An emergency fund is more essential than ever, and so is making every dollar count.
Ellen B. recently left her two-bedroom apartment in Washington, D.C., to stay with family in Kansas City, Missouri. This gave her more time with her parents and an opportunity to take stock financially.
“I started paying more attention to my finances several years ago, but the uncertainty we are all facing now adds some urgency [to] getting my finances in better shape,” Ellen says. “I feel more motivated to make specific plans for budgeting and saving for the unexpected.”
Many are facing economic uncertainty, but there are ways to use this period to shore up your finances. Today is a “great time to review our finances and better plan for the unknowns ahead,” says Molly Berger, a financial coach based in Denver.
TIP NO. 1: TAKE STOCK OF YOUR SPENDING
“See if there is anything that can be cut or downsized,” Berger advises. Look over your credit card statements; many companies have an online tool that will break down your statement spending by category.
“ASK YOURSELF HOW MANY MONTHS OF EXPENSES YOU NEED TO FEEL SAFE IN THIS CLIMATE.” LINDSAY BRYAN-PODVIN, FINANCIAL THERAPIST
TIP NO. 2: SHED SOME STUFF
You may have more than you think: The average two-bedroom apartment rental holds nearly $30,000 worth of belongings. So try applying the six-month clutter rule — if you haven’t used it in half a year, it can go. It could also be time to clean out your closets, earmarking items to sell or donate. You could make quick cash from your spare stuff and perhaps even save rent money you’re spending on storage space.
TIP NO. 3: PAD YOUR EMERGENCY FUND
If you’re working from home more, you’re spending less by not commuting or shelling out for that midday latte or after-work cocktail. So if you’re able to, put that money into an emergency fund. Don’t have one of those yet? Not to worry, you’re far from alone: A 2019 study by the Federal Reserve found that nearly 40 percent of American households would struggle to pay for an unexpected $400 expense. But it’s never too late to start saving.
Start by calculating the essentials — rent, food, utilities — and base your emergency savings goals off that monthly number, advises Lindsay Bryan-Podvin, a financial therapist in Ann Arbor, Michigan. “Ask yourself how many months of expenses you need to feel safe in this climate. … Then, work to increase saving money in your emergency fund,” she says.
TIP NO. 4: DITCH SOME SUBSCRIPTIONS
Take a look at any recurring subscriptions you’re not using or services that have an annual membership fee. Saving even $50 per month could boost your savings to the tune of $600 per year! “For instance, I canceled some of my frequent flyer memberships since I will not be traveling anytime soon,” Berger explains.
TIP NO. 5: DON’T BE AFRAID TO ASK FOR HELP
If you’re struggling to keep up with bills, do your homework on what kinds of help are available. Call your credit card company, utility company or landlord, and ask whether you can have extra time to pay penalty-free or lower your interest rate.
The same goes for student loans. The CARES Act paused federal student-loan payments for six months without interest. But if you’re still employed and able to pay, “you can take a big dent out of your student loans,” advises Stacey Tisdale, CEO of Mind Money Media.
For those with private loans, it “is a great time to be reaching out to companies to refinance,” she adds, while stressing the need to ask plenty of questions before making a move.
TIP NO. 6: PROTECT YOURSELF WITH INSURANCE
Make sure your homeowner’s or rental insurance policy is up to date to protect yourself from unforeseen expenses. While 95 percent of homeowners have a policy, only 37 percent of renters do, according to a poll by the Insurance Information Institute. “Call your insurance providers and see if you have appropriate coverage for your situation,” Berger recommends. It’s often cheaper than you think: Policies can cost less per month than a fancy coffee for you and a friend.
Life insurance and financial legacy planning are also important. “These are the tasks that can help provide peace of mind long term, not just day to day, that can make us feel more prepared,” Bryan-Podvin says.
TIP NO. 7: WHEN YOU DO SPEND, SHOW YOUR VALUES
Small businesses are hurting right now. Purchasing restaurant gift cards, buying fitness studio class packs, donating to a staff relief fund or booking future salon appointments can all help. Some restaurants are accepting donations to cook for first responders, which is a way to double your impact.
Bryan-Podvin says that the crisis has spurred her to shop hyperlocally in order to give back within her community. “I want to ensure that the money I do spend right now, mostly on food, is going to local farmers, purveyors and restaurants, and I’m tipping generously when I do so,” she says.
By Kaelyn Forde