By Ricardo Chamorro
We’re living through times of great economic uncertainty. But that doesn’t mean you can’t still plan for your financial future. Only 49% of Americans today have a positive estimation of their current financial situation, while fully 50% fear their finances are getting worse. Luckily, the power to reduce your economic worry and improve your financial well-being is in your hands. While no one can yet measure the total financial impact of the coronavirus outbreak, adopting a few best practices for financial health today can go a long way to set you up for the best and brightest tomorrow.
So, here are six tips to help you stay on top of your finances as this outbreak continues.
1) Reduce Your Fixed Expenses
It always makes good financial sense to live well within your means, and crafting a manageable budget is the first step toward doing so. Fixed expenses like rent, mortgage payments or auto loans usually eat up the lion’s share of any monthly budget.
But with 3 million Americans already unable to afford their mortgage payments during the coronavirus outbreak, you may be among those who are finding it hard to budget for all your fixed expenses. Now might be a great time to refinance your loans and secure new, lower monthly payments.
Refinancing is easy, especially today. By refinancing your auto loans, student loans or mortgage, you can reshape your month-to-month finances in a way that best suits your current situation. And if that’s not enough, a personal loan may be an excellent option to help you consolidate debt and stay in control of your budget. Please don’t feel like your only options are either toughing it out or missing a payment!
2) Clean Your Wallet
On top of fixed expenses, well-managed variable expenses are another big part of any healthy budget. These can include essentials like credit card and utility bills, as well as nonessentials like travel expenses, takeout and subscription services.
While your travel expenses might be at an all-time low these days, three in four Americans have some sort of video or streaming subscription, and more Americans than ever before are ordering food delivery. That can take a huge bite out of your budget! Subscription services can sap $500 out of the yearly budget, and cutting back on restaurant orders is one of the easiest ways to reduce your food expenses. Give your wallet a little spring cleaning. You might be surprised by how much you can save if you eliminate unnecessary subscriptions and cook more at home.
3) Make Money Work for You
The goal of a balanced budget is savings. At a time when most Americans don’t have enough savings to cover a $1,000 expense, you shouldn’t underestimate the value of putting away for a rainy day. But there’s more to building your savings than just cutting costs. One of the best ways to increase your savings is to make your hard-earned money work for you.
Putting your money to work doesn’t mean taking investment risks you might not be ready to accept. Getting the most out of your money can be as easy as opening a high-interest savings account. At PenFed, we offer a Premium Online Savings account with almost 20 times the national average APY, or annual percentage yield. Depositing your money with a trusted credit union or financial institution can help you beat inflation and get more bang for your buck.
4) Take Advantage of Great Offers
Human beings are creatures of habit, and we like to stick with the same credit cards or financial services we’ve used for years. But sometimes, making the switch to a different product can make a huge difference. Cash back rewards can turn all our necessary purchases into smart financial maneuvers.
There are also a number of cash back offers available right now, just for refinancing a loan. Seeking out these deals can help you save on month-to-month expense and grow your savings with the extra cash. So, take a look at what offers are out there. You might be surprised by what you find.
5) Protect Your Credit Score
Amid all the uncertainty and upheaval of the last few months, your credit score may be the last thing on your mind. But that doesn’t mean you should neglect it. Protecting your credit score can make or break your finances.
One of the worst things you can do to your credit score is miss a credit card or loan payment. You may think you’re doing yourself a favor by putting your money toward more pressing expenses, but every missed payment can hurt your financial reputation. If you’re struggling to stay on top of your credit cards or loan, ask your lender about a new payment plan or even a forbearance program. Enrolling in and sticking to a forbearance program can help, rather than hurt, your credit score. Don’t wait until you’ve already missed a payment to make the changes you need.
6) Join a Credit Union
One thing we all need to do during this crisis is stick together. Unlike a traditional bank, a credit union, like PenFed, is member-owned and community-focused. And 96% of credit union members report being highly satisfied with their experience. With a credit union that works for you, you can find the lending community that can understand your current situation, whatever it is, and help you make the most out of your finances.
There’s a lot more you can do to protect and strengthen your finances, but following these six tips are a great first step toward financial resilience and freedom. The most important thing to keep in mind is that you should never panic. The power of sound financial preparation is well within your grasp. Are you ready to take charge of your future?
Ricardo Chamorro is EVP and Head of Consumer Banking at PenFed Credit Union, the nation’s second-largest federal credit union. PenFed Credit Union is federally insured by NCUA.
