7 Tips on How to Manage Your Finances Right Now
Losing sleep over your finances and worried about the overall economic impact of the coronavirus? Here are 7 tips on how to manage your finances right now so you feel more in control and confident about your financial situation.
#1 Reprioritize Your Spending
One of the best things you can do to manage your finances right now is to revisit your monthly spending.
Since we’re all on lockdown, you’re probably not spending nearly as much money on gas or eating out.
Did you cancel your summer vacation or other travel plans?
What else are you not spending money on right now?
There’s never been a better time to review what you aren’t spending money on that you normally would, and create a new budget for the short term.
Then, take the money you’re saving, and stash it in your rainy-day fund.
Also, avoid the temptation to shop online for nonessentials. There are a lot of online retailers offering some great deals right now.
So, before you go and buy a summer wardrobe or purchase that new gadget, ask yourself if you really need it.
#2 Cancel Services You Don’t Need
If you have been laid off or had a cut in pay, or think you might be laid off in the near future, now is the time to cut services you don’t need.
If you have a budget, go through it line by line and evaluate what you don’t need. If you don’t have one, look at the last 2 or 3 bank statements.
Whether it’s monthly memberships or streaming services, every little bit you cut will help keep more money in your pocket to help you pay upcoming bills or save for later.
#3 Redirect Unused Money to Savings
If there’s one thing we have learned from this global health crisis, it’s the importance of savings.
A mere weeks before the COVID-19 lockdown began, Bankrate released their January Financial Security Index survey, which revealed that 4 in 10 adults, or 41%, would be able to cover the cost of a $1,000 emergency room visit or car repair using their savings.¹
16% of respondents said they would finance with a credit card and pay off the balance over time, while 14% said they would borrow the money from family or friends.²
As many Americans just learned the hard way, having a larger savings cushion may have potentially made this health crisis less stressful.
If you are still receiving a full paycheck and are working at home for the time being, consider redirecting some of your usual expenses into your emergency savings account.
Save money you would have otherwise spent on…
- Public transportation.
- Morning coffee at the drive-through.
Depending on your situation, you may not be able to divert extra money into a rainy-day fund. But if you can, we strongly recommend doing it.
Even if you can only set aside $50 or $100 a month until things return to normal, you’ll be glad you did.
#4 Call Your Creditors
If you or your spouse has been let go, furloughed, or have had your paycheck decreased and you know you aren’t going to be able to pay your bills on time, call your creditors immediately.
Many credit card companies, mortgage lenders, and banks that handle your car loan have programs around payment flexibility and forbearance.
Whatever you do, do not assume creditors will automatically waive late fees because of this crisis.
Be proactive and call them. Explain your situation and see what they can do to help you out.
The same applies if you rent. Call your landlord, and see if he or she will work with you before you’re unable to pay.
It’s worth noting many cities have temporarily halted evictions right now, so look into your rights as a tenant before you speak with your landlord.
#5 Request a Lower Interest Rate on Credit Cards
This is an easy tip on how to manage your finances right now–and one that could potentially save you a lot of money.
If you are a long-time customer and have a decent credit score, asking for a lower rate is often all it takes.
Even 1 or 2 points may add up to hundreds of dollars saved on interest.
Let’s say you have a credit card limit of $5,000 and the card is maxed out. The interest rate is 21.30%, and the minimum payment due each month is $138.
If you stayed at this rate, you would pay off the card in 59 months.
If you lowered your rate just 1 point to 20.3% and paid the same $138 each month, you’d save about $273 in interest and have the card paid off in 57 months.
#6 Look into Your Student Loans
Federal Student Loans
To provide relief for student loan borrowers, the CARES Act placed all federal student loans in automatic forbearance.
Federal loan payments are automatically stopped from March 13, 2020, through September 30, 2020. During this period, interest is set at 0%.
If you made a federal loan payment after March 13, you can call your student loan provider to get a refund for your March payment.
In addition, you will not be penalized for making a payment that’s less than your typical monthly minimum due.
If you can make partial or regular federal loan payments, we recommend you do so because with 0% interest, your payments during this period will pay on your principal balance.
So, if you can do it, this is your chance to pay down on the balance and reduce that debt!
Private Student Loans
The CARES Act does not apply to private student loans. However, many institutions are providing financial relief and allowing borrowers to pause monthly payments.
Should your lender allow you to pause your payments, interest will still accrue on your loan balance.
We recommend contacting your lender and explaining your financial situation. Be honest and see if they will work with you.
Ask for flexible repayment options. See if they can pause your payments, lower your interest rate, or switch to an interest-only repayment plan.
Another option is to refinance your private student loans, since interest rates are low right now.
#7 If You’re Expecting a Refund, File Your Taxes
Due to COVID-19, the IRS has pushed back the tax deadline for individuals and businesses from April 15, 2020, to July 15, 2020.
If you know you’re going to get a refund, file your taxes as soon as you can so you can get the refund sooner rather than later.
If you end up owing money, not to worry. According to the IRS, “Taxpayers may also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed.”
If you do get a tax refund and don’t need the money to pay bills, we recommend putting it in your emergency fund or using it to fund your IRA or 401(k).
If you add to your 401(k), it needs to go through payroll deduction. We recommend you contact your Human Resources department, tell them the amount you want to invest, and they will take it out of your paycheck(s). Then use your tax refund to live on and make up the difference during this time.
If you have a traditional or Roth IRA, you can use IRS Form 8888 and redirect your refund into your IRA. Or, if you’re currently set up for automatic monthly contributions from your bank account, make a one-time payment for the amount of your refund.
Note: 401(k) Maneuver does not provide tax or legal advice. Please consult your tax or legal professional if you have questions regarding your specific situation.
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