Over the last several months, unemployment rates have skyrocketed as a result of the Covid-19 pandemic.
If you’re worried about your situation, you’re not alone. Luckily though, there are things you can do to minimize the pandemic’s effects. Listed below are financial mistakes to avoid to protect yourself and your family.
1. Not Having a Budget
One of the biggest financial mistakes you could make during Coronavirus is to not have a budget. It’s going to be a lot harder for you to manage your money if you don’t have a clear idea of how much is coming in or where it’s going.
Now is the perfect time to sit down, assess your finances, and give every dollar a job. Do this even if you’re confident you’ll be able to weather this storm. Having a budget will set you up for long-term financial success and help you avoid a lot of unnecessary expenses.
2. Not Updating Your Budget
If you have a budget, good for you. You’re in the same boat as 67 percent of Americans. Have you updated your budget in response to Covid-19 though?
If you haven’t looked at your budget in a while, consider updating it. If you’re out of work, making updates to your budget will help you stretch your dollars a bit more and ensure you can continue covering essential expenses.
If you are working, you still might want to change your budget to pay off debt faster or put more money into your savings account.
3. Not Adding to Savings
Speaking of savings accounts, not adding to it is another mistake to avoid right now. If you have the ability to add to your savings account, consider doing so. Ideally, you’ll have enough saved to cover between three and six months of bills and expenses.
For those who don’t have that much of a safety net, start working toward it. Even if you don’t quite reach three months’ worth of expenses, you’ll at least be better off than you would have been otherwise. Remember, any amount of savings is better than no savings at all.
4. Not Applying for Unemployment
One of the most valuable finance tips for Coronavirus survival is to take advantage of the assistance programs available to you. If you’ve lost your job, apply for unemployment benefits and unemployment insurance.
Look into programs like the Supplemental Nutrition Assistance Program (SNAP) too, so you can access groceries to feed your family.
Don’t automatically assume you don’t qualify. Most people who are out of work right now qualify for at least some assistance, so do your research and see what options you have to work with.
5. Not Communicating With Creditors
A lot of people assume their creditors are not flexible when it comes to loan or credit card repayments. In reality though, many financial institutions are being accommodating during this time.
If you aren’t confident you’ll be able to make loan or credit card payments on time, don’t skip the payments and hide your bills. Reach out to your creditors as soon as possible and talk to them about your situation to avoid financial mistakes.
There’s a good chance they’ll be willing to work with you and let you skip a payment or pay a lower amount. You never know what your options are until you ask.
6. Draining Retirement Savings
If you have money saved in a retirement account and have fallen on hard times, you might be considering taking that money out to keep yourself and your family afloat. Before you do this, make sure you consider all your options.
By withdrawing money early from your retirement accounts, you’ll be setting yourself up for additional tax payments and potential penalty fees. Be sure to talk to a financial advisor before you take this step and consider whether there are any alternatives you can use instead. Early retirement withdrawals should always be a last resort.
7. Making Emotional Financial Decisions
This is an emotional time, and a lot of people are feeling unsure of the future. It’s understandable that you feel this way, but now is also not a good time to act on your emotions.
If you make financial decisions based on emotion, you could find yourself dealing with serious, long-term financial problems as a result. Always talk to someone you trust before making any big decisions. Keep a cool head and think about the potential consequences of your actions before you proceed.
8. Not Researching Loan or Credit Options
Even if you follow all of the above tips, you still might find yourself needing to apply for a loan or line of credit to help you get through an emergency. If you are looking into this, be sure to do your research before deciding on a lender.
Look at each lender’s website and check out their How it Works section to see what they offer and what kind of repayment terms you’re working with. This will ensure you’re getting a loan or line of credit that provides you with the money you need as soon as possible.
Avoid These Financial Mistakes
As you can see, there are things to avoid while you’re preparing your finances for Covid-19. Keep the outlined tips in mind and you’ll be in a great spot for success.
Are you looking for more personal finance tips? If so, check out some of our other blog posts, like this one on what makes up your credit score.