The Pandemic Paradigm
The past few months have brought about a paradigm shift in almost every aspect of our lives. We are yet to reach the point where we divide this era into pre-pandemic and post-pandemic. As COVID-19 sweeps across the globe, we have all started changing how we live and interact with other people around us. We have taken steps to maintain social distancing and personal hygiene. While we focus on handwashing, wearing masks, and standing six feet apart to maintain good health, we should not lose sight of our financial health.
Financial experts have always recommended saving three to six months of your expenses in your savings account as an emergency fund. If you have not taken control of your personal finances yet, this would be a good time to start. You could not find a better time to figure out your discretionary and non-discretionary expenses. With restaurants, malls, theatres, and other non-essential stores being shut down, it is rather simple to see what our basic needs are and where we can trim our expenses. Emergency savings are more critical than ever in a world where nearly 1.4 million Americans filed for unemployment for two weeks in a row and at a point, more than 6 million people filed for unemployment in a single week.
Here are a few steps you can take to improve your financial health.
Audit your personal finances
Make a list of all the debt you have. High-interest rate debt can be a significant drag on your finances. Prioritize paying down the debt with the highest interest rate first or work with a legitimate debt consolidation agency to consolidate the debt and reduce the interest on your debt. Like I mentioned earlier, this is a good time to separate your discretionary and non-discretionary expenses. You are probably saving money on travel and entertainment and should move these savings into your emergency fund.
Develop a habit of saving
It is hard to change behavior but the current pandemic has forced all of us to change our behavior. If this means you are saving money now, try to continue your current frugal habits to build up your emergency fund instead of reverting to old spending habits once the COVID-19 restrictions are lifted. By creating a routine of setting aside money, you will be able to save more money in the long term. You can take another step and start investing the money you save into accounts bearing higher interest rates or assets that help your money grow at a rate that outpaces inflation.
Get refunds and claim benefits
If you had subscribed to products and services that you are no longer using during the lockdown and probably don’t intend to use it in the future, you could ask for a refund. If you require financial assistance, there probably are government programs available but you will need to claim the benefits you can receive. Talk to insurance companies and lenders and see if they are offering a moratorium and apply for it. If you were enrolled for a gym membership, you could consider suspending your membership and getting a refund or put your monthly membership payments on hold as long as the lockdown continues. A combination of bodyweight exercises like push-ups, pull-ups, squats, lunges, and crunches or yoga can go a long way to keeping you fit without the use of expensive fitness equipment or gym memberships.
Stay up to date with respect to bank policies
Many companies are providing relief to people who need it during this pandemic. If you need to hold off on certain payments, get in touch with your financial institution, and see if they are offering anything that can help you defer payments. Banks such as Citibank, Wells Fargo, and Chase have outlined options on their respective website. Take care to understand your options as skipping payments might add interest to your debt or you might be responsible for a large lump-sum payment once the moratorium on payments lifts.
Reduce your auto insurance premium
Companies that offer auto insurance, calculate your premium based on how much you drive. If you are working from home, this means you are barely driving, which in turn lowers your risk of getting into an accident. Get in touch with your insurance company or visit their website and see if you can make adjustments to your premium. You might be able to save some money as long as you continue working from home and switch back to your original plan once you start commuting again. Some insurance companies like Geico have a low premium auto insurance product associated with very low miles driven.
The entire world went into lockdown by the end of March 2020 due to the COVID-19 pandemic. Most of us have seen behavioral changes to cope with the pandemic. As horrific and monstrous this entire crisis has been, it has also taught us to rise above the monotony of staying indoors by learning new skills and avoiding stress and depression. Many families have started spending more time together. People have started cooking their own meals and eating around the table together with their families. There have been multiple posts on social media about people appreciating the beauty of nature around them, listening to birds singing, and also talking about how clean and pollution-free the air has become.
As states are easing the lockdown and people are slowly getting back to work, one would wonder if things will ever be the same again. It is during a crisis such as this when people have time to evaluate their actions, their habits, their relationships, and their personal finances. Even if you have started saving in small amounts, it is the habit of saving that counts. In the long run, if you continue this habit, you will see your savings multiply and you will be better prepared to face an emergency in the future.