To Make 2020 Less Stressful, Fix Your Finances
Just ask your bank account: 2020 has been a tough year.
With workers being laid off and the stock market see-sawing, it’s a scary time. But that doesn’t mean you have no control over your own financial situation.
Set yourself up for whatever the rest of the year holds by strengthening your finances now. From refinancing your debt to reducing your monthly spending, here are nine easy ways to get a better handle on your financial life:
1. Save Discretionary Dollars
Between online shopping, memberships, and subscriptions, it’s easy to spend every last dollar you make. Ask yourself what you really need, and add what you’d spend on discretionary expenses to your savings account.
Yes, you can still enjoy takeout from time to time. But you have to be deliberate: Reward yourself for wins, not whims. When you do make discretionary purchases, use a debit card with a round-up feature. That way, you’re still saving a little each time you treat yourself.
2. Build an Emergency Fund
Not even one in four Americans have an emergency fund that could cover six months of expenses. An emergency fund keeps unexpected surprises from forcing you to take on debt.
If there’s one financial lesson you should take from this pandemic, it’s that emergencies happen. And while the COVID-19 situation is unique, there will be other times in the future when you’ll want an emergency fund.
You might need to have your car repaired, or you may need to pay for unexpected medical bills. And while you might not feel financially stable enough to start an emergency fund, it’s easier than you might realize. Saving as little as $5 a week could make all the difference.
3. Check Your Credit Score
With everything going on, your credit score might be the furthest thing from your mind. It shouldn’t be: Not only can errors keep you from getting a loan, but your credit score impacts the interest rate you’ll be offered.
Contrary to popular belief, checking your credit doesn’t necessarily result in a lower score. In fact, 76% of people who checked their scores more than seven times in a year saw improvement. Only 38% of those who checked their scores once in a year saw improvement in their credit scores.
4. Refinance Your Debt
Interest rates have gone down dramatically due to COVID-19’s economic consequences. If you have debt — whether it’s credit card debt, a mortgage, or a car loan — there’s never been a better time to refinance.
When you refinance, you’ll either lower your monthly payment, reduce your payment timeline, or both. If you go the former route, use the money you save to build your emergency fund. If you choose the latter, you won’t see the benefits now — but think how good it will feel to have that debt off your shoulders months or years sooner than you expected.
5. Get A Side Hustle
While Uber and Lyft were once popular choices for side hustles in the gig economy, it’s difficult to practice social distancing while driving. Thankfully, there are other opportunities that can help you stay far enough apart from other people.
Rather than give rides, make deliveries: Instcart’s orders have increased by 400% this year. Also look into options online: You could transcribe documents, become a freelance writer, or offer graphic design services from the comfort of your own home.
6. Take Advantage Of Rebates
With so many people staying at home and not using their cars, several car insurance companies are offering discounts and rebates. For example, Geico is offering a 15% rebate on customers’ policies for up to six months.
Another place to look for rebates is home improvement stores. Because consumers are using the time to improve their homes, companies like Menards are offering an 11% discount on everything. Why leave free money on the table?
7. Don’t Touch Your 401(k)
Are you considering pulling money from your 401(k) to help keep you afloat? Instead of taking money out — and potentially hurting yourself in the long run — lower your contributions.
With the extra money, your first port of call should be your savings account. Once your finances improve, you can always invest those funds into a self-management retirement account, such as an IRA.
8. Upgrade Your Budget
At the end of each month, do you find yourself scrambling to update your paper budget? Do you find yourself overspending month after month?
Now is the time to get your budget to a better place. Get an app like Mint or PocketGuard, which are free to use and can track your spending automatically. Connect it to your bank account for a 360-degree view of where your money is going.
Think carefully through the categories you want to monitor. Even if you aren’t able to travel right now, for instance, you may want to once the pandemic passes. Break once-in-a-blue-moon transactions, such as property tax, into monthly amounts so you aren’t blindsided by a big bill in the fall.
9. Invest in Alternative Transportation
If you’ve been stuck at home for the past few months, think about how much money you’ve saved on gas and car repairs. Wouldn’t it be nice to make those savings permanent?
Depending on where you live, your alternative transport options will vary. If you live in town and want to minimize your contact with others, a bicycle might be your best bet. If you’re in a big city, you could always walk or take the subway. Elsewhere, you could get a bus pass or carpool with friends.
Give it a try for a few months. If all goes well and you have a partner with a car, you could even sell one of your vehicles for extra cash.
The pandemic is the perfect time to give your financial life a makeover. Get out of debt, give yourself some peace of mind with an emergency fund, and stop stressing about money. No matter what the rest of 2020 holds, you’ll be glad you did.