Still employed?
Financial steps to take now
The coronavirus pandemic has thrown tens of millions of people into financial distress. But not everyone is feeling the pinch yet.
Roughly one quarter of Americans say the coronavirus crisis hasn’t impacted their financial situation, according to a survey conducted in mid April by J.D. Power.
“Just because you are employed (now) doesn’t mean you are safe a month from now,”says Dan Slagle, a certified financial planner. Those fortunate enough to have financial stability can use this time to focus on their fiscal health and emerge from this economic crisis in better shape.
Here are five steps to consider:
1 Bolster savings
Your car is sitting idle. You can’t go to the gym. The money you’re saving on daily expenses could well be eaten up (literally) by hungry kids who are now home all the time. But if not, use it to build up your emergency reserves.
In an ideal world, you’d have three to six months worth of living expenses stashed away in an emergency fund. If that feels intimidating, start with one month, then keep going from there.
2 Student loans
Payments on most federal student loans are suspended, interest-free, through Sept. 30. That means any payments you make between now and then will go directly toward the principal on your loan, which could save you money in the long run.
Consider your financial circumstances before paying down your loan during the forbearance, though. Your money might be more urgently needed elsewhere. Consider using it to pay off high-interest debt or to build emergency savings.
3 401(k) contributions
If your emergency fund is solid, and you aren’t carrying a load of credit card debt, consider giving your retirement savings a boost, essentially buying in while the market is down. Doing so means you’ll increase your returns when the market eventually rebounds.
4 Save on your mortgage
If you own a home, you may be able to lower your costs thanks to lower interest rates. Even relatively new homeowners could benefit from refinancing, as mortgage rates are one percentage point lower than they were a year ago. “If you can lower your rate by 1% or more, it can have a huge payoff in the long run,” says Mike Zung, owner of Java Wealth Planning.
5 Give back
This one won’t technically improve your financial situation, but it will make a difference. Support those hit hardest by this financial crisis by donating to a food bank or shop at a small business.
“Personal finance is not all about accumulating money,” Zung says. “It’s about spending it in a way that reflects what you value.”
This article was provided to The Associated Press by the personal finance website NerdWallet. Want to suggest a personal finance topic that Quick Fix can address? Email apmoney@ap.org.