You’ve heard for years about how important it is to manage your finances, for now and for the future. But with the world still in pandemic upheaval and the global financial picture in flux, it’s gone from important to essential.
Maybe you’ve been laid off or are working part-time from home. Perhaps you’ve been forced to take a second job to make ends meet, or you’ve lost traditional benefits as you’ve moved from employee status to contract work.
Even if you haven’t been affected directly, you’re bound to feel the impact of the shifting fiscal landscape sooner rather than later, and it pays to be prepared. Fortunately, many of the same strategies that have worked in the past will work for you now—plus, there are lots of great new ideas out there to help you adapt. Let’s take a look at a few of them.
Deal with emergencies first
Many companies have been furloughing or laying off workers—or terminating positions altogether. If you’re among those affected, you’ll need a way to meet your financial obligations. So, if you find yourself in economic crisis mode, it’s time to do some financial triage.
- Consider your most basic needs first. Start with keeping a roof over your head and a way to get from one place to another. Contact your landlord or mortgage holder, and your car loan company (assuming you have a car) and find out whether/how they’re willing to work with you.
- Don’t be afraid to ask lots of questions: How flexible are your creditors willing to be? What programs do they offer for people in your situation? Are they willing to reduce your overall debt, or to stretch out or temporarily suspend payments? Is your bank willing to waive ATM, overdraft, or late fees? (Tip: they probably will, but they won’t if you don’t ask.)
- Investigate possible avenues of relief available through government programs. Look into tax deferments, food assistance programs, Medicaid, unemployment insurance, and student loan relief. And don’t assume that you don’t qualify. The old “leave no stone unturned” adage applies here—a little bit of financial relief can equate to a whole lot of mental relief!
Address your employment situation
Maybe your job is secure for now, or perhaps your employer is thinking about downsizing. Either way, it doesn’t hurt to check in with human resources to find out where you stand. Ask whether your benefits are safe or if they’re likely to be amended (meaning, reduced), and learn how to access them. Know your status and your options regarding medical benefits, 401(k) accounts, 403(b) accounts, pension plans, and other retirement options.
Ask your supervisor about foreseeable changes to job duties, and pursue opportunities for cross-training to keep yourself versatile and relevant. It also doesn’t hurt to acquire new skills that make you marketable, either within your current company or within a different organization.
Additionally, keep an eye out for possible side hustles and contract work. Not only can these provide extra income in uncertain times, but you never know when one might evolve into a more desirable, full-time position, in case you want (or need) to shift gears and adopt a new employment strategy.
Think about your next move
Once you’ve dealt with potential emergencies and evaluated your work situation, start thinking about the bigger picture. You may want to set up a new budget, assess where you might be able to modify your spending (ahem, meaning cut back a bit), and take a generalized look at what you’ll need to do in order to pursue your long-term goals.
You’ll find plenty of online apps and advice available that can help you with everything from budgeting to building your credit, and from insurance to investing.
- Create a new budget that reflects your current economic reality and what you hope to achieve. Track your expenses and list your priorities, then cut expenditures on any items and services you don’t need or use.
- Develop a plan to address your debts, and then begin paying them off. In particular, beware of certain types of “minimum payment due” plans offered by many creditors— reading the “fine print” becomes important here. It’s a useful option if you’re in a serious (and temporary) financial pinch, but choosing this route usually creates a different sort of financial burden: draconian interest rates, far exceeding whatever the market interest rates might be at the moment.
- Once you’ve got your basic expenses and debts covered (or paid off), put away any money you can in savings to give yourself a cushion. Most financial advisors will suggest that you squirrel away at least six months’ worth of household expenses, but any amount of buffer can help in an unforeseen financial crisis.
Solidify your standing
Insure yourself against future crises, whether they involve your car, home, health, or life. Consider saving by bundling insurance and making sure different policies don’t overlap. Many reputable insurance companies offer attractive discounts when you insure multiple items (car, home, apartment, boat, household goods) under one “umbrella” policy.
Also, where feasible, consider creating a few extra financial safety nets. For instance, in my humble opinion, some “warranties” are simply point-of-sale upsell attempts—have you ever been offered a warranty contract for a $10 flashlight? I have! However, in the case of HVAC systems, PCs, or mobile phones (or any item you’ve come to depend upon), a warranty can protect you against unexpected expenses that can arise when appliances or home systems break down.
A final word: No matter what your income level, please make sure you have health care insurance! Even if you’re young. Even if you’re totally healthy. Even if you haven’t needed it (yet). Even if you live in a state where an ER is required to treat you if you show up. Health care insurance is essential for your peace of mind as well as your long-term financial health. Why? Because an out-of-pocket medical bill could cost you your savings, as well as your future wages, and, in extreme situations, could put you in a position where declaring bankruptcy is the only way out (yes, that can happen). My advice: just don’t go there. (Tip: Check out the Affordable Care Act. You might qualify.)
In uncertain times, it’s important to take a holistic view of your financial health. If you keep your immediate needs, your long-term solvency, and your future goals in mind, you’ll be able to stay grounded as you adapt to the shifting demands presented by our rapidly evolving world. Good luck and stay positive!
Do you have a topic you’d like for me to address? Just let me know! I love hearing from my readers. (By the way, this topic was a suggestion from a reader in Idaho. Thanks so much!)