Disclaimer: Upstart is not a financial advisor, the following content is for informational purposes only.
Given the unprecedented nature of this crisis, everyone is worried about their financial future, and experts aren’t able to help quell those fears, either.
The good news? There are plenty of proven financial health habits that are still valuable. In fact, they are even more relevant now in the wake of this crisis. Launching a proactive financial strategy might sound overwhelming right now, but, broken down into small, doable steps—you can begin your journey to financial security. As success mentor and author Darren Hardy said, “the slightest adjustments to your daily routines can dramatically alter the outcomes in your life.”
Now is the time to focus on building better financial habits, so that you can be prepared for anything else that comes your way.
“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like,” claimed actor Will Rogers. It might be painful to look at cashflow right now, but you need to do it if you’re going to understand how to maximize it.
Technology has made it easier than ever to track your spending with intuitive apps that connect directly to your bank accounts. They’ll even organize each charge into a certain category automatically.
Whether you check your finances weekly, bi-weekly, or monthly, consistency is critical. Consider setting calendar reminders for yourself to help build the habit. Use this time to sync on your finances from last year, and collectively set goals and plans for the year ahead. During this crisis, those goals may look quite different. Maybe you decide the goal is to not default on your mortgage. That’s OK. The important thing is that you have a clearly defined objective and financial strategy to get you there.
Once you have a good idea of how your money is being spent, you can set budgets for yourself and adjust them as life happens, which these days, might include a layoff or extended health care. Again, you will have more security knowing there’s a financial plan in place.
Tighten your belt
As many of us are living on reduced budgets right now, it’s critical you look for ways to increase the gap between your expenses and income. You can do this by getting into the habit of reviewing your fixed costs or recurring expenses that remain the same each month.
Once you do that, you can ask yourself questions such as: what interest rate are you paying on your car loan? Could you refinance your mortgage, and how might you be able to use that extra money to benefit you in the long run? Are you really using Netflix, Hulu, HBO and Disney+ regularly, or are there any cuts you can make to the subscriptions you’re signed up for? If a cost is not related to an essential need, critically ask yourself if you can do without it. Cutting those costs will bring you that much closer to financial security.
Mix it up
“Diversification is protection against ignorance,” says Warren Buffet.
Investing your money is a great way to build wealth. It’s safe (and smart) to assume the economy will continue to take unexpected dips and falls. If you have all your investment eggs in one basket, now is the time to address that. Consider diversifying your investments across various stocks, bonds, mutual funds, real estate, cash equivalents, and foreign stocks. Both short and long term investments should be visible in your portfolio.
As you do this, think about your personal financial goals, the timeline you’re willing to commit to, and your risk tolerance. Also aim to have investments in various industries and sectors. Financially speaking, it’s best to have multiple irons in the fire so that you’re never too dependent on one portion of the market.
Save it for a rainy day
Recent reports indicate that Americans aren’t great savers. For example, single people between the ages of 18-34 have an average of $2,729 in their savings accounts.
Building a robust savings account should be a turnkey habit, regardless of what the economy looks like. To build this habit, take a set percentage of funds out of your paycheck as soon as you get it, or even before it hits your bank account, if possible. Set up a savings account and avoid removing funds from it unless there is a true emergency.
Every month, inch up how much you’re funneling to your savings account. Tackling this in baby steps will make this habit a breeze.
Tackle your debt
Paying down your debt while you’re in financial survival mode may sound preposterous. Consider reaching out to your servicer to see what options are available to you during this crisis. Rather than ignore your debt and let it rack up, research ways to refinance or get rid of interest rates entirely so that you can escape the endless cycle of debt.
Another big factor to consider is your mindset. Rather than being concerned about ways you can and should be paying off your debt, focus your efforts on finding a way to increase your income, for example. Take a look at the factors you can control now to make lasting impact.
The COVID-19 pandemic has created a financial crisis few could have predicted. But remember that we have a lot more control over our personal financial situation than most of us realize. We stand ready to help you navigate that road ahead. From all of us here at Upstart, we hope you stay well, stay strong, and stay on the path to financial security.