Monday, 25 January 2021

The coronavirus pandemic and resulting economic fallout pulled the financial rug out from under many.

Millions joined the unemployment rolls, if only temporarily, and businesses lost money as shutdowns and health concerns kept consumers home.

But a new year is a chance for a fresh start, and 2021 offers opportunities to make deliberate decisions to get back on firm financial footing. Whether you've drained your emergency fund, overused your credit card, or gotten behind on bills, you can take steps in the coming months to recover and rebuild your financial foundation.

Check your credit scores

Before you can effectively improve your financial situation, you need to know where you stand. You can access a free credit report once per year from each of the three credit reporting bureaus by visiting AnnualCreditReport.com.

Examine the report and request corrections if you find any errors. If your score has dropped over the past year, find out why: Maybe you've missed payments or increased your debt level due to the pandemic. Understanding the reasons for your credit score will help you set goals for improving your finances.

Build an emergency fund

By September 2020, 14 percent of Americans—up to 46 million people—had completely run out of emergency savings, according to a recent poll. If you've dipped into your emergency fund this year (or if you didn't have one to begin with), start saving now. Even $10 or $25 per week will add up over time. Set up an automatic contribution to a separate savings account for as much as you can, and your emergency fund will start growing, ensuring you'll be prepared for the next economic emergency.

Pay down debt

If you relied on credit cards, personal loans or a loan from your retirement account to tide you over during the pandemic, make it a priority to repay those debts. Remaining in debt and paying interest payments over time can cost you  more than the amount you originally borrowed and limit your ability to reach other financial goals. Create a plan for paying off the debt and stick to it. 

Consider refinancing

Despite other dreary economic news, the U.S. housing market is booming, driven by historically low interest rates. If you're a homeowner, those low rates may mean you can refinance your home and lower your monthly payment, freeing up more money to pay down debt or add to savings. Potential home buyers can also lock in an extremely low interest rate, possibly getting a mortgage payment lower than current rent payments. 

Create new income streams

If you're one of the many who have learned to live on less during 2020, or if you're concerned about loss of income in the coming months, consider how you might ease the situation. Now could be the right time to start a side gig, invest in an income-producing rental property, or look for additional ways to create new income.

Stick to your plan

If you had a financial or investing plan in place before the pandemic, revisit it and make sure you are still on track. For instance, if you've been contributing faithfully to a retirement account, it's wise to continue: An economic downturn simply means you're getting more investments for your money, and cashing out of the market during a downturn means you'll miss out on the recovery upswing.

Rather than panicking about your financial situation, remain calm and take stock of the situation. Take steady, focused steps in the right direction to get back on track. 


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