Rethinking financial goals after COVID-19 for young families
Monday, 15 June 2020
Raising young children is hard work. But it's undoubtedly been especially difficult during the COVID-19 outbreak without school, childcare, recreational activities and while working at home. And, of course, the current financial uncertainty hasn't made life any easier.
Even though there's so much going on right now, carefully managing your money and preparing for future financial needs has never been more important. Here are some tips and ideas to help you best allocate resources and prioritize goals as you work to make it through this time and look toward the future.
Delay large expenses in favor of saving
Raising children is also expensive, making it difficult to put money aside. However, the coronavirus pandemic has certainly highlighted the importance of having an emergency fund. That said, it probably makes sense right now to delay unnecessary expenses in favor of saving. Perhaps you could hold off on buying a new car or skip the summer vacation. Sure, a trip to the beach is a lot more fun than putting the money in the bank. But the peace of mind of having a little savings is well worth it.
Consider refinancing your house
Interest rates are very low right now, making it a good time to refinance your home. The general rule of thumb is if you can lower your rate by one percentage point, it's worth the cost of refinancing. You could pay a lot less interest in the long run, and you could also reduce your monthly mortgage payment, which could be helpful during this time. However, to make refinancing a smart move, you should plan to stay in your home for at least several more years.
You might also want to consider a home equity line of credit. If you've built up some equity in your home, using it to borrow can be an affordable way to give yourself some financial flexibility. You don't have to use your equity line if you don't need to, but if you find yourself in a bind, you have easy access to cash.
Add or remodel instead of moving
Adding more children often means needing more square footage. And in many cases, this means moving to a larger home. However, right now might be a good time to consider remodeling or adding on to your home instead of moving.
Again, interest rates are low and, depending on your situation, you could probably get a low rate on a home equity loan or line of credit. Adding on or remodeling could be more affordable than moving and increase the value of your home as well.
Replace or supplement your income
Millions of people across the country have lost jobs and income as a result of the COVID-19 crisis. However, the Coronavirus Aid, Relief and Economic Security Act , or CARES Act, boosted unemployment benefits and extended them to many Americans who would not have qualified before. Check with your state unemployment office to see if you could qualify for benefits that could help you get through the economic downturn.
In addition, being creative about supplementing your income could pay off. Perhaps offer to babysit other children, pick up a delivery gig or look for online freelance opportunities. Even a few hours of additional work a week could help right now.
Work hard to cut expenses
Again, raising a family is expensive, but there are almost always ways to trim expenses. You're probably already saving money because you're eating at home, not paying for childcare, or spending money on activities—which is a small silver lining in the COVID-19 cloud.
Food is one of the top expenses in most U.S. households. Finding ways to trim your grocery bill—using coupons, shopping sales and buying store brands, for instance—can end up saving you a lot of money each month.
It's easy to find other ways to trim costs around the house, too. Using less energy and water, cutting back your cable channels, cancelling unused subscriptions and doing more home maintenance yourself are just a few ways you can save. And while a few dollars here and there might not seem like much, when you're struggling to make ends meet, it can make a big difference.
Check your insurance coverage
Managing financial risk is always important and even more so during shaky economic times. Right now, it makes sense to review your insurance coverage to make sure you have enough to protect you against financial losses in the event of an accident or other unfortunate event.
Also, it's always smart to buy life insurance sooner than later, as you can typically get more coverage for a lower premium when you are younger.
The COVID-19 crisis has placed a lot of stress on American families, including financial stress. But taking steps now to increase savings, reduce expenses and stabilize your financial situation can give you peace of mind now and greater confidence in the future.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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