*Note: This is an updated version of an article which I had posted back in September of 2020, entitled Do Your Finances Need A Tune-Up?
Now that restrictions are lifting after the COVID pandemic and lockdown from 2020, we are now in an especially critical situation due to the financial beating and recession which has negatively impacted the majority of the population. Whether you are someone who already had emergency funds and retirement savings in place before the pandemic hit, or you are hoping to finally start setting aside those funds for the future, it is important for you to review your financial health on a regular basis and to find ways to protect yourself so that you are prepared for any potential financial emergency. What if you don’t know where to start? The most important principles to follow in the quest for financial health include 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. I have lived without credit card debt or a car note for almost a decade now, and I will never fall back into the debt trap ever again. I am also acutely aware of my budget at all times, and I review it on an almost weekly basis to make sure I am on track. The emergency financial cushions which I have established give me peace of mind, because I have successfully created and maintained my own safety nets. By no means am I wealthy, but I know that I am not in any precarious financial waters either.
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.