In the the midst of the economic uncertainty caused by a global pandemic, it’s easy to forget that some things in our lives are completely straightforward and controllable. The wonderful thing is that we can take the reins and make our best effort to build a solid financial foundation, in spite of the circumstances around us. These tried-and-true tips about budgeting, savings, and other topics will help protect and uplift you in these trying times.
1. Create an emergency fund
Car repairs, burst pipes, sudden medical expenses, and unemployment can be surprising. The times we’re in are an important reminder of how unpredictable life can be. That’s why it’s a good idea to save up for an emergency fund, which will cushion you from the impact of expenses you might not expect.
Financial experts recommend for you to put your emergency fund in a high-yield savings account, where it can earn a solid amount of interest every month. Contributing to this account when times are good will help protect you financially from an emergency.
2. Make a budget
It’s a piece advice you’ll hear time and time again: making a budget is the best way to keep your finances in check. It tells you where your money should go and how it should be spent. It makes life significantly easier.
Mortgage or rent, utilities, food, car payment, insurance, and other necessities should be marked under “Essential” expenses. The rest is totally discretionary – “fun money” - and you’re the one to decide how it should be used.
A budget isn’t a one-and-done thing, though – you should be monitoring it regularly and updating it on a monthly basis to ensure that you don’t start bad habits.
3. Focus on savings
The rule of thumb for savings is often considered to be 20% or more of your income. Put savings first by making them automatic: use a checking account for spending and a savings account for savings, take advantage of split-deposits, and send a portion of your income each month straight into your 401(k). See if you can get a 401(k) match from your employer.
When saving, be sure to keep your savings goals separate from each other. For example, savings for a new personal computer are different from your emergency funds. Another tip: don’t put savings in your checking account because you’ll be tempted to use them, and it will appear that you have more money to use offhand than you actually do.
4. Protect your money
Your money deserves a safe place to be stored, and a Federal Deposit Insurance Corp. (FDIC) bank is one of the safest. In an FDIC bank, your money will be protected against loss by the U.S. government in the case that your bank fails. You can use FDIC’s BankFind tool to determine if your bank is insured by the FDIC.
The FDIC insures several different kinds of accounts, including CDs, checking accounts, savings accounts, and money market accounts.
5. Get rid of debt using two popular methods
The snowball method involves paying off debt with the lowest balance first, and slowly paying off larger and larger balances. The avalanche method, on the other hand, involves paying off the balance with the highest interest rate first and getting smaller from there.