How to manage debt and improve financial health during an economic turmoil
All of us are going through an economic turmoil. As per an article published in ‘The New York Times’, the hit to the US economy could last for a decade or so.
“The Congressional Budget Office projected on Monday that the coronavirus pandemic could cost the United States economy $16 trillion over the next 10 years. When adjusting for inflation, the pandemic is projected to cause a $7.9 trillion, or 3 percent, loss in “real” G.D.P. through 2030.”
Therefore, we have to play our part and take care of our physical as well as financial health. Many people have lost jobs or are facing pay cuts. Even if you’re getting your regular paycheck, you’re worried about your financial future.
It is worrisome if you have debts to pay off. You have to manage it and pay it off asap. That will help you to simplify finances and improve your financial health as well.
Let’s see how to repay debt and simplify your finances during an economic turmoil so that you can have a better financial future.
Consolidate and reduce the number of accounts you hold
It becomes difficult to manage your finances when you have multiple accounts to pay off. Well, if you’re in this situation, you can consolidate your multiple accounts into one single payment every month. By choosing this option, you can manage money in a better way along with paying back debts in full. You can choose from enrolling in a consolidation program or taking out a consolidation loan to replace your multiple monthly payments with a single one.
The situation worsens if you have experienced pay cuts and have debt. However, you can handle a pay cut and repay debt during this time and manage your finances in a better way. If you can’t manage it on your own, you can get professional help and repay your debts through a consolidation or settlement program.
Opt for a balance transfer
If you’re worried about paying back your credit cards, then you can opt for the balance transfer option.
By choosing this option, either you take out a new balance transfer card or use your lowest interest rate credit card and transfer your high-interest credit dues to this card. This helps you to manage debt in a much better way.
If you take out a new balance transfer card, you can get a zero or very low-interest rate offer for a limited period within which you can repay the transferred balance. Even if you use one of your low rate cards, you can repay your credit card balance at a much lower rate; in turn, it will help you save quite a significant amount.
Reduce your outstanding balance
If you are having difficulty managing money and debt along with paying it off in full, then you can opt for debt settlement .
By choosing this option, you can get rid of your debts by paying less than what you owe.
If you want professional help, call a reliable settlement company without stepping out of your home. You can enroll in a settlement program over the phone.
Then, all you have to do is pay an agreed-upon amount to the settlement company, and they will negotiate with your creditors to reduce the payoff amount and handle every other intricacy.
So far we discussed how to deal with debts, reduce them, pay them off, now we’ll focus on improving your personal finance.
Automate contributions toward your savings and retirement account
First of all, pay attention to increasing your savings and do not stop contributing to your retirement account(s).
If you can manage your necessities even with a reduced paycheck (as many people have experienced a pay cut), automate a percent of your income towards your savings account. Save an amount even if it’s 5% of your paycheck, if possible.
Also, do not stop contributing to your 401(k) if you have one. Try to deposit an amount to match your employer’s contribution to the maximum. And, do not take out a loan from your retirement account. It is security for your golden days.
Deposit into an emergency fund
If you haven’t done it yet, start depositing to an emergency fund. You must have understood by now the importance of having an emergency fund. It helps you to meet your necessities if you’re laid off or have a pay cut.
And, if you have an emergency fund, check out how much you have. Can you sustain for about 6 months without a paycheck?
Try to have an amount in your emergency savings account with which you can meet your daily necessities for about 6 months.
If you’re starting now, try to deposit 10% or at least 5% from your paycheck if you’ve not faced a pay cut.
You can set up an automatic transfer to your emergency savings account at a particular date every month. Such forceful savings will help you build a good cushion of emergency savings for the rainy days.
Organize your finances and declutter paperwork
Having multiple accounts means you already have piles of paperwork, which takes a lot of your time to organize finances. Think carefully! You may not be reading all of them as well. They are just lying like that. You can’t even throw them as well.
So, what can you do?
You will have to invest some time initially. Glance through them and get rid of the paperwork that you don’t need.
Then, opt to receive your account statements along with other important communication and notifications online.
Find the loopholes in your budget
Yes, budgeting is an important aspect when you want to simplify your finances and improve your financial health during this time of turmoil. So, carefully analyze your budget and find out Loopholes, if any. Also, you should assess your budget and modify it, if required, from time to time.
In the end, I would like to mention that during this pandemic, many people have lost jobs and are experiencing pay cuts. So, if you’re one of them, check out how to manage money and meet necessities on a limited income.