Last year was financially difficult for millions of Americans who were laid off, shut down their businesses, or got sick and were unable to support their families. Though many of the issues we have faced economically are much larger than anything the individual consumer can control, there are some financial lessons we have learned to help us better prepare for disaster. ACCC explains what we’ve learned from 2020 so we can better prepare our finances for the next time disaster strikes:
Save for Emergencies
Let’s start with the most important of these financial lessons. Your best line of defense against financial emergencies is having an emergency fund. If 2020 taught us anything, it’s that emergencies can happen at any time to anyone. Losing your job, getting sick, or losing a family member who contributes income to your household can be emotionally and financially stressful. While we can’t always predict when these things will happen, it’s important to be prepared for them. Most financial experts recommend saving three to six months’ worth of expenses. This can keep you afloat and help you avoid accumulating credit card debt while you get back on your feet. You can breathe easier knowing you’ll still be able to afford rent, groceries, and medicine for a few months.
Have Multiple Streams of Income
Having multiple streams of income can also be helpful in case of emergencies. A side hustle you enjoy doing is a great way to earn extra cash. You can use the money from your side hustle to bulk up your emergency savings when times are good. During emergencies, (e.g. if you lose your job or get sick and have expensive medical bills), use your side hustle income towards these expenses. Side hustles don’t even have to feel like “work.” If you like animals, you could pet-sit or walk dogs. Maybe you enjoy crafting. Sell your crafts on sites like Etsy. These are all fun ways to make more money that can come in handy in emergencies.
Ensure Your Resume is Up to Date
While they may not immediately sound like the other financial lessons we’ve discussed, keeping your resume updated is also important. Thousands of Americans were unexpectedly laid off during the pandemic through no fault of their own. Though it is difficult to find another job when so many companies are laying off employees, not hiring new ones, having your resume ready to go can speed up the job search. For many people who work at the same company for years, they may not have a current resume, if they have one at all. Writing a resume from scratch can be tedious and time-consuming, so continue to update it regularly.
Keep Debt Under Control
Debt is stressful under normal circumstances. In an emergency, when you have to prioritize your expenses, debt can be even more overwhelming. Knowing you can’t afford your credit card payments and your accounts could go to collections is never a good feeling. Stay on top of your debt so it doesn’t become even more of a problem if you run into some kind of financial emergency. Additionally, if you are dealing with an emergency situation, contact your creditors right away when you know you won’t be able to make your payment on time. They may be able to work out a payment plan with you. In fact, according to our September 2020 Financial Health Index, 80% of consumers who asked their credit card companies for financial relief received help.
If paying off debt is something you struggle with, you can reach out to a nonprofit credit counseling agency. A certified credit counselor will assess your budget and may enroll you in a debt management program.
Organize Important Financial Documents
Keep all your important financial documents in one place. Organizing them in a filing cabinet or accordion folder can make them easy to find. If you need to apply for a personal loan, unemployment, or any other financial assistance, you should have certain documents easily accessible. These documents may include bank statements, tax documents, pay stubs, and your Social Security card. Make sure these are all stored in a safe place!
Financial Lessons from 2020: Final Thoughts
Unfortunately, many Americans learned some of these financial lessons the hard way in 2020. Going forward, we cannot take financial stability for granted. There are disasters that are out of our control, like this pandemic, that will impact us financially. Prepare for emergencies while you have the ability to do so. Your future self will thank you for it!
If you struggle to pay off debt, ACCC is here to help. Call 866-826-7177 for a free credit counseling session.