It’s no question—the COVID-19 pandemic has had a massive financial impact on many people. Thousands of workers lost their jobs. Many businesses had to shut their doors permanently. But as the local and world economy tries to bounce back, it’s time to get your personal finances back on track, too.
Everyone’s financial situation is unique. The same rings true for the path to financial security. The saying goes, “We’re in the same storm, but we’re not all in the same boat.” Still, many basic financial principles can be valuable to anyone as they try to bounce back from financial setbacks brought by the pandemic.
Start with clearing your credit card debts
Maybe, you now have a more stable flow of income. You’ve probably managed to survive the hardest year by being frugal, turning to your savings, and getting a bit of help from credit cards. While it’s tempting to treat yourself as soon as you get more breathing room in your finances, it’s crucial to settle your credit card debts first. Keep in mind that any debts with high interest rates can blow out of proportion quickly.
By clearing your credit card debts, you can gain that much-needed peace of mind. Plus, it’s easier to make better financial and other life decisions when you don’t have huge debts hanging over your head.
Rebuild your emergency fund
Have you taken out hundreds or thousands of dollars from your emergency fund in the past year? That’s OK. Like any person on the planet, you had a crisis. That’s what it’s for, after all. But now that you have a more stable cash flow, it’s time to rebuild your emergency fund. After clearing the debts you’ve accumulated in the past year, start allotting money for your emergency fund each month. You’ll never know when the next crisis will hit. But like with any emergency, you can do your best to prepare for it.
A rule of thumb is that people should have three to six months of living expenses in an emergency fund. But having to survive through a pandemic that has left millions unemployed, rethink your saving goals. You may need to keep more than what you used to save. That way, you’ll be more well-equipped the next time you lose a job or face an unexpected financial obstacle.
Re-evaluate how you spend money
One thing the pandemic has taught many of us is recognizing what’s essential and what is not. Now that you’re no longer struggling, it’s time to re-evaluate how you spend money. Did you have to stop lots of subscriptions or other monthly expenses that turned out to be unessential? Did you delay dealing with home repair issues and end up spending thousands of dollars on emergency services amid a crisis?
While it’s fun to subscribe to all video streaming platforms, see if you really need all of these tools. Sure, you can call a professional emergency electrician anytime. But maybe, you can save more on keeping your electrical system and other parts of your home well-maintained. Updating your budget based on what you’ve learned about your spending in the past year is a good way to bounce back financially.
Plus, rework your today’s budget for the new normal. See if the cost of certain goods and services has changed due to the pandemic. Some businesses needed to adjust their price offerings to accommodate home delivery, one-day on-site service, and other services that fit the requirements of the new normal.
Recalibrate your financial goals
The past year might have been a huge financial setback for you. This might have pushed off some of your financial milestones, such as buying a new car or getting that dream house. That’s OK. You need to take care of your financial fundamentals first. But this doesn’t mean that you stop reaching for your goals.
As you clear your debts and re-evaluate your budget, recalibrate your financial goals, too. Your new objectives will serve as light posts that will guide you as you adjust your finances for the new normal.
Diversify your income
At this point, you probably know that you need to work harder to reach your new financial milestones. But you also have to be smarter about your income. Diversify it. When you rely only on one job, you risk losing the capability to meet your financial obligations or stay on track with your financial goals.
Are you a good graphic designer? Consider getting freelance gigs on web or layout design. Once you finally get disposable money, try investing in stocks, mutual funds, or any other investment vehicles. The idea here is not to put all your eggs in one basket. If you lost your job last year, it’s high time to upskill or diversify your income. That way, you won’t be left struggling when the next economic crisis hits.
Even as the economy recovers, getting your personal finances back on track won’t happen overnight. Adjust your expectations accordingly. What worked in 2019 may no longer work now or in 2022. But what matters more is that you start today. Pretty soon, you’ll find yourself hitting one milestone after another.