There is no doubt that this past year has reminded us how fragile the finances of the average American can be. For those facing financial insecurity, Cynthia Campbell, Chief Experience Officer at BALANCE, offers these tips for helping get your financial house back in order.
1. Analyze and revise your budget
Take a hard look at your spending patterns over time and build a new budget based on your current income and goals. Start by categorizing your expenses as essential and non-essential. Focus on making those essential payments – such as housing, utilities, food, child support and debt repayments, particularly trying to reduce higher interest debt. Then be ruthless in cutting non-essentials. You can revisit discretionary expenses once your finances stabilize and you achieve your most pressing financial goals. In the interim, be creative in finding no/low cost opportunities for entertainment.
Ultimately, budgeting is not about spending, it is about freeing up money to save. Saving is critical for financial well-being and a habit to keep well after you hit your initial financial goals.
2. Seek assistance
Look for updates on new economic assistance programs or extensions, like unemployment and payment moratoriums. Go to your county’s website for health and human services to find out what kind of public assistance they offer. This can include food assistance, childcare assistance, health insurance, work search programs, and transportation certificates.
Some employers offer financial wellness programs that provide employees free financial counseling, tools or other resources. Employers might also help employees identify any financial assistance options available through the benefit packages they offer, such as hardship loans available from their 401k.
3. Be proactive.
If you are unable to make your rent/mortgage, utility, credit card, loan, or other payments, you should reach out to your providers and financial institutions as soon as possible. Find out if you can place any bills on forbearance or another type of payment arrangement until your hardship ends. The more transparent you are with your providers, the more they will be willing to work with you.
Similarly, if you are paying for spousal, child, or other support, consider filing with the court to have those payments modified based on your current income or lack of income. Not making required support payments could put you on the hook for arrears, plus interest. So, it is in your best interest to ask for a modification with the courts to avoid any judgment against you.
4. Grow the topline.
In addition to actively managing expenses, look for opportunities to supplement your income. If you are out of work, make job searching your full-time position. If you are underemployed – and assuming it is consistent with your primary employer’s policies -- explore becoming part of the gig economy to boost your income. Perhaps you can turn your avocation or special skills – like home repair, cleaning, or cooking -- into a paying gig.
5. Monitor your progress.
Stay on top of your credit report. Getting and keeping credit card debt around 10%-20% of your available credit helps maintain a good credit score. A good credit score can help you make necessary purchases when you need them or secure loans.
Watch how your savings are growing. A big part of becoming financially healthy is to build your savings. Having a savings account can help you be prepared for life’s inevitable unexpected expenses.
Remember, no matter what your financial situation, improvements are possible. Take time to analyze your financial health, set a plan, and then actively work towards your goals. Financial fitness may be a long journey, but it is doable with the right mindset and tools.
An ARAG partner, BALANCE offers members financial counseling, tools and education services to support their financial fitness.
