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The current pandemic has quickly become a health crisis. But, it’s also become a financial one, too. As COVID-19 continues to take its toll on the economy, you may notice changes in the way you save, spend, and invest your money.
Looming concerns around job security, changes in income, and the overall economic climate may leave you wondering how to effectively manage and protect your finances. Though there is no one-size-fits-all solution, here are five money management tips to consider:
Whether you’re relying on your credit card during these uncertain times, are looking to apply for loans in the near future, or just want to stay on top of your finances, it’s important to monitor your credit score. By checking your score frequently, you’ll be able to identify and address any mistakes promptly and ensure your score doesn’t drop drastically. In general, the higher your score, the better your chances of being approved for loans and credit accounts, so you’ll want to keep a watchful eye on your credit report.
Many lenders have adjusted their policies to accommodate those who have experienced the financial impacts of COVID-19. However, you should take extra precautions to minimize its impact on your standing. If you’re unable to meet monthly payments, reach out to your lender and see if they offer any relief programs. In addition, try to pay down debt whenever possible to avoid late fees and missed payments that could negatively impact your score. Even one late payment can lower your credit score, which is why you’ll want to keep all accounts current.
The current economic climate has triggered a refinancing boom as homeowners look to take advantage of low mortgage rates. Mortgage refinancing involves replacing your current mortgage with one with lower interest rates and different terms. This may be especially beneficial if you’re not planning to move in the near future.
You can also leverage the equity you’ve built up in your home through a home equity loan (HEL). Once approved, you’ll receive a lump sum payment that you can use however you’d like. For instance, you could use the money to consolidate debt or to cover living expenses in the short-term. You can then pay back the loan in monthly installments over a set period of time. Just make sure you can afford the payments before taking out an HEL to avoid putting yourself in a worse financial position.
Prioritizing your expenses may require you to evaluate your spending and create a budget. When establishing a budget, start by listing out essentials, such as housing, utilities, and groceries. Then factor in any outstanding debts like student loans, car payments, and credit card accounts. Lastly, think about non-essentials like going out to eat and buying clothes that can be cut from your budget if needed. By prioritizing your expenses in this order, you’ll ensure you spend your money strategically,
Once you’ve covered essential needs, focus on paying off high-interest debt. Paying these accounts down first will prevent you from accruing interest and can save you money in the long-run. Whenever possible, try to pay down debt to avoid late fees and missed payments to stay in your lenders’ good graces.
An emergency fund provides financial security during times of need. In times of uncertainty, such as a pandemic, you may need to tap into additional funds to help keep you afloat in the short term. Whether you lose your job, experience a pay cut, or fall ill unexpectedly, it’s recommended that you have anywhere between three and six months’ worth of expenses stowed in reserves.
If you have yet to start an emergency fund, or you experience a greater loss of income than you expected, you can still find ways to preserve your money. Every dollar you save reduces the likelihood of missed payments. If you have any money left over from your tax refund or stimulus check, consider putting it into savings. In addition, look for opportunities to cut monthly expenses or major purchases that you can delay to further stretch the funds you have.
As the virus continues to raise concerns, phone scammers have seized the opportunity to prey on COVID-related fears. The Federal Trade Commission has issued warnings of more sophisticated scams around stimulus checks, illegitimate at-home testing kits, and fake charitable organizations. Falling victim to one of these could put your finances at risk, which is why you must be vigilant during these times.
To best safeguard your money and personal information, don’t donate to organizations until you have conducted sufficient research and verified their legitimacy, refrain from providing your credit card or personal information over the phone, and keep up on the latest threats reported by the FTC. If you feel like you have been a victim of a scam, contact law enforcement and report the incident to the Federal Communications Commission promptly.
These turbulent times can have financial impacts. But, with careful spending and preplanning, you can maintain financial stability now and in the future.Tags: coronavirus, emergency fund