The rapid spread of COVID-19 has dramatically changed how most people live their day-to-day lives. Almost everyone has been driven inside their homes, legally discouraged from leaving for any reason, which means that you are almost certainly working from home — that is, if your work hasn’t been put on indefinite hold as the pandemic passes through.
In either case, you might be worrying about how you are going to manage your money as this crisis drags on.
Staying inside and away from social spaces like stores, restaurants, entertainment venues and the like makes for an entirely different spending and saving strategy than normal life requires. You should take your state’s social distancing or stay-at-home order as an opportunity to shift your budgeting efforts and strengthen your personal finance overall.
Take Advantage of Money Management Tools
You might find solace in the fact that you aren’t the only one fearful about your financial future. In fact, many are now looking to take stock of their assets and expenditures to better understand how they can manage their money better in these uncertain times.
Fortunately, you can use some of the best money management software out there to gain a full picture of your personal financial health — and you might even be able to take advantage of discounts on these tools, as companies offer deals that help the masses of people fearful or struggling. Money management tools connect directly to your accounts to track your spending, and they can automatically pay bills or move money to and from savings accounts to ease your burden and your mind.
Don’t Overspend on Supplies
If your income is limited during the pandemic, the last thing you want to do is add an unnecessary expense — especially one that harms others. While you should have enough food and cleaning supplies for a couple weeks, to limit your need to venture into public spaces and risk spreading disease, there is no need to waste your money hoarding goods. In fact, buying more than you need of things like toilet paper, hand sanitizer, milk and baby formula deprives others in your community of the same essentials, potentially putting them at risk of disease or worse.
Spending extra on supplies isn’t wise, but you shouldn’t try to spend like everything is normal, either. First, you shouldn’t be venturing out of your home to spend time in social spaces like bars, restaurants and theaters; secondly, you should try to reserve the money you have for essential expenses over the long term, especially if your employment is tenuous or your income is fixed. It is a good idea to modify your budget, perhaps focusing more on adding to emergency or retirement funds if you can.
Focus on Your Minimum Payments
While other countries have directed lenders to give borrowers a break as long as COVID-19 rages, the United States has made no such move. Some landlords are postponing or eliminating rent payments for the duration, but for the most part, your debts very much remain in effect. Even if your income is unchanged, you should consider lowering your monthly payments to the minimum, which will give you more financial flexibility should you need it in the future.
However, if you are experiencing significant financial difficulty, you might consider filing a hardship claim with one or more of your lenders. Hardship programs allow borrowers a temporary reprieve from regular payments; some reduce the interest while others delay payments. You must file a hardship claim before your account goes into collections, and the sooner you communicate with your lender about your situation, the sooner you can enjoy a reprieve.
Use Your Emergency Fund (if Necessary)
Every financial guru in existence advocates for building an emergency fund. Since you started making money, you should have been adding to an account that you could rely upon during hard times. The best advice is to save up between three- and six-months’ worth of expenses, so you have enough money to maintain your lifestyle should something unexpected occur — something unexpected like a pandemic.
You shouldn’t feel bad about dipping into your emergency savings right now, especially if you have been hit hard by business closures and the impending recession. However, you should try to limit your reliance on your emergency fund; it should only be used for essentials to keep the fund as large as possible for as long as possible. You definitely don’t want to waste your fund on frivolous expenditures.
COVID-19 isn’t the end of the world — but it is a significant change to how you live your life. Roughly 50 percent of Americans have been financially affected by the pandemic and thus forced to modify how they spend and save. Though these economic changes are undoubtedly temporary, you should take steps to protect your finances from lasting harm.