the funds deposited into your bank account. Those funds could be available as soon as the next business day.
One of the biggest benefits of a personal line of credit is that it’s a form of revolving credit. As long as you replenish the balance, you can continue using the credit that you have available. You can use it as a safety net on more than one occasion.
Another potential back-up plan is asking your close friends or relatives for help. They could give you a personal loan to take care of the emergency and allow you to repay them in the future. Make a mental note of what close friends or relatives would be open to lending you money and who would also have the financial stability to take on that risk.
However, your loved ones might be going through a similar struggle. They might not be ready to empty their wallets at a moment’s notice.
Boost Your Savings
There are small ways that you can boost your savings in a hurry. You could scour through your bank accounts to find any unnecessary spending, like forgotten subscriptions and memberships. You could trim monthly costs and adjust your budget to maximize savings. You could sell unwanted items online, like clothing, furniture, books and collectibles. Bringing in some extra funds could be very useful.
Focus on the Present
It’s always wise to prepare for the future, but these unprecedented times call for a change in perspective. If you’re worried about your financial security in the present, you shouldn’t be focusing so much on your long-term financial goals. There’s no need to worry about building up your retirement savings or your children’s college fund—unless you’re going to need them in the next year or so.
Focus on stabilizing your personal finances now. Follow a budget and track your spending. Plan ahead for essential payments, like rent/mortgage, auto loans and utilities. Bulk up your emergency fund. Pay down balances on credit accounts. If you have enough savings to invest elsewhere, tackle vulnerabilities that will affect you in the immediate present, like missing medical coverage or crucial home repairs.
Your best strategy is to put your long-term goals on hold. You should focus on the present for now.
COVID-19 has thrown everything up into the air. All you want to do is regain some sense of control. While you can’t control the rising number of cases or the instability of the economy, you can at least try to gain some control over your finances.
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