This year has certainly been full of surprises, partially from the fear surrounding COVID-19, and partially from the economic upturns which have wracked the entire globe. From long furloughs to unemployment, people everywhere are feeling the financial effects. We are officially in a recession, which makes it even more important for everyone to review their finances and find ways to protect themselves during the financial downturn.
There are general financial guidelines which should always be followed, such as paying down debt, establishing an emergency fund, finding other means to generate income, and continuing to contribute to retirement accounts. Another vital component in good financial health is establishing a budget and really examining your spending habits. Almost invariably, people find out after they create a budget that they are spending money needlessly on frills that they don’t need. By eliminating those hidden money drains, it becomes easier to cover living expenses, thus reducing some of the stress involved in getting by financially.
I have had a budget in place for over 30 years, and I have seen the power it wields. By following a budget, I was able to pay down all credit card debt, pay off a car, establish an emergency fund, and put money aside for retirement, so I know it can all be done. Even at this point, with zero debt, I am acutely aware of my budget, and I review it on an almost weekly basis to make sure I am on track.
If you need help in establishing a budget, you can use a budget calculator. I found a wonderful budget calculator on Pigly.com which is very easy to use, and extremely thorough. It helps you break down all expenses, from the essentials to debts and savings so you can target all your goals and ensure that your income is allocated optimally. All you have to do is plug in your income, and the calculator will automatically generate a low end and high end for all the categories. So even if you have never established a budget before, you can set one up instantly.
When budgeting, don’t be afraid to contribute to your retirement accounts right now, as long as you have your debts paid down and you have an emergency fund in place. I am a big proponent of Dave Ramsey’s investing philosophy, and I am grateful that I educated myself on financial wellness and dug myself out of what once seemed like a desperate situation. It was only after I had paid off all of my credit cards and established an emergency fund back in 2013 that I began aggressively started putting money aside for retirement.
The fact is, we are living in uncertain times and need to be prepared for whatever hits. By buttressing our financial health, getting creative with income streams, and following a budget, we will be better equipped to survive the ebb and flow of the current economy.