The pandemic changed our focus to health. It not only focused on protecting our physical health but also highlighted the importance of financial well-being. Over 70% Americans reviewed their financial plans in the past year. One third made changes to that plan.
You are not the only one who feels the need to have your finances in order and be prepared for any future financial disasters.
Financial planning professionals have many tips that you can use to help your family and yourself succeed.
Experts’ opinion
Kristin Hansen CEO, Believe in a Budget
“Wow, I didn’t realize how much I spent on ______ until it was too late!” This is a common refrain that I hear a lot over the past year. No matter what your financial situation is, you should audit your expenses regularly to see if there are any areas where improvement can be made.
However, you must realize that there is a limit to how much you can cut your expenses. If you are barely making ends meet and have financial goals such as funding an emergency fund, it is time to find ways to increase your income. You can make money fast by using the skills and knowledge that you already have. It’s never too late for you to acquire monetizable skills and knowledge if you feel you don’t know enough. A side hustle or hobby that makes a little extra money can make a huge difference in the face financial disaster.
Laura Beaulieu VP Marketing, Billshark
“If you have never negotiated your bills, such as your internet or cable bill, there is a 90% chance you are overpaying. You have the right to negotiate with your service providers. They’d rather have you as a client than lose you to a rival.
Lindsay Bryan Podvin, LMSW-Financial Therapist, Mind Money Bala
You can save a lot of money by having an emergency savings account. You’re not waiting in line at Target to grab a few magazines and then putting them in your shopping cart. You’re not grabbing a cup of coffee on your way to work. You’re not meeting up with friends to have a drink or appetizers. These types of expenses are virtually gone, which has reduced extraneous spending and made it easier to save. Many people thought it was impossible to ‘give up’ certain expenses before the pandemic. But now they are realizing that it may not be as difficult as they imagined.
Kelan, Brittany Kline Founders, The Savvy couple
You need an emergency fund to ensure you are financially prepared in the future. It could be anywhere from $1,000 to three to six months of your monthly income. This will allow you to continue covering your monthly expenses and search for a job or supplemental income. This will provide some relief in a stressful situation.
Ask for a discount or negotiate the price of what you want to buy. Another way to save money is to ask for discounts. Although the worst thing someone could say is “no”, everyone wants to be able to accept different circumstances after the year.
Tawnya Reding and Sebastian Rodrigues. Money saved is money earned
We recommend that you save at least six months’ worth of expenses for emergency purposes, but it is a good idea to have some money saved up for the unexpected. Savings should be a priority, regardless of your income or liabilities. This will ensure that you are able to cover yourself for financial hardship.
Stephanie Nicolette, Resource Navigator, Family Reach
“Tips that we found useful:
- Look into what programs your utility or mortgage company might offer. Ask them about your situation to see if they have any suggestions.
- To see if an interest-free payment plan can be set up, contact billing departments or vendors.
- Ask your healthcare team about specific costs such as parking at the hospital and meal vouchers.
- Learn about the laws that may be of assistance to you, and then review policies that might apply to you. For example, student loans.
- Look for ways to cut costs and lower expenses. You could cancel subscriptions or memberships that you don’t use.
Kevin Panitch Founder, Just Start Investment
Limiting your transportation and housing expenses is the best way to save large amounts of money. These are the two largest expenditures of Americans’ money, and therefore the best place to save.
Kimberly Coleman and Mom In The City
It is important to track where your money is going. My husband and me went through our budget line-by-line and deleted any unnecessary items. The same process was done with my financial plan for business. Any expense that was not directly or indirectly leading towards profit was removed.
You might consider adding more streams of income.
Kelley Long, CPA/PFS, CFP(r), Financial Coach, Wealthtender
“The goal in any financial disaster is to make it through it as quickly as possible without causing long-term financial damage. If you lose your income, try to get yourself back in a position where you can have income again. This means having enough money to pay your bills and trying to avoid financial obligations that cannot be canceled or paused quickly in case of future hardship.
Talk to your creditors to discuss options for putting a halt to payments or granting a payment holiday before you commit future paychecks to past costs. It will be easier to recover from disaster and reduce your monthly expenses if you can do so quickly.
Kristen Dillard is Director of Product Management. Quicken/Simplifi
“Pay yourself. This is the old advice, and one of the most important tips: don’t spend more money than you make, and save, save and save. Always have an emergency fund, a rainy-day fund, and a retirement savings account. Do not wait until there is money left at the end to start saving for your rainy days. While ten percent is a good guideline, it’s not necessary. If you don’t have the funds, you should start saving as much as you can. Automating savings contributions makes it even easier. Virtually all financial institutions offer the option to have money automatically transferred from your checking account to savings or investment accounts.
