Do you need a post-pandemic recovery plan for your personal finances?
As you go back to work and begin receiving a salary again, it may be the perfect time to change your financial habits.
The lockdown showed us all the unnecessary things we can do without, like we did for so many weeks this spring. As you look at life during the pandemic, can you find areas where you were wasting money before the shutdown? Maybe it’s activities and sports for the kids, or going out to eat, or shopping for entertainment. If you are like most people it’s easy to see how many money wasters were in your life before we were forced to stay at home.
Now is not the time to slip into bad habits and splurge, rather it’s a time to be disciplined and focus on needs rather than wants. Wants are nice, but they are not necessary. Needs are the things you can’t live without—food, clothing and shelter. Wants are anything else.
The financial pressure may have eased a bit, but if you forgo your wants for a while longer you’ll be more financially stable than if you start the pandemic recovery on a spending spree.
Did you have a workable budget that you actually used before this crisis hit? If not, now is the time to create a realistic budget with about 12-15 categories to track where your money goes. If there are too many categories it’s hard to use. If there are too few ctegories, the information may be meaningless. A well designed budget is not restrictive. It’s a tool to be sure you are spending your hard earned money on the things that are most important to you and your family.
Remember to include a category for generosity. We are called to give according to our capability. During the pandemic recovery you may not have much capability, but you may have some, so give a little, with a happy and grateful heart.
As you are designing your budget, consider creating a written Crisis Budget. You have just survived a major financial crisis—maybe the largest in your life. One thing is for certain—we never know when the next crisis will come, so think about the things you did to adjust. Were you prepared? How much was your income reduced and how did you change your habits to compensate? What things did you do right? What things could you have done differently?
Along with the crisis budget, set up an emergency fund. If nothing else, the pandemic provides a better understanding of why an emergency fund is so important. Figure out how you can quickly save a minimum of $1,000 so that you will be prepared when the next crisis occurs. Don’t stop at $1,000, Grow your emergency fund to 1 month’s income, then 3 month’s income, then 6 month’s income
If your income was reduced during the pandemic, did you run up credit card debt to cover essentials? Or if you had debts that were put in forbearance, now is the time to tackle those debts. Try to pay them off as quickly as possible, starting with the smallest ones. If there are larger debts, contact your lender and let them know you are back to work and you want to set up a payment schedule. Be sure to get any agreement in writing.
It’s also a great time to start your debt snowball in order to pay off your debt sooner rather than later. Interest charges will eat up your resources rapidly—and you need that money for things more important that paying interest. The quicker you eliminate debt, the more financial options you have during a crisis.
In any situation where people are vulnerable, scammers will take advantage—BEWARE! If someone posing as a debt collector calls you, verify who they are, the name of the company and the name of the person you are speaking to. If they are legitimate they will have all the information about your debt including your personal information, the amount of the debt and your account number. Do not give them any of this information over the phone. If you are suspicious about a caller, hang up and call back using the number on your official records. Do not call back on the number that just called you.
Hope you are able to get back to a new normal soon and that as bad as the pandemic was, it’s a chance to grow closer to Christ.
Join us on the Compass Catholic podcast where we’ll talk about getting back to work and getting back to normal.