This year, the effects of COVID-19 have been rough on all of us, with some having a harder time than others.
In addition to the fear of getting sick and becoming used to new safety protocols like social distancing, many people have lost work, seen a reduced schedule, or have experienced a cut in their wages. While there are government programs that aim to alleviate some of the stress, the issues remain.
However, with proper planning, all is not lost. By making a budget, cutting some costs, and setting financial goals, you can get through this pandemic with some money in your pockets. Let’s look at how to get through these tough times and tips to follow in case something like this ever happens again.
The key to a successful budget is to look at every aspect of your finances and come up with a plan for how much you can spend each month on what you need and want. Take time to sit down and calculate the money that you have coming in and then list all of your bills and how much you are paying to each. Use what you have left over and put it in savings or take a much needed night out at your favorite restaurant, as long as you have enough money for the next bill.
Whatever you do, remember that your bills are the top priority, and if you are not making enough income to cover those expenses, then you need to make adjustments. Look at that list of your recurring bills and see if there is anything that you can cut, at least for the time being. That could be canceling a fee for a TV streaming service or reducing how many times you go out for coffee or lunch each week.
Prioritizing your bills is key. Pay utilities so you can keep the lights on and the air conditioning going during the hotter summer months. Because of the reduction in jobs around the country, many companies and landlords are offering the option for delayed payments for several months if you are short on funds. If you simply cannot pay one of your bills, call the company and ask if they are currently offering such a program.
If coronavirus setbacks have prevented you from paying some bills, then there is a chance that your credit score could take a hit. Don’t let this get you down because as the situation in the country improves, you can take steps to remedy this all-important score. The first step is to look at your report and see where you are having issues and which cards or loans hold the most debt. Often, your bank can provide this report, or you can go to one of the credit reporting agencies like Experian or Transunion. Sometimes you can look at this report and see a damaging debt that you forgot about.
Paying your credit cards is one of the most efficient methods of improving your credit. You don’t have to pay them off in full, but by chipping away at the most troublesome debts, you can make the processes a bit more manageable. If you have some cards with smaller balances that you can pay off right away, then do that, so you have fewer pots to fill when you have limited funds.
Once you start making progress and getting credit cards paid off, you may feel the urge to cancel those cards, but strange as it may seem, doing so could do more harm than good. When you close an account, it will often increase your credit utilization ratio, which is the amount of revolving credit you're currently using, which is divided by the total amount of credit you have available. If you owe the same amount of money but with fewer cards, it could negatively impact your credit score. Keep the card and keep the balance low.
Also, avoid getting new cards during this time, as every new application you submit creates a hard inquiry that will typically reduce your score by 5-10 points.
Although many are dealing with financial struggles during the pandemic, the economy and stock markets are improving, so there are opportunities to work and add income to factor into your budget. If your hours or salary have been cut, this might be a good time to consider a part-time job to fill in the income gaps. If you have enough money to pay for the essentials, then this extra income can also be added into an emergency fund that you don’t touch unless there is a real emergency and you are in financial trouble. You could add this money into a high-interest savings account, so it grows over time.
Although full-time work may be hard to find, the gig economy is still going strong. This could allow you to be a driver for a restaurant or work with Uber or Lyft. If you are an expert on a particular subject, you could also look into educating others as an online tutor or a freelance writer.
Remember that we are still in the middle of the active pandemic, so it’s important to try your best to avoid getting sick so you can continue to work and make money. Although many states are taking precautions as they reopen, you also want to take your own steps to remain safe. Wear a mask when out in public, practice social distancing, and request to leave work when you are feeling sick so you can get better and not infect others.
Money is certainly tighter these days, but you don’t have to let it get you down. Follow the steps discussed above, try to keep calm, and you will get through these tough times.