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2020 has brought unexpected changes for the U.S. to say the least.
First, the bilateral trade war with China, the slump in oil prices, and now the coronavirus pandemic.
Be it in health or the economy, Americans may not have witnessed such a disastrous year in a decade.
Some newspapers and financial experts have already started comparing 2020 in the U.S. with the 9/11 emergency or even with the Pearl Harbor bombing. They are not exaggerating!
In New York City alone, the number of casualties is already 3 times bigger than 9/11. CNN Business is reporting that in April, America lost more than 20 million jobs. And most likely in a decade, more jobs were lost in comparison with job creation.
It is only natural for us to be losing sleep at night and feeling anxious about our future and our families.
Yes, the federal government is doing its duty to try and assist. It has set up the coronavirus aid fund of $2 trillion and sent out $1,200 stimulus payment as an aid to the economic downturn caused by the pandemic.
It is certainly helpful, but not enough to make it through the next year.
We have to take some self-initiatives as well. There are a few essential, smart money moves to make that can give us direction towards a secure future.
Try these 5 smart, essential money moves to help yourself make it through the economic crisis and maintain a strong foundation for the future.
1. Revise your budget during economic turbulence
The first essential money move that you can take is the correction of your present budget strategy. Because of the current economic downturn, it is necessary to decrease your fun budget.
Discretionary spending that was ok before, should be curtailed now.
Times are too uncertain and you may need more money in savings in the coming months. You could lose your job or be forced to take a pay cut. So save every penny you can now, why you still have money coming in.
Revise your budget to concentrate only on essential things like groceries, utility bills, and the housing payment. Fun, pleasure, and entertainment have to take a backseat for now.
Take a look at points where you can consider decreasing your budget:
A. Adopt the 50/50 budgeting strategy instead of the 50/30/20 rule of saving
Up until now the golden rule for saving was the 50/30/20 rule. But in times like this you need to adopt a stricter budget.
The 50/30/20 rule states that you should spend 50% of your after-tax income on necessities like housing and utilities. 30% of your income should be spent on your wants and 20% should go to savings.
But for now, forget the 50/20/30 rule and start following the 50/50 strategy instead.
It means 50% of your money should be spent on your basic needs and the remaining 50% should go directly into savings.
This is best way to financially protect yourself for uncertain times ahead and be prepared.
B. Reduce your spend on NECESSITIES
While 50% is still what you should spend on needs each month, it doesn’t mean you can’t find ways to save on this part of your budget too.
Americans are infamous for our habit of wasting food. Statistics state that around 30% to 40% of the total food processed in the U.S. is simply wasted.
That equals round $240 billion! So, for now, try to minimize waste and spend less on food in general.
Another necessity you can reduce your spend on is utilities. Make sure you are adjusting the temperature when you aren’t at home to maximize your savings.
If your car payment is high, consider selling your car and opting for something cheaper. Or rent out a room in your house to reduce your monthly housing bill.
It is crucial that you find ways to be frugal and save cash whenever and wherever you can. During an economic crisis, you need to make aggressive money moves and cut spending wherever possible.
2. focus on your savings account and choose an interest-yielding one
A critical time like this shows just why an emergency savings account is so important. If you do not have an emergency purpose savings account now is the right time to set up one up. And if you do have one, keep funneling more money into it.
Choose an online savings account that offers a high-interest rate return to make your savings grow more.
Bankrate.com’s April 2020 report says HSBC Direct is offering 1.70% APY or Annual Percentage Yield for their online savings account.
I use Discover Bank online savings and love it. It currently has a 1.85% return!
Other than HSBC Direct and Discover, Vio Bank, Comenity Direct and Popular Direct also offer high yield savings accounts.
3. continue retirement investments if possible
Right now, most of us are thinking about how to avert this current turmoil and how we can save our jobs. But, long term thinking, like making plans for retirement has taken a backseat.
While we need to pay attention to fighting the COVID-19 outbreak, it is important to not completely forget about future retirement-planning.
If you are able to, continue contributing to your 401k retirement fund. Your future self will thank you!
Where to invest in this recession-looming market?
Yes, there are warnings everywhere that the world economy may enter into the recession phase. We are going to witness a bear stock market more than the bull stock market.
But if you make a clever strategy then you may not be hit hard by the recession. If you have some extra money then consider investing in stocks while they are low.
As the economy improves, the stocks will go up. Because of the recent drop, some prime stocks are available at a lower price than normal.
If you have the funds, then consider buying some of these now so that when an upsurge happens, you can sell them at a higher price and make a quick buck!
But be cautious, if you are not a professional stock investor then take advice from a stock market expert first and make investment accordingly.
If you want to try investing on a much smaller scale, I recommend the Acorns app. It rounds up your spare change from purchases you make and deposits it for you into an investment account.
Not only are you automatically saving extra money with each purchase, you are also investing it to grow!
4. Make sure you have enough insurance coverage to protect your family during economic uncertainty
Review your health and life insurance coverage and make sure you do not skip any payments on this. If you were to get sick, you wouldn’t want to put yourself into a devastating financial place of being hospitalized without insurance to cover the costs.
One of the essential money moves you can make during an economic crisis is simply to avoid an even worse financial situation. Do not put yourself into even more harm.
Even though it is morbid, you should take a look at your life insurance coverage as well. Make sure you have enough coverage for everything your family would need.
5. Ask your credit card issuer and lending firm to give you short-term debt payment relief
Many credit card issuing companies and lending firms have already announced available assistance.
In crisis times like this, they may suspend and interest charges to borrowers. They will assess the situation and when they realize all things have again become normal, they will start the interest charging process again.
Do a quick google search on your credit card companies for any announcements. If your company hasn’t specifically announced this then give them a call and ask!
Here are a couple examples of current assistance being offered by some of the bigger companies:
● Apple Card has offered credit card holders the option of holding on their March payment.
● CitiGroup has also offered a pause in payment without penalty if needed.
Though it may not be considered a financial move, you can consult a financial mentor who can show you the right way.
During uncertain and confusing times, a financial expert may provide good advice. They can tell you which savings account is ideal or how you can curtail your budget. Or if you do have money to invest, consulting an expert is the safest way to use that money.
So, even in economic crisis, there are smart and essential money moves you need to make! Protect your financial health and future.