Monday, March 16, 2020 was the start of “the week that America shut down” — which means we have been living with the impact of COVID-19 for four months.
I continue to collect expert recommendations on how to navigate what could be another four to 12 months (or longer) of coronavirus-related uncertainty about health protocols, school schedules, financial impacts (e.g., income, expenses, investment volatility), travel, family gatherings, and more.
Below are five insights that I have gained:
Build a Bigger Buffer
Save more, if possible. Many experts are recommending larger emergency funds equaling six to nine months’ worth of expenses (or more).
While this certainly sounds wise, given the extent of COVID-related job losses, the unfortunate reality is that three in 10 adults are “one modest setback away from hardship” according to the Federal Reserve. Bottom line: Save as much as you can when you can (e.g., tax refund, extra $600 per week unemployment benefit).
Identify Budget Busters
Spend less if you are earning less. Good places to cut back include bank fees, autodraft payments for services that are not being used (e.g., gyms that are closed and satellite radio for your car when you are not commuting), multiple streaming services, and (you fill in the blanks after a careful review of household spending).
Take Small Steps
Look for additional ways to make small cuts…a dollar here and two bucks there. It all adds up. Even if it feels like there is no wiggle room in your family budget, there often is upon a more careful examination of expenses. Aim to have a “zero-based budget” where income and expenses are perfectly aligned (i.e., income – expenses = 0).
Stop the Bleeding
Avoid incurring additional credit card or other debt if at all possible. Seek out local services in lieu of income (e.g., a food pantry). Consider contacting a nonprofit credit counseling agency to help negotiate outstanding balances with creditors and arrange more favorable repayment terms (e.g., lower interest and/or smaller payments).
Try to Change Negative Thought Patterns
Think about challenges that you successfully overcame in the past and identify what you learned then that you can apply now during the pandemic.
Another key question to ask yourself: “What steps can I take now to move forward?” From there, develop a series of action steps. Studies indicate that having a “growth mindset” helps people build resilience and confront tough challenges and changed circumstances.