COVID-19 has wreaked havoc on people’s physical, emotional, and financial health over the last few months. Nearly 40 million Americans have lost their jobs, and small businesses are struggling to survive. Even though many people are starting to go back to work, their financial troubles are far from over. How can we recover financially from COVID-19?
Prioritize Paying Off Debt
If you had to use credit cards to get by during COVID-19, make paying them off your first priority. Credit cards often have high interest rates, which can result in your credit card debt spiraling out of control before you know it. Also, if your credit utilization is high, it will hurt your credit score. Aim to have your utilization rate at 30% or lower. If you are unsure of where to start when it comes to paying off your debt, contact a nonprofit credit counseling agency, like American Consumer Credit Counseling, to get the help you need.
Rebuild Your Emergency Fund
If you had an emergency fund before the pandemic, but depleted it while you were furloughed or laid off, it’s time to start rebuilding it. Automate your savings if you haven’t already to make it easier to save without even thinking. You also need to increase your emergency savings goals. Some people may think that $1,000 in an emergency fund is sufficient. While that may be true for less expensive emergencies, like an urgent car repair or a flight across the country to attend a family member’s funeral, it’s merely a drop in the bucket during a major crisis like COVID-19. Many people were out of work for two or three months while states had stay at home orders in place. This is why it is important to have at least 3 months’ worth of expenses in your emergency fund.
Resume Saving for Retirement
You may have stopped making contributions to your retirement accounts during COVID-19, and that’s okay. Affording the basics, like housing, food, and medicine was the top priority. However, if you have returned to work now, it’s important to start saving for retirement again. It’s especially important to resume those retirement contributions if you took money out of your 401(k) or other retirement plan during the pandemic to make ends meet while you were out of work. You don’t want to do any further harm to your financial future. Compound interest adds up over time, so don’t wait to start putting money into your retirement account again!
Going through any sort of financial crisis, whether it’s a job loss, overwhelming debt, depleting your savings, or a combination of these, can be very stressful. COVID-19 certainly took a financial toll on millions of Americans. Talking about financial issues can feel shameful or embarrassing, but it doesn’t have to be that way. Sometimes talking to friends or family about your financial trouble can be helpful, especially if they’re in the same boat. Also, if you need professional help getting your finances back under control, don’t be afraid to reach out.
If you’re struggling to pay off debt, ACCC can help. Sign up for free credit counseling session today.