How to Get Back to Financial Wellness After COVID-19

The COVID-19 pandemic has created unanticipated financial hardships for many.  And now that things seem to be normalizing, it's time to start focusing on getting back to financial wellness.

It all starts with small, manageable steps to rebuild and get back on stable financial footing.

Press Pause on Big Money Goals

While rebuilding, it's wise to stop putting money towards other savings goals until people can get back on their feet financially. That doesn't mean these goals and savings plans should be taken off the table entirely.

Instead, it means that taking 3-6 months to rebuild an emergency savings account takes priority over continuing contributions to the family vacation fund. Families should sit down and discuss existing money goals to decide which should be put on the back burner and when to resume them in the future.

Cut Any Unnecessary Spending

Many people were forced to cut out unnecessary expenses in the early days of the pandemic. Budgets for eating out, travel, and gym memberships all quickly disappeared.

Now is the time to re-assess current spending habits to determine if any other areas would benefit from a cut. There may be further opportunity to prune some non-essentials families used to spend on, like streaming services, cable, or clothing. Any savings can be used to tackle pandemic-related debt.

Repay Loans and Other Debts

For someone who took out a loan or line of credit to cover expenses during COVID-19, it's imperative to pay that money back in a timely manner. Allowing debt to linger can not only cause financial strain but prevent someone from truly getting back to stable financial health.

Outline all debts and create a plan to repay them. The plan should include how much to allocate to each debt per month and an ultimate payoff date.

It's critical to not let loans linger if money was borrowed from a retirement account. While loans and interest from a retirement account like a 401(k) go back to the account holder, the money is best able to work towards long-term goals when it has more growth potential.

Restart Retirement Investing if Possible

Financial investments, like 401(k) contributions or IRAs, might have taken a hit if someone experienced a pandemic-related job loss or pay cut. As the country slowly gets back to work, outline prior investments and determine if it's possible to resume contributions. Retirement timelines may have shifted slightly, but the truth of needing to invest for the future hasn't changed.

Prepare for Next Time

If COVID-19 created awareness about anything, it's how important it is to be financially prepared in an emergency situation. It's a good idea for people to determine how much they'll need if they would need to be out of work for six months. 

Then, create a plan to save that amount. No number is too small when it comes to padding savings to account for future emergencies. Saving even $100 towards an emergency fund is a step in the right direction. And having an emergency account on hand if unexpected events arise means less stress in the face of uncertainty.

Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.

Source: iQuanti, Inc.

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Categories: Personal and Family Finances

Tags: Coronavirus, COVID-19, Financial Services, Financial Wellness, Personal Finance