We learn from COVID-19’s surprise
We need to be ready for anything if we are to learn one thing about the pandemic. Few people could have predicted the unexpected. We could not have foreseen the massive job losses, let alone the complete collapse of entire industries within a matter of hours. Even economist pessimists didn’t expect a major economic shut down to occur simultaneously with increased medical costs and school closures for many Americans.
This very dark cloud has a silver lining: many people are now more conscious of the what-ifs in life. We know that even though it seems unlikely, it is still wise to be prepared.
It is a smart idea to research information that can help you prepare for any disasters.
The most common financial hardships that occurred during the pandemic
A wide range of financial problems were created by the pandemic. Many families faced hardships unlike any other. These are some of the most difficult hurdles that families have faced in the past year.
- There is a loss of jobs. We saw 22 million job losses in 2020. It could take many years before unemployment levels return to pre-pandemic levels. Restaurants, hospitality, and live events are among the hardest hit industries. You may have felt a great deal of financial stress if you were among the many millions of Americans who lost their jobs during the disaster. The light is now shining through the tunnel. You have the chance to explore new industries and roles as the economy recovers. You may be able to find a new job by exploring your strengths and interests.
- Hours reduced. Some people lost their jobs completely, but many saw their hours decrease. It is difficult to find data on reduced hours. However, we can say that many people felt the pinch of having fewer hours and a decrease in their income. Consider a side-job if you noticed your hours being cut during the pandemic. Research shows that a side hustle can bring in up to $8,000 annually.
- The loss of childcare. Pandemic-related disruptions to childcare caused a staggering $1Billion in annual losses. Many parents feel the pressure of trying to figure out how to keep their children safe while also managing their jobs. In fact, 700,000.000 parents left their jobs to take care of their children. This problem should be eased by school reopenings.
- Businesses closing. Business owners and employees have also suffered over the past year. Nearly 100,000 businesses were permanently shut down by COVID-19 or its variants. Although business owners may not be thrilled at the idea of starting over to build their business again from scratch, remember that you’ve done it before. Learn from your mistakes this time.
- Inability to pay rent or mortgage. 15% of adult renters, an estimated 10.7 million adults, were not paying rent by March 2021. A household that is not current on its mortgage payments could have as many as 9.5 million people. Many areas had programs in place to temporarily halt rent or mortgage payments and prevent eviction after the pandemic. However, these programs are ending. Reach out to your creditor if you’re still unemployed, have a mortgage or renting and need to work out a payment plan.
Evidently, Americans were affected by almost every aspect of the recession. It is clear that it is crucial to plan financially for the unexpected.
How to be more prepared for the future
You want to make sure you have enough savings for the worst. We can’t predict the future nor how many difficulties we will face, as the pandemic demonstrated.
Proper financial planning is essential for your financial well-being . These are the three things you can do in order to be more prepared for the future, based on the advice of financial planners we spoke with and guidance from recognised organizations.
Make sure you have an emergency fund.
Nearly all of the financial planners we spoke to mentioned an emergency fund. This fund is basically a rainy day fund. It’s money that you save for unexpected situations like a global health crisis, which could shut down almost everything.
Experts recommend that you have at least three to six months’ worth of expenses in emergency savings. Although this may seem daunting, you can take small steps to build your emergency savings account. These tips will help you get started.
Reexamine your spending and budget
Interviewed family financial planning professionals, many of them said that they have helped clients control their budget by reviewing it carefully. Start by going through the statements of your bank and credit cards from the past few months. This will help you spot trends and save potential. Our subject matter experts shared that they have had clients who were shocked to discover they were still paying for subscriptions they thought they had cancelled.
You will be able to create a budget that works for you if you have a better understanding of your spending habits. There are many resources that you can use here.
Negotiate your recurring costs by evaluating them
Take a look at your recurring costs and decide what you really need. You might only need one streaming service, but you can probably afford any other.
You can save money by avoiding unnecessary small bills, but bigger savings are possible when you avoid larger costs. It might seem tempting to lease a luxury vehicle, but it will save you more money and allow you to invest or save on your insurance. The same applies to renting. Look at your needs and find rentals that will meet them.
Once you have decided which expenses are essential, assess each one. Some expenses, such as internet streaming, cable and streaming, might be negotiable. To avoid you switching providers, call your provider and ask if they can offer you a lower rate.
You can make strides to reduce other bills. For example, we have tips that will help you cut down on your utility bills.
Many Americans are now more aware of financial planning as a result of the past year. You can do one thing to ensure your family’s safety in the event of another disaster: build a solid emergency fund.
