The novel coronavirus (COVID-19) pandemic has upended nearly every aspect of our daily lives and has resulted in unexpected changes to millions of people’s financial situations. In fact, a new CapTech survey found that approximately 71% of U.S. adults are experiencing financial impacts due to COVID-19, while 57% agree that the impacts of the outbreak will affect them financially.
Whether it’s due to job loss, unexpected emergency or economic events that are out of your control, the pandemic will continue to impact personal and household finances for the foreseeable future. However, during this unprecedented time, there may be an opportunity to revisit and adjust your short- and long-term financial goals to ensure you’re setting yourself up for a future of financial stability.
Saving for vacation: Whether it was your dream trip to Europe or a long weekend getaway to wine country, COVID-19 has caused many travelers to either cancel or postpone their vacation plans. If you had to cancel for financial reasons, it doesn’t necessarily mean that a vacation is off the table entirely this year.
There are budget-friendly options available. Instead of flying to Hawaii, perhaps you plan a road trip or even a staycation. “Staycations are a great option for those who want to get away without breaking the bank since you’re minimizing the expenses that would have been spent on things like airfare and rental cars, for example,” says BECU Financial Educator Stacey Black, who has been with the credit union for over 20 years.
It may not be the dream vacation you planned on, but it can still be fun and relaxing — and you can always redirect those dollars to a future dream vacation or your emergency savings fund.
Completing your degree: Current and prospective college students have been profoundly affected by the pandemic. Whether you’re beginning school in the fall or you’re in the middle of your college journey, Black emphasizes the importance of creating and sticking to a budget so you know exactly how much income you have coming in.
Also, don’t be afraid to reach out to your advisor or the financial aid office to ask for advice and suggestions about how best to navigate this situation. There’s a good chance that help is available, but you won’t know unless you ask.
“Some students may qualify to receive more financial aid, while others may consider federal work-study jobs,” says Black. “Plus, some institutions may even have emergency financial aid programs for times like these.”
Paying/budgeting for a wedding: Due to COVID-19, many couples have opted to either postpone their wedding until large gatherings are safe, or have sought alternative options in order to tie the knot as originally planned.
If you fall into the former category, Black recommends reviewing all your contracts and getting in touch with vendors as soon as possible. “If applicable, you can also review your wedding insurance to see what’s covered,” says Black.
For couples who had to pull from their wedding fund in order to pay for unexpected expenses, it’s important to explore opportunities to cut back to avoid going over your allotted budget. For example, if having all your loved ones attend the big day is your top priority, consider exploring options for lower-priced food and decorations. And, if you’re willing to reduce the guest list in favor of a more intimate gathering, you may even have enough to splurge on a band or food from your favorite caterer.
“While these decisions can be difficult, asking yourself these questions can help you start married life off on the right financial foot,” says Black.
Reassess your budget: To work toward regaining financial stability, Black says now is a good time to look over your monthly subscriptions and cancel any that you can live without. She emphasizes that the goal isn’t to deprive yourself of anything fun or enjoyable, but rather, to spend less to have fun. Instead of a TV marathon, get creative by finding free virtual and socially distant activities, such as hiking, starting a book club or playing online games with your friends and family.
There are a number of ways to form better budgeting habits, like keeping a spending journal and setting attainable monetary goals. Budgeting tools are also available to help you keep track of your spending and assess where you can cut back. For example, BECU’s Build a Better Budget interactive module looks at your full financial picture and offers strategies to help you build and achieve your financial goals.
Paying off debt: If you’re one of the many Americans working toward paying off debt, COVID-19 likely dealt a blow to your ability to use discretionary income to pay off student loans and credit card bills as quickly as possible.
As you work to get back on your feet, Black recommends prioritizing essential expenses like housing, utilities, and food. For the time being, pay only the minimum payments due if that’s all you can afford.
“If your income has been interrupted, consider reaching out to your financial institution to see if they are willing to work with you on changing due dates or delaying payments for now,” says Black. “Once you’re back in a place where you have disposable income, consider looking into other long-term debt payoff strategies.”
Sticking to a budget: If at all possible, try to avoid racking up additional credit card debt or opening new cards in order to pay for necessities. According to a recent CreditCards.com poll, about a quarter of Americans (28 million people) with new credit card debt have gone deeper in the red during the pandemic. Turning to credit cards may seem like the simplest solution right now, but in the long-term, you could end up paying thousands of dollars in interest — and your credit score will also take a hit.
“Check with your financial institution to see what relief options may be available. For example, BECU offers a Member Assistance Program to support members facing financial hardship due to unforeseen circumstances,” says Black.
If you’ve exhausted all other options and do need to go the credit card route, Black recommends looking for low interest rates, low fees, and favorable terms. Also, make sure you consider the new monthly payment and the impact it’ll have on your current and future budget.
Saving for retirement: Dipping into your retirement savings is another action that should only be considered as a very last resort due to possible tax implications and penalties. However, if you do need to pull from your retirement fund, Black suggests consulting with a financial advisor first to help you figure out the best course of action.
“For example, if you’re hoping to stick with your original retirement date but used some of your funds due to COVID-19, they can help organize your finances, assess how much you need in cash flow in retirement and outline the necessary steps to achieve your goal,” says Black.
Set up or strengthen your emergency fund: If you have any disposable income, Black recommends putting it directly into a savings account. While you may be paying off debt or saving for a big purchase like a house, Black says now is the time to focus on preserving your cash as much as possible.
“In uncertain times, it’s better to have cash on-hand and delay your goals for better peace of mind,” she says. To set up an emergency fund, get in touch with your financial institution and open a savings account that you can only tap into in the event of an emergency.
“Once things start getting back to a new normal, set-up automatic transfers to ensure you’re continually saving,” Black advises. She further explains that having a separate savings account can help you avoid future debt because you’ll be able to cover an emergency or an unexpected expense without having to put it on a credit card or take out a personal loan.
COVID-19 may have thrown you for a major loop in the financial department, but there are many ways to reduce the economic impact and slowly but surely get to a place of economic stability.
As a member-owned credit union, BECU is focused on helping increase the financial well-being of its members and communities by returning profits in the form of better rates, fewer fees, community partnerships and financial education. BECU is federally insured by NCUA.