In the midst of a global pandemic, we expect to be concerned about our health, but perhaps not necessarily about our finances, too. As businesses have closed and the economy has taken a hit, many people are taking another look at where they can tighten their budgets.
The good news is that even when times are tough, there are some helpful steps to follow to make sure you’re keeping your finances as healthy as possible, whether that’s keeping a good credit score or making sure the most important bills are paid for first.
We think we know where our money goes each month but mapping out each expense is helpful for figuring out what’s important and what can be cut. You might have forgotten about that annual magazine subscription you’ve had for five years or didn’t realize you and your family members could save money by being on the same phone or music streaming plan.
The Consumer Financial Protection Bureau’s budgeting worksheet can help you track your income and your monthly payments by categories like childcare, phone, and internet. This can help prioritize spending for the short term.
There are a great number of free apps online that can also help monitor your budget, such as Pocketguard, which shows how much money you have on hand after your money goes toward bills or saving goals, or Honeydue, a finance app built for couples to help track all of your accounts together, from banking to investing.
When times are tight, worrying about a credit score may seem like the last thing on your mind. But keeping your credit score up is important for long term financial health, especially when you’re in need of big items like a house or a car.
Making payments on time, even if they’re the minimum payment, is the most important factor in keeping credit scores up, according to NerdWallet.
And while you may be tempted to cut up your credit cards, remember these factors play a role in your score, according to Experian: payment history, the age of your oldest credit line (the older the better!), not exceeding 30 percent of your credit limit, a mix of different types of credit, and new credit (too many new types of credit can hurt you).
When you’re working with a limited income, you may wonder whether putting money in savings or paying off debt takes top priority. Experts say it’s a good idea to take on both, according to The Balance.
Make sure to have at least some money in savings for emergency funds, which can be helpful for surprise costs such as a sudden medical bill or a critical appliance like a refrigerator that needs replacing.
At the same time, put money toward paying off debts, whether that’s your highest loan or some smaller ones. Some argue it’s best to pay off the highest interest debt first so the total cash owed doesn’t keep accruing. But others argue in favor of paying off the smallest debts first, because this has what’s called a “snowball effect,” a term popularized by Dave Ramsey, which helps get rid of your catalogue of debt faster, and can be a powerful motivator.
The COVID-19 pandemic is an economically precarious time for a lot of people. The Consumer Financial Protection Bureau has a list of resources for what to do if you can’t pay certain bills or loans.
Contact a Sea Mountain Personal Insurance Specialist to learn how we can help support you in your insurance needs